Press Releases

Current and older Press Releases of DIW Berlin
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12 February 2014

Low Base Interest Rates: An Opportunity in the Euro Debt Crisis

Member states of the euro area have been struggling with the legacies of the severe financial and economic crisis for four years now. But debt ratios are still rising. Negative primary balances, low growth, and low inflation do not allow for a recovery similar to the one in the US after the Second World War. Between 1946 and 1953, the US was able to almost halve its debt with no haircuts. The crisis countries of the euro area were able to "buy time" with bailout packages and low interest rates. But as long as the other influencing factors are not developing more positively, it remains uncertain whether the current stabilization of the euro debt crisis is sustainable. The ECB's low interest rate policy undoubtedly offers some relief in this situation. First, the interest burden for most countries in the euro area has declined in recent years. This effect has tended to stifle increases in the debt ratio. Second, low interest rates strengthen the economy. In turn, this increases government tax revenue and improves the primary balance. Low interest rates have also played an important role in driving down the debt ratio in the US. At the moment they appear to be the only lever in the euro area with which to make euro area countries' debt more sustainable. What matters now is that they seize this opportunity.

5 February 2014

Energy and Climate Policy - Europe Is Not Alone

To date, the European Union has been at the forefront of international climate protection. But there are now a number of other countries also pursuing a proactive energy and climate policy. They are increasingly investing in renewable energies, exploiting potential energy efficiencies in industry, buildings and transportation, and contributing to the reduction of greenhouse gas emissions through carbon prices. If Europe remains at the forefront of these developments, this would enable it not only to retain its credibility on global climate protection but also to improve the security of its energy supply, increase investments and innovations in growth industries thereby creating new employment opportunities. An ambitious energy and climate policy does not come at the expense of the competitiveness of the European economy. The proportion of energy costs is low in many parts of industry: For 92 percent of value added in the industrial sector, the ratio of energy costs to turnover is an average of 1.6 percent. Only in very few sectors are energy costs a factor in location decisions. For these sectors, there are exemption regulations so that climate programs do not cause a distortion of competition. Instead, the Global Competitiveness Index of the World Economic Forum highlights the importance of an innovative environment. Germany and some other European countries are among the leaders with respect to green patents. The future implementation of the energy transition and the design of the 2030 targets will determine if Europe stays among the leaders.

29 January 2014

Minimum Wage: Number of Eligible Employees Well Below Five Million

In the fall of 2013, DIW Berlin presented a study on minimum wages which was based on data from the Socio-Economic Panel Study for 2011. The data for 2012 have since become available. As expected, in terms of structures for employees with gross hourly earnings of less than 8.50 euros, i.e., those expected to receive the planned minimum wage, little has changed. These include, to an above-average degree, employees with simple occupations, women, employees in eastern Germany, mini-jobbers, working pensioners, and students. In particular, the minimum wage affects workers in small businesses, consumer-oriented services, and agriculture. In 2012, 5.2 million workers received a gross hourly wage of less than 8.50 euros, equivalent to 15 percent of all employees. There is evidence that the number of low-wage workers has decreased over the previous year - to about half a million. However, a statistically significant decline is only evident among full-time workers and workers engaged in simple occupations. These account for more than half of all low-wage workers. It is significant that a large proportion of workers earning less than 8.50 euros per hour in 2011 were above the minimum wage threshold in 2012 - as a result of wage increases. Their number is now likely to have declined due to further wage increases and will have fallen again by up to 700,000 by the time the minimum wage is introduced. In addition, there has been a decline in simple occupations, i.e., jobs that often only pay low wages. It is politically controversial as to whether certain groups will be excluded from the future minimum wage regulation - if pensioners and students were excluded, the number of people entitled to a minimum wage would be reduced by yet another million.

22 January 2014

Improved Energy Efficiency: Vital for Energy Transition and Stimulus for Economic Growth

As part of the energy transition process, the German government has set far-reaching energy efficiency targets, including doubling the annual energy-efficient refurbishment rate for existing residential buildings from one to two percent. DIW Berlin has estimated the additional energy-related investment required to meet these targets and analyzed the impact this could have on the economy. In the long term, the savings on household energy bills far exceed the additional investment. This, combined with further measures to increase energy efficiency in other sectors, substantially reduces energy consumption and greenhouse gas emissions. Even allowing for some elements of uncertainty, these measures to improve energy efficiency have a positive impact on income and domestic demand. They could also result in significantly positive effects on employment, depending on the ratio of productivity gains and new jobs. Nevertheless the most recent savings are not nearly enough to achieve the German government's energy efficiency targets. Clear and reliable framework conditions are needed soon to increase the number of buildings being refurbished for energy efficiency. Given the present analyses, which indicate that forcing the pace of energy efficiency improvements has a positive impact on German economic growth and employment, the government's hesitation seems even less justified.

15 January 2014

Women Still the Exception on Executive Boards of Germany's Large Firms - Gradually Increasing Representation on Supervisory Boards

The trend toward more women on the boards of directors of German companies continued in 2013, albeit on a small scale. The share of women on the supervisory boards of the 200 largest companies increased by more than two percentage points, and thereby at a somewhat higher rate than in recent years, to just over 15 percent. The corresponding share of women on executive boards virtually stagnated at a low level of just over four percent. These findings are revealed in DIW Berlin's latest Female Executive Barometer. In the DAX 30 companies there was even a decrease in the share of women on executive boards. The shares of female executives in MDAX, SDAX, and TecDAX companies also remained low. The development in companies with government- owned shares was limited as well. Moreover, women chairing boards of directors are still very much the exception in all the groups of companies studied. This applies to both supervisory and executive boards. The findings clearly indicate that increasing the share of women on corporate boards is not a self-sustaining process, that progress is slow, and that substantial efforts are still required. In order to achieve equal representation of both genders in these posts in the foreseeable future, more drastic changes are needed. In Germany, public companies could play a pioneering role, which is not the case at present. Companies in Germany and their interest groups can look to the Nordic countries for examples of firms that achieve substantial increases in the number of women on corporate boards without mandatory state regulation. Comparing European countries, however, we see that the share of women on corporate boards increased the fastest in countries with a mandatory women's quota.

18 December 2013

Recovery is Gaining Some Momentum

In 2013 the German economy will grow at 0.4 percent which is below the growth rate of potential output. The output gap is 0.5 percent. In 2014 gross domestic product will expand at 1,6 percent and the output gap will nearly be closed. In 2015 the economy will grow above trend at a rate of 2 percent.

The pace of expansion of the world economy has accelerated in the third quarter. Advanced economies contributed more and more to the recovery. The cyclical upturn builds mostly on the revival of private consumption which profits from gradual improvements of labour market conditions and still low rates of inflation. In addition, growth in emerging markets accelerated notably; in particular China and India grew dynamically. Despite the expected start of tapering of unconventional measures in the US, the stance of global monetary policy will remain very expansionary. Moreover, fiscal policy will be less contractionary. Over the course of time, diminishing policy uncertainty will spur investment. Gradual improvements of labour market conditions will revive private consumption. All in all, the global economy will grow at rates of about 4 percent in 2014 and 2015. The German economy continued its recovery. However, production will expand only modestly in the final quarter of 2013. German exports will revive as part of the global recovery. As we go along, this in turn spurs investment which will peak at the turn of the year 2014/2015. Then, the overall economy will grow at potential and will decelerate somewhat thereafter.

In light of the recovery, the creation of new jobs will continue, although at a declining rate. Unemployment will increase as the work force grows - mainly due to migration. In 2014 the rate of unemployment will be at 7 percent and will be slightly above that in 2015. As a result of new jobs created, wages will rise.However, since labour supply will not be scarce, mainly due to migration, the rise of wage will be modest. At a rate of 1,3 percent, low inflation props up purchasing power of private households. As the output gap narrows and consumption rises, inflation will rise gently to 1,6 percent in 2014 and to 1,7 percent in 2015.

In 2013, the overall public budget is marginally in surplus of 0.2 percent relative to nominal gross domestic product. In 2014 the budget will be nearly balanced, in 2015 the surplus is 0.7 percent.

16 December 2013

Demand Development and Fuel Usage on the Road: Alternative Drive Systems Slow to Get Going

The 54 million vehicles in Germany drove almost 720 billion kilometers in 2012. To date, alternative drive systems and fuels have not achieved any notable success in terms of vehicle numbers or vehicle use. However, the diesel engine, which has higher emissions of air pollutants, is gaining ground: diesel vehicles now constitute 29 percent of all passenger vehicles and 43 percent of all kilometers driven. Diesel fuel has been the most important energy source in road transport for ten years now. The proportion of biogenic fuels has stagnated since 2008 at below six percent, natural gas and liquefied petroleum gas cover only 1.5 percent of demand. In terms of alternative drive systems, not only are there promising long-term options, such as electromobility, but short-term meaningful alternatives should not be neglected either. The use of natural gas represents an alternative system with fewer emissions of greenhouse gases and air pollutants than conventional fuels and is potentially open to renewable energies use. The use of natural gas in the transport sector should therefore continue to be supported.

12 December 2013

More Child Care Facilities – Reduced Burden on Parents Increases Satisfaction

As of 2005, and since 2008 in particular, child care provision for under-three-year-olds in Germany has been expanded across the board. We examine whether this expansion of services using evidence of a reduced burden on mothers and fathers with children in this age group has significantly increased these parents’ satisfaction with various areas of their lives. To shed more light on this issue, we analyze data from the Socio-Economic Panel Study (SOEP) and Families in Germany (FiD) and compare them with official data to provide information about the regional child care ratio. These analyses show that both parents tend to be more satisfied with child care and family life in a region with a wider range of child care facilities. Particularly for mothers in western Germany, there is also a positive correlation between child care services and satisfaction with income, health, and life in general, indicating that an increased provision of early years child care helps reduce the double burden of work and family against a background of dominant gender roles that still prevail.

5 December 2013

Residential Property in German Cities: Purchase Prices to Continue Rising Faster than Rents in 2014

Since 2010, housing prices in Germany have been growing on average by 6 percent a year. During the same period, the rents have been increasing by 4 percent, which is significantly slower than the housing prices, but substantially faster than the consumer prices. This is one of the results of the DIW Berlin study that examines the housing price dynamics in 71 large German cities. The largest rent increases can be observed in Berlin (8 percent); in Hamburg and Munich the rents have been increasing on average by 4 to 4.5 percent a year. Much lower housing rent growth rates are found in Ruhr area; Gelsenkirchen faced even a 1 percent rent decline. The trend of generally increasing housing prices and rents will continue in the nearest future, too. By the third quarter 2014, the housing prices are expected to go up by 6.5 percent, whereas the rents are predicted to increase by 3.5 percent.

5 December 2013

Distinct Change in the Structure of Immigration

Recently, the number of immigrants to Germany, especially from the eastern and southeastern European countries that joined the EU in 2004 or 2007, has risen sharply. In addition, migration from southern Europe has regained importance. Many migrants have come to take up some training, the vast majority, however, for employment. These migration flows are having distinct effects on the recent development of the labor market. For example, additional jobs in Germany are increasingly being filled by foreign workers, but there are also more foreigners among the ranks of the unemployed. The unemployment rate is roughly twice as high among immigrants as among Germans. Although the qualification structure of the migrants living in Germany has improved markedly because of immigration in recent years, a considerable share– one-third – of the workers who migrated recently has no formal vocational qualification. But those who do also have difficulty integrating into the labor market: migrants – including those who moved to Germany in recent years – relatively often have only simple jobs, even though they are qualified for better ones. It remains to be seen whether the most recent procedural changes for recognition of foreign qualifications will remedy the situation. It is difficult to predict how immigration will develop in the coming years. In all likelihood, immigration from Romania and Bulgaria will increase when these countries’ citizens are granted full freedom of movement. Many of them took advantage of the southern European labor markets open to them when their countries joined the EU – and are now confronted with the dire employment conditions there. For this reason, migration flows may take a different direction in the future.

29 November 2013

Strategic Reserve to Secure Electricity Market

There is an ongoing discussion about whether the German electricity market offers sufficient incentives for investment in power plants and for keeping them connected to the grid, thus ensuring sufficient security of supply. Recommendations for further securing power supply include payments, some of them comprehensive, to power plant operators - in addition to energy revenues and based on their generating capacity ("capacity mechanisms"). Other suggestions are to keep individual power plants available that are used only during times of scarcity and high prices ("strategic reserve"). The present article analyzes the various reasons that could lead to a lack of incentives for investment and the extent to which they legitimize employing capacity mechanisms or require other approaches. It is concluded that a strategic reserve would suffice for securing generation adequacy, and finally, design options are discussed.

21 November 2013

Happiness Levels in Germany higher than ever since Reunification

Today, Germany's citizens are happier on average than at any other point in time since reunification. Even though more than 20 years have passed, the average level of happiness in eastern Germany is still significantly lower than that in western Germany. This is demonstrated by the most recent long-term Socio-Economic Panel Study (SOEP) data gathered by TNS Infratest Sozialforschung in collaboration with DIW Berlin. The level of happiness measured in Germany in 2013 matched that of West Germany in 1984 (when SOEP was initiated). For many years following reunification, life satisfaction was lower than today. The lowest level in the period under observation was measured in 2004 and 2005, a phase of high unemployment. It can be said with high statistical certainty that people in eastern Germany are less happy overall than those in western Germany. However, further regional differentiations should generally be treated with caution: for example, the methodology does not permit one to declare Schleswig- Holstein's population to be the happiest or Brandenburg's the unhappiest in Germany, based on SOEP data. Measured regional differences in life satisfaction are too small to justify such results, and the very small samples could also be significantly biased due to chance sampling errors. Rather, the SOEP surveys show that on average, one can live quite well in all of the Länder, and the majority of people living in Germany are quite happy with their lives overall.

20 November 2013

Construction Industry: No New Momentum from Additional Infrastructure Investments for Now

Following a decline last year and stagnation in 2013, the construction industry's economic prospects for 2014 are looking noticeably brighter. DIW Berlin expects more than six percent nominal growth for construction in Germany, or four percent in real terms, primarily as a result of persistently brisk residential construction activity and recovery in public-sector building. The core construction industry should benefit most from this upward trend. Further growth expectations for the construction industry are also fueled by the ongoing coalition negotiations. Additional investments, for example for transportation infrastructure and energy-efficient refurbishment of buildings, are under discussion. However, a significant time lag is to be expected before the effects of potential investment programs would have an impact on the construction industry. In addition, the announcement of funding measures in the field of energy-efficient refurbishment is also likely to delay decisions, as residential property owners would first wait for the improved financing conditions.

13 November 2013

Improving the Reconciliation of Familiy and Work Through a New Wage Benefit for Family Working Time

According to current survey results the reconciliation of family and work is still very difficult for a lot of parents. Most parents seek to share gainful employment and family duties more equally. Yet, financial incentives often favor the conventional single- or one and a halfearner model. In a study commissioned by the Friedrich Ebert Foundation and the Hans Bockler Foundation DIW Berlin has investigated the behavioral effects and related costs of a new benefit for 'family working time' which is intended to support a more fair division of care work and employment within the household. This subsidy is intended for parents with children aged between one and three years and can be received when both spouses decide to work in 80 % of a regular full time job which corresponds on average to about 32 hours per week. The benefit is differentiated by earned income and is relatively larger for low income households. The study reveals that the share of couples with both spouses working 80% of a full time job which is currently about one per cent could be roughly doubled by this benefit. Fiscal costs would be moderate in the short run. If such a reform, however, leads to a change in social norms towards a more equal division of employment and care work within households, more couples would be encouraged to choose this working hours arrangement and thus the long-term costs would increase.

6 November 2013

Production of Unconventional Energy Resources Puts Pressure on OPEC in Future

OPEC countries has benefited from the increase of oil prices in the past few years. Except the worldwide crisis 2008/2009 the demand of oil from OPEC countries was high stabilizing the cohesion within the OPEC. However, this might change in the future: Worldwide demand may not grow as fast as assumed in actual projections due to reduction of subsidies for oil consumption or other demand restricting changes of energy policy. Supply of unconventional energy (oil sand, shale gas) from non-OPEC countries may increase more as projected. In this case it is possible that demand for OPEC-crude could fall in the long term. In particular, this would affect OPEC-countries with high energy reserves: Saudi Arabia, Iran and Iraq which cannot realize their production potential completely altogether. In that case, Saudi-Arabia could reduce its crude oil production and temporarily accept decreases of oil export revenues. However, the country certainly is not willing to permanently reduce production and thus forego oil revenues. On the other side Iran and Iraq depend on oil export revenues to finance reconstruction. Therefore, in a more stable political environment both countries will strongly increase their oil production and boost oil revenues at the expense of Saudi- Arabia. This conflict of interests threatens OPEC's internal cohesion and its power to control oil prices.

30 October 2013

Target-Balances - Anchor of Stability

Since the beginning of the crisis, large Target 2 positions developed on the balance sheets of the national central banks in the euro area. At the height of this development in the middle of 2012, the German Bundesbank disclosed Target-claims vis-à-vis the ECB amounting to around 750 billion euro. Since then, the balances decreased and currently amount to 570 billion Euro, which is still considerably higher than before the crisis. Should the monetary union break apart or should individual members exit the currency union, the remaining creditor countries would face substantial losses; in this regard the Target-balances represent a risk for the stable countries within the monetary union. However, it is essentially the liquidity injections of the Eurosystem and the use of liquidity via the Target payment system that aim to prevent such a situation. The support of banks in the crisis countries through the liquidity provisions of the European Central Bank, the assistance being also reflected in the large Target imbalances, constitutes a cushion against adverse developments in capital and financial markets. The support in turn provides the time necessary to implement structural reforms as well as fiscal and bankregulatory measures.

Target 2 - the payment system of the Eurosystem - caused a controversial debate in Germany during the recent past. This report reaches the conclusion, that any fear expressed with respect to potentially too large risks for Germany is to a large extent unfounded. Rather, Germany should be regarded as a beneficiary of the Target system. In the course of the crisis, financial risk in the Euro area was, in fact, reduced through Target 2. This was particularly advantageous to both, the German government and German private investors and banks. Since 2007, German investors reduced their exposure in the crisis countries by almost 400 billion Euros, and they still hold assets in these countries worth around 740 billion Euro.

17 October 2013

Autumn 2013 Joint Economic Forecast: Economy Picking Up - Put Budget Surpluses To Good Use

Project Group Joint Economic Forecast

Completed in Essen on 15 October 2013

Economy Picking Up – Put Budget Surpluses To Good Use

The German economy is on the verge of an upturn driven by domestic demand. The improving global economic climate and decreasing uncertainty are fuelling investment. Private consumption is benefitting from favourable employment and income prospects. Real gross domestic product looks set to grow by 1.8 percent in 2014, after an increase of just 0.4 percent this year. Consumer prices are expected to rise by a moderate 1.6 percent this year and by 1.9 percent next year. The German public budget will continue to show a surplus.

17 October 2013

Poverty, Unemployment, and Political Action

The poor and the unemployed are politically less interested and active than persons above the poverty line and the working population. Compared to other European democracies, Germany shows above-average levels of inequality of political participation. Data from the German Socio-economic Panel Study (SOEP) suggest that this inequality has been increasing in the past three decades. The data also indicate at an individual level that political participation does not decline in response to job loss and loss of income. Rather, the low levels of political involvement existed prior to these events and can in part be attributed to social origin.

9 October 2013

Changing the economic model in China towards higher consumption growth

The Chinese model for economic growth is further transforming. While the rise in output was heavily based on investment and export activities in recent decades, private consumption is expected to become a driver for growth in the period ahead. However, the conditions for higher consumer demand of private households are not optimal: The savings rate is high, particularly driven by the low level of social security and highly regulated financial markets. Up to now, it is quite unclear whether the transformation towards a consumer society can be handled without major frictions.

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