Team
The people behind the ifo Institute offer the very high level of expertise and experience needed to fulfill our research and service mandate.
ifo Viewpoint 214: Neodirigism
Bank failures, economic inequality, populism, train delays, lack of housing, pollution – all this is laid at the feet of neoliberalism. Neoliberal policies are often named as a cause of social and economic grievances. The term actually refers to a historical school of though that, in response to the world economic crisis of the late 1920s and early 1930s, demanded not less but rather more government action to establish conditions that would improve the functioning of the economy. However, people who use the term nowadays are usually referring to a disproportionate faith in the market and the state’s withdrawal from areas where it is actually needed.
ifo Viewpoint 223: Abolishing the Debt Brake Is Not Worth It
The debt brake enshrined in Article 115 of Germany’s constitution has been the subject of controversial debate since its introduction in 2009. Critics argue that in the event of major economic slumps, the maximum permissible deficit for the federal budget of 0.35 percent of gross domestic product (GDP) is too small, even when adjusted for cyclical effects. The debt brake also leads to an excessive reduction in government debt and creates incentives to neglect public investment. Moreover, interest rates are so low that significantly more government debt can be afforded.
ifo Viewpoint 250: Can Economic Growth and Ecological Sustainability Coexist?
Is long-term economic growth compatible with ecologically sustainable development? This question stands as one of the most debated issues of our time. Over the past decades, growth driven by economic liberalization and globalization has brought prosperity to billions and reduced global poverty. However, this positive trajectory has come at a high cost to the environment and the depletion of natural resources. The limitations of economic growth at the expense of the environment are evident. Sustainable economic prosperity can only be achieved in the long run if it is coupled with ecological sustainability.
ifo Viewpoint 230: A Business Plan for a Digital and Green Transformation
Negotiations for a traffic light coalition in Germany have begun in a good atmosphere, but they will still be difficult. This is especially true for fiscal policy. Here, the task is something like squaring the circle. The green and digital transformation requires considerable private investment in addition to public investment, and the former will hardly take place without substantial tax incentives. Tax relief on investment is also important to support the increasingly fragile economic recovery. At the same time, the debt brake narrows the scope for public borrowing.
ifo Viewpoint No. 196: Italy’s New Government: Transfer Union or Euro Exit
The Five Star Movement and the Lega Nord promised Italian voters massive tax cuts and increases in public spending in their election campaigns. How a country with a government debt ratio of 132 percent of its economic output was going to finance these promises was unclear though. Now the first draft of a coalition agreement between the two parties has been made public, explaining where the money is supposed to come from: namely from the purses of taxpayers in other Eurozone countries. If these countries don’t go along with the plan, the coalitionists wish to take Italy out of the Eurozone.
ifo Viewpoint 220: It Is Time to Expand the Tax Loss Carryback
The coronavirus pandemic plunged the German economy into a severe recession. Following a recovery over the summer, growing numbers of infections give reason to fear that autumn will be difficult.
ifo Viewpoint 239: The Government Should Stay out of Wage Policy — Supply-Side Reforms Make More Sense in the Fight against Inflation
How can inflation be contained in Germany? Wages are currently playing a major role in this discussion. Trade unions point out that the current inflation rate of more than 8 percent is reducing employees’ real incomes.
ifo Viewpoint No. 184: What It Will Cost Us If Donald Trump Is Serious
Free trade? Open markets? Both no longer seem to be the order of the day. Instead 2016 and 2017 may well go down in economic history as the years that ushered in a drastic change in economic policy course and saw it veer towards protectionism. Things all began with the Brexit vote by the British, with the climax to date being the Americans’ decision to elect a president who openly favours isolation by voting for Donald Trump.
ifo Viewpoint No. 202: Germany’s new industrial policy
By laying out his national industry strategy 2030, German Federal Economy Minister Peter Altmaier has kickstarted an important debate. How is Germany’s future as an industrial location to be secured? Many see technological change, US dominance in digitalization, and China’s ascendency as a threat to traditional industrial countries like Germany. Is a new national industrial policy the right reaction? There are three fundamental problems with industrial policy. First, politicians know no more than private investors about which technologies will win out in the future. Second, they tend to be worse than the private sector at terminating failed projects in good time. And third, there is the danger that long-established, politically well-connected companies will abuse industrial policy in order to secure privileges at the expense of competitors, taxpayers, and consumers.
ifo Viewpoint 226: Does Compulsory Insurance for Natural Disasters Help?
The dramatic flood damage in the German states of Rhineland-Palatinate, North Rhine-Westphalia, and to some extent also in Bavaria and Saxony has revived the debate about compulsory insurance for damage from natural disasters. Currently, there is no obligation for homeowners in Germany to insure themselves against flood damage. About 46 percent of all buildings are insured voluntarily, but there are large differences within Germany. In Baden-Württemberg, 94 percent have insurance, while the figure in the particularly hard-hit Rhineland-Palatinate is currently 37 percent, and in Bremen, only 23 percent.
ifo Viewpoint 251: The Equity Pension – How It Can Mitigate the Demographic Problem of German Pension Insurance
Demographic change poses major challenges for German pension insurance: if fewer and fewer contributors face more and more pensioners, contribution rates will have to rise or pension benefits will have to fall. If the aim is to avoid both these outcomes, the pension fund will have to be supported from outside. Up to now, this has been done primarily through subsidies from the federal budget – a method that is increasingly reaching its limits. The German government now wants to help stabilize pension finances with what is known as the equity pension.
Ifo Viewpoint No. 176: Italian Banks Should Not Be Allowed to Sidestep Investor Bail-In!
Should Italian banks crippled by non-performing loans be bailed out at the taxpayers’ expense? For a long time this kind of bank bail-out was common practice. Germany is no exception to this rule. One of the lessons of the financial crisis was that bank losses must no longer be passed onto taxpayers. That is why the European banking union rules strictly limit state funding for ailing banks. It is only allowed after private investors have sustained losses amounting to at least eight percent of the balance sheet total. Exceptions are possible in a crisis, for instance, that poses a threat to the banking system of the Eurozone as a whole. This is not, however, the case with the Italian banking system.
ifo Viewpoint 238: Don’t Raise the Eurozone’s Public-Debt Limit
In February 2020, the European Commission announced that it would present a plan for reforming the eurozone’s economic governance, including the rules for public debt. After a lengthy postponement due to the Covid-19 pandemic, the project is now back on the table, amid widespread calls to give governments more leeway, for example to finance climate protection spending.
ifo Viewpoint No. 191: Three-Step Plan for a Better European Monetary Fund
The European Commission has proposed further developing the European Stability Mechanism (ESM) into a European Monetary Fund (EMF). Firstly, the European Council should be given a greater say and should be able to approve or reject bail-out programmes. Secondly, it proposes giving the EMF more instruments and more money to support crisis-afflicted states and banks. Thirdly, the EMF should be obliged to report regularly to the European Parliament and national parliaments on its activities, with a view to achieving greater democratic control.
ifo Viewpoint No. 208: The Debt Brake Is the Target of Criticism – But It Supports Sustainable Fiscal Policy
Criticism of the debt brake enshrined in Germany’s Basic Law is growing. In view of the downturn, more and more politicians and economists are arguing that the debt brake stands in the way of reasonable economic policy and is an obstacle to public investment. What should we make of these accusations? It is right to ask, ten years after the introduction of the debt brake, whether this instrument is outdated. But the criticism is overblown. The hopes that some people pin on an end to the debt brake are unrealistic. And the debt brake by no means prevents policymakers from taking economic countermeasures in the event of a crisis. The German economy is weakening, but current forecasts expect it to stabilize in 2020. Only if, contrary to expectations, the downturn were to worsen would it be worth considering a debt- financed stimulus package. Then the government could take countermeasures by improving depreciation for investments and moving up the planned abolition of the solidarity surcharge from 2021 to 2020.
ifo Viewpoint 241: Europe Must Avoid a Subsidy Race
The energy crisis – especially the shortage of gas due to a loss of supplies from Russia – is plunging Europe into recession and causing social tensions and distributional conflicts. European governments are eagerly seeking ways to defuse the situation, but they will succeed only if they cooperate closely. The cross-border energy market must remain open, and the European Union should leverage its market power when purchasing gas in third countries. But without coordinated national crisis-management strategies, Europe’s response could become a self-defeating subsidy race.
ifo Viewpoint 232: Economic Consequences of the Covid-19 Pandemic and Lessons for Future Crises: Results from Economic Research
In addition to the damage to health, the Covid-19 pandemic caused tremendous economic costs. What can be learned from an analysis of the economic consequences and of crisis management in politics and in society? Extensive research is now available on this, although it mainly relates to the earlier phase of the pandemic: essentially experience and data from 2020. Various lessons emerge for dealing with future pandemics. The most important concerns the question of whether there is a trade-off between protecting health on the one hand and limiting economic costs on the other.
ifo Viewpoint No. 190: Sustainable Fiscal Policy Calls for More Restrictive Debt Rules for Eurozone
One of the key issues on the table in the coalition negotiations is the next German federal government’s position on reforming European Monetary Union. One of the highly controversial topics under discussion is the future of European debt rules. Critics claim that the current rules are too restrictive and will hamper public investment. In reality, a serious application of the existing concepts for ensuring sustainable fiscal policy would call for stricter, not softer debt rules.
ifo Viewpoint 243: Higher Wages May Help Overcome the Shortage of Skilled Workers!
There is currently intense debate in many countries about a shortage of skilled workers. For instance in Germany, despite record employment figures, according to surveys by the ifo Institute, close to 50 percent of companies say they are constrained by a shortage of skilled workers ¬– also an all-time high. From an economic perspective, there is a simple answer to shortages: higher prices.
ifo Viewpoint 221: The Advantages of the Division of Labor also Apply to Economic Policy: The Green New Deal
Even in times of the corona pandemic, environmental and climate protection are among the dominant topics in the economic policy debate. This is justified. Global warming is one of the greatest challenges of our time.