Publikationen Prognose und Konjunkturpolitik

Eastern Germany Still Playing Economic Catch-Up

The economic gap between eastern and western Germany is still sizeable, even 25 years after the fall of the Berlin Wall. In terms of GDP per inhabitant and productivity, eastern Germany has attained nearly three-quarters of western German levels, respectively. Since some years, the catch-up process is advancing very slowly indeed. The main reason for low productivity is the lack of highly skilled jobs. ...

Reunification: An Economic Success Story

People’s expectations after the fall of the Berlin Wall 25 years ago and of reunification in 1990 were huge. The government promised to create “flourishing landscapes” within a few years. The euphoria of reunification came not only through the desire to finally become one country and one nation again but also had tangible economic reasons: the people from East Germany wanted better economic prospects, ...

European Unemployment Insurance: Economic Stability without Major Redistribution of Household Incomes

Depending on how it is structured, the introduction of a European unemployment insurance within the euro area could make a significant contribution to stabilizing economic developments. This even applies to a relatively small-scale system (based on the volume of transfers) with a maximum eligibility period of six months and transfers of 30 percent of last net salary. Higher payments would amplify the ...

Safe Bonds for the European Monetary Union: Strengthening Bailout Ban with More Robust Financial System

The cost of state bankruptcy in the euro area is incalculable due to the repercussions for the financial system. As a result of contagion effects, there is a risk that the entire Monetary Union could be pushed into deep recession. This forces euro area member states to implement rescue packages during periods of crisis, at a high costto taxpayers. The bailout policy adopted during the most recent crisis ...

Debt Restructuring in the Euro Area: How Can Sovereign Debt Be Restructured More Effectively?

The International Monetary Fund (IMF) stated in spring of this year that a more timely restructuring of Greece’s sovereign debt would have been beneficial. But what are the available options for early debt restructuring? The report argues that current reforms in the Euro area, in particular, introducing collective action clauses, are unlikely to be sufficient in their present form. Alternatively, a ...

GDP-Linked Loans for Greece

Greece is standing at a crossroads. The need for a third rescue package has now become a critical issue. The Greek government is calling for another de facto-public debt restructuring. An alternative option presented here would be to convert existing GLF loans into GDP-linked loans. Interest payments would then be linked to the development of Greece’s GDP. First, this would reduce the likelihood of ...

Banking Union and Bank Regulation: Banking Sector Stability in Europe

Despite the most recent period of calm on the financial markets, the long-term resilience of the European financial system is not yet assured, even several years after the financial crisis began. However, the stability of the financial system playsa crucial role for real economic development and consequently for growth and prosperity. The financial crisis has shown that stricter regulation is required ...

The European Central Bank as Lender of Last Resort

In the wake of the recent European debt crisis, the European Central Bank (ECB) has grown significantly in importance. As the crisis worsened, the ECB needed to take measures that went far beyond standard monetary policy operations - particularly with respect to its function as lender of last resort. It provided the banking sector with almost unlimited liquidity and, in addition, purchased government ...

Stabilizing the European Monetary Union: High Time for More Reforms! Seven Questions to Ferdinand Fichtner

Making the Euro Area Fit for the Future

The crisis in the European currency area is not yet over. Although the situation in the financial markets is currently relatively calm, the economic crisis appears to be bottoming out in most countries. Nevertheless, there are still fundamental design flaws in the Monetary Union. If these are not fully addressed, it will only be a matter of time before a new crisis hits, and a partial or complete breakup ...