Press Releases

Current and older Press Releases of DIW Berlin
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14 May 2002

No economic upswing at start of this year First results from the national income and product account for the first quarter of 2002 and a forecast for the second quarter

At the beginning of this year, economic growth once again failed to exhibit any dynamism. Real gross domestic product turned out to be stagnant (-0.1%) compared to the previous quarter. This was largely due to a weak domestic demand; but above all to heavily declining investments in new equipment. Although import figures decreased, higher export rates prevented a further decline in economic growth. Compared to the previous quarter, retail prices experienced a slight increase of 0.7% during the first quarter of this year. This can be attributed to an increase in taxes that took effect at the beginning of this year as well as to an increase in prices, which mainly took place in the consumer sector (i.e. restaurants or personal services); the introduction of the Euro was largely responsible for this price increase, although there was also a upward movement in the price of fruit and vegetables in January.

7 May 2002

Labour Market Policy: Taking Regional Variations into Account

Results of international workshop held by DIW Berlin 11th-13th April 2002

7 May 2002

Above average participation in Military Service for Abitur Students and the unemployed

Analysing data from the DIW Berlin's Socio-Economic Panel Study (SOEP) shows that Abitur students and the unemployed are more likely than others to take part in military service or its community service equivalent. Abitur students should theoretically be more interested in avoiding military or community service, because their relatively high level of qualifications increases the chance of gaining a higher income and thus doing military service would lead to higher income losses. This hypothesis, however, cannot be confirmed by the empirical evidence.

23 April 2002

The State of the World Economy and the German Economy in Spring 2002

The world economy is currently at the beginning of an upswing. Output in the U.S. has started to recover even earlier than had been expected by the Institutes. In Western Europe, while the rise in production was still modest in the first months of the year, consumer confidence as well as business climate improved markedly. Also in the Asian NICs the cyclical bottom has been passed; Japan, by contrast, continued to be in recession.
Weekly Report/ Wochenbericht 17/2002

10 April 2002

Prices for Crude Oil: Between Hope for Business Revival and Fear of War. DIW Berlin: 20 to 25 US-Dollar per barrel if the situation eases off in the Middle East

Signs of a nascent economic recovery in the USA and in Europe, the increasing willingness of the OPEC-countries to stick to the quota, and speculations on a possible US military intervention in Iraq, which would consequently result in a restricted oil supply, have led to an unexpected drastic rise in prices for crude oil in the first quarter of 2002. Prices for crude oil had already topped 27 US-dollar per barrel at the beginning of April. In its current weekly report 15/2002 (Wochenbericht 15/2002), the DIW Berlin states that if the situation eases off in the Middle East, prices for crude oil should fall slightly (to 20 - 25 US-dollars per barrel). The Berlin-based institute reasons that this development would be mainly attributable to remaining stocks and the seasonal decrease in oil consumption in the second quarter of the year. However, if the crisis in the Middle East were to escalate, a further increase in prices, even up to over 30 dollars, would become likely.

10 April 2002

Reform of the ECB's Governing Council and EU Enlargement. DIW Berlin argues for an adjustment of its decision-making structure

A further possible ten countries could be EU members by 2004. The EU accession countries will automatically become members of the Eurozone a few years after this, if they comply with the criteria stipulated in the Maastricht Treaty. In its current weekly report 15/2001, the DIW Berlin points out that if the European Central Bank (ECB) were to keep its present decision-making structure, it would in future not be able to react swiftly to the monetary requirements of an enlarged Eurozone. As the ECB's Governing Council runs in practice on the principle of unanimity, the imbalance between voting rights and the population or economic size of member countries - which support the voting rights - would further increase. The DIW Berlin therefore argues for a thorough reform of the ECB' s Governing Council: the seven largest countries should be represented in the Council by one delegate each; the smaller countries should form groups, with each group being represented by one delegate, who changes annually on a rotation basis. However, the necessary decisions must be taken before 2004, as it would be much more difficult to reach agreement on such a political decision after EU enlargement had already taken place. In its report, the DIW also states that the accession of countries to the EU, which have a retarded economic development, will not affect the ECB' s monetary policy, as the EU accession countries' influence on the consumer price index is only marginal.

3 April 2002

Japan: a way out of the crisis. DIW Berlin's Quarterly Journal on Japan

Japan's overwhelming success story came to an abrupt end when the bubble burst in the 1980s. The Japanese economy has since found itself in a permanent crisis. Its economic situation has been characterised by deflation. Despite all political attempts, domestic demand has not recovered. In its latest volume of the Quarterly Journal of Economic Research Japan: How to overcome the Difficult Decade?, the DIW Berlin comprehensively analyses the possibilities and limitations of Japanese reform policy for the first time; both Japan's macro-policy and its recent structural reforms in the business and banking sector and the social welfare system are examined.

27 March 2002

Great Britain could join the European Monetary Union.
DIW Berlin: the pound would then have to be markedly devalued

From an economic point of view, Great Britain's accession to the European Monetary Union is neither a great risk for the country itself nor for the current members of EMU. This conclusion was reached by the DIW Berlin in its current weekly report 13/2002 - 14/2002. However, the most difficult problem would be to fix an adequate exchange rate for the pound, which was neither a burden to Great Britain nor the European Economic Union. At the current exchange rate of between 1,60 euro and 1,65 euro, the DIW Berlin is of the opinion that the pound should be devalued by up to 20%, in order to strengthen Britain's competitiveness. In all other areas, Great Britain has already begun to converge towards Europe.

20 March 2002

Monetary Policy of the ECB: Maintain Current Course of Expansion

After the European Central Bank (ECB) only reluctantly reacted to the synchronous world-wide economic downturn, a further reduction in interest rates has become even more unlikely against the backdrop of the beginnings of an economic upturn in the Eurozone. Financial markets even expect an increase in interest rates. In its current weekly report 12/2002, the DIW Berlin warns against the repetition of former mistakes. Upswings in the economy have been repeatedly curbed by an anticipatory tightening of the monetary course whilst still in their infancy and thus preventing an improvement in the labour market through more growth. This negative experience should induce the ECB to stick to its current expansive monetary course. All the more so as there are no signs that inflation rates will increase in the Eurozone. In order to be able to maintain this course, unions and management in the Eurozone have to continue with their policy of moderate wages.

20 March 2002

Argentina: no long-term solution provided by free floatation of the peso. DIW Berlin recommends exchange rate bands

By allowing the peso to float freely at the beginning of this year, Argentina fundamentally changed its monetary policy. For the previous eleven years, the peso had been pegged to the US-Dollar by a currency board. In its current weekly report 12/2002, the DIW Berlin warns against this strategy. It also does not consider the free floatation of the peso to be a workable solution. The DIW instead suggests that a middle course: an exchange rate system, whic allows the exchange rate to fluctuate within a certain band similar to the former European Monetary System (EMS). On the one hand, this measure would contribute to a stable monetary policy. On the other hand, it would allow the central bank to devalue the peso in times of crisis and of considerable structural upheaval or to reduce the pressure on the peso through joint interventions. Argentina should co-operate with Brazil and the other Mercosur countries, with whose national economies it has extremely close trade relations and with whom Argentina could reach a credible agreement on price stability.

5 March 2002

Berlin has to continue its consolidation policy. DIW Berlin on the economic future of Berlin

Berlin has no other alternative but to continue its strict policy of consolidation. Despite the fact that cost-cutting measures greatly curb regional economic trends, the DIW Berlin advises strict compliance with these measures in its current weekly report 10/2002. However, no further cuts should be made in the budgets for education, science and culture, as these sectors have a promising future and stimulate economic demand and growth in Berlin. Financial resources, however, have to be used in a more innovative and efficient way than they have been up until present: the DIW Berlin considers the foundation of private universities to be an example of innovative funding.

12 November 2001

Euroframe: Prospects for the European Economies 2001/2002

The World Environment
· The September 11th attacks on the United States and the consequent combat against international terrorism have clouded the short-term outlook for the world economy.
· World economic growth had already slowed considerably from the final quarter of last year. Monetary tightening in reaction to persistent high growth rates in the US was partly responsible.
· A further deepening of the international cycle in the remaining part of the year seems unavoidable, while the previously expected recovery of the international economy will be delayed by at least one to two quarters to early 2002.
· Uncertainties surrounding this outlook are high. Our projection starts from the assumption that possible further attacks will not have major negative effects on sentiment, and that the oil supply from the Middle East will not be disrupted.

23 October 2001

Terrorist Attacks Reinforce Cyclical Downswing -
Recovery not Before Next Year

The economies of the United States and of the rest of the world were hit by the attacks of 11 September during a phase of pronounced cyclical weakness. Pro-vided there are no additional massive terrorist attacks, there is no extension of the conflict, and there is no reduction of petroleum supplies, a world-wide re-covery that also gives new impetus to world trade may be expected from the first half of 2002. A crucial factor for the cyclical recovery is the fact that in the industrialised countries economic policy had been expansionary already before the attacks and that additional stimulating measures were decided afterwards. In the United States, the current recessionary phase will be overcome early next year, and the economy will recover markedly in the course of the year. In Ja-pan, output fell noticeably during the first half of this year, and a recovery is not expected until the second half of next year. In the euro area, economic growth has slowed considerably since last spring. In the course of next year, the forces of upswing will gradually prevail, with exports and domestic demand gaining momentum.

26 September 2001

Prices for crude oil have levelled off, however uncertainty remains. DIW Berlin expects prices for crude oil to level off at the OPEC's set target

Prices for crude oil will probably soon again be levelling out between 22 to 28 dollars per barrel, a price span that is also favoured by the OPEC. However, prices are expected to level off at the upper edge of the span. In its current weekly report 39/2001 the DIW Berlin points out that such a price level may be too high in view of the current situation of the global economy. It is, therefore, also in the OPEC's interest to keep prices as low as possible.

5 September 2001

EU Eastern Enlargement can be financed - the pressure for reforms is growing. DIW Berlin presents EU budget scenarios for 2007 and 2013

The planned enlargement of the EU to include the twelve candidate countries can be financed without any problems: this is the conclusion that the DIW Berlin reaches in its current Wochenbericht 36/2001. Nevertheless, the Institute calls upon current EU members to begin now with the reform of structural and agricultural policy in the run-up to enlargement. Such reforms are long overdue and would be more difficult to carry out following enlargement.

25 July 2001

European research and innovation systems

DIW Berlin comments on the situation of private and public research institutions

Innovation depends on cooperation between different institutes and the business sector. Division of labour between subsidised institutes on the one hand, which are more heavily engaged in pure research, and private service industries on the other which are more focussed on rendering production-related consultancy and implementing services is a precondition for achieving a higher level of innovation in Europe. The DIW Berlin has come to this conclusion in its recent weekly report 30/2001 based on its study of research and innovation systems in six European countries.

25 July 2001

Housing conditions of foreigners in Germany

DIW Berlin: Despite improvements there is still a large gap in housing conditions between German households and foreign households in Germany

Housing conditions for foreigners have clearly improved since the end of 1985 in West-Germany. At that time about 15% of foreign households had no bathroom. This number fell to 2% in 1998. In addition to that the number of households without central heating fell to 16% which is a cut by half. Each foreigner has about 31 square meters at his disposal, three square meters more than in 1985.

10 July 2001

Germany's economy extremely slowing down.
Economy is only growing at a rate of 1% this year.
DIW Berlin presents summer-baselines of 2001/2002

The German GDP will only grow by 1% this year. A noticeably economic recovery and an economic growth of 2,3% can not be expected until next year. This conclusion is reached by the DIW Berlin in its summer-baselines on the economic development 2001/2002. The eurozone, too, is expected to show a slower economic expansion this year; the GDP will only increase by 1,9%. An economic recovery is not expected before 2002. The aggregate output will then increase by 2,5%. In order to lastingly overcome the economic downturn the DIW Berlin suggests a four-point strategy which is focusing on monetary policy, wages policy and financial policy.

27 June 2001

European Economy lacks dynamics
DIW Berlin: Economic growth rate will continue to slow down

The economic downturn in the eurozone has continued in the first quarter of 2001. In its weekly report 26/2001 the DIW Berlin concludes that the seasonally adjusted real gross domestic product has only increased by 0,5 % in the first quarter of 2001; which boils down to an annual growth rate of 2%. The accelerated rise in prices, which was a bar to the spending power of private households and investments, led to an economic slow-down. Yet, the downward trend of the US economy is an additional drain on the European economy. Consumer confidence and growth indicators suggest that economic growth will even continue to decelerate.

7 June 2001

US-American Economy in a downturn
Economic policy takes active countermeasures. DIW Berlin judges the Fed's monetary policy as exemplary

The determined and expansionary measures taken by the US-American economic policy give rise to the assumption that the heavy slide in the economic activity will not result in a recession but will be overcome as early as this year. This conclusion was reached by the DIW Berlin in its latest weekly report 23/2001. It is above all the Fed's promotion of growth and employment that gives a positive impetus to the economy.

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