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The Crises Has Not Ended Yet

Interview mit Hans-Werner Sinn, Figyelö, 19.-25.06.2008, S. 21

Hans-Werner Sinn, President of the IFO Institute for Economic Research at the University of Munich, says the nadir of the American economy will continue for a while.

Last year, economic growth in Germany turned out to be better than was previously expected, and the American markets also seem to be recovering. Can we relax now, has the crisis ended?
“No, unfortunately, it hasn’t, not in the least. The markets haven’t recovered yet, the American real estate market is still heading downwards. According to the most recent data, the economy is not at all more dynamic than it was.”

How long will this stagnation last, do you think?
“It’s difficult to say. The downhill trend of the real estate market will cause further problems in the bank sector. I'm convinced that the American real economy's depression will continue, which will in turn influence the world economy.”

How does all this affect Europe, and within it, Germany, the strongest economy of the continent?
“Deceleration will ensue primarily through exports, which are already in a difficult situation because of the strong euro. Europe generally follows the American processes, only about a year later. For this year, we expect a growth of 1.7 percent in Germany, and the uncertainty will continue the following year, too.”

Evidently, this does not make the situation of German politicians any easier. By the way, which do you think is the greatest success of the grand coalition led by Angela Merkel?
“I consider it a great achievement that the budget is now in balance. Not counting the time when the balance was improved by a single year's income, in the past three decades, since the time Willy Brandt was in power, this is the first time that Germany managed this feat. For four years, the German budget showed a deficit that was higher than the 3% deficit/GDP Maastricht criteria, whereas last year, it showed a slight surplus.”

And which is the greatest failure?
“That the reforms have been stopped. They should have continued the measures initiated by the former Chancellor, Gerhard Schröder, namely, the marketization of the welfare systems and making the labour market more flexible.”

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