How does a country’s output change if the number of employed or net investments increases? And what impact does this have on other countries? In Ifo Working Paper 161 Sebastian Benz and Markus Zimmer as well as Ifo research professor Mario Larch develop a theoretical model that allows them to characterise the production structure of 11 countries in the European Union by taking into account trade in intermediate goods and internationally mobile capital. One of the conclusions reached by the authors is that all countries increase their output if the number of employed at every level of qualification rises in the country in question. At the same time, however, capital mobility and trade in intermediate input tends to lower the output in other countries. Details

Is the lawsuit filed by Hessen and Bavaria against the Länder fiscal scheme equalisation (Länderfinanzausgleich) an overdue step in protest at unfair distribution? This is the central question examined by politicians and academics in the latest ifo Schnelldienst 9/2013. According to Volker Bouffier, Minister President of the State of Hessen, the lawsuits is not against the Länder fiscal equalisation scheme per se but against the deficits of the existing scheme. Norbert Walter-Borjans, Finance Minister of North Rhine Westphalia, on the other hand, describes the behaviour of the plaintiffs as lacking in solidarity and stresses that the fiscal equalisation scheme has stood the test of time to date. The academics Rolf Peffekoven, Joachim Wieland, Thomas Lenk and Nathalie Behnke also give their views on the issue. Details

The Ifo World Economic Climate Indicator continued to rise, even if only slightly. Both assessments of the current economic situation and the six-month economic outlook improved slightly compared to the previous quarter. There are a growing number of signs that the world economy is stabilising. Details

As the fifth year of the crisis rolls on, Europe is facing a double challenge: to improve its competitiveness, and to stabilise the euro zone. Comprehensive reforms and deeper integration should lead to a new, stronger Europe. Under the title “Relaunching Europe”, the Summit will focus on how Europe can boost out of its low-flying phase. Three panels will address different aspects of such a programme: how Europe can solve its debt crisis (Panel 1: “Becoming Slimmer”); how Europe, despite the enormous differences amongst the individual economies, can develop a stronger, global dynamic (Panel 2: “Getting Fitter”); and, lastly, how much political and economic integration is good for this new Europe (Panel 3: “Growing Stronger”). Details

Last summer, the financier George Soros urged Germany to agree to the establishment of the European Stability Mechanism, calling on the country to “lead or leave”. Now he says that Germany should exit the euro if it continues to block the introduction of Eurobonds. Soros is playing with fire. Leaving the eurozone is precisely what the newly founded “Alternative for Germany” party, which draws support from a wide swath of society, is demanding. Crunch time is fast approaching. Cyprus is almost out of the euro, its banks’ collapse having been delayed by the European Central Bank’s provision of Emergency Liquidity Assistance, while euroskeptic parties led by Beppe Grillo and Silvio Berlusconi garnered a combined total of 55 per cent of the popular vote in the latest Italian general election. Details

May 15, 2013: The Ifo World Economic Climate Indicator continued to rise, even if only slightly. Both assessments of the current economic situation and the six-month economic outlook improved slightly compared to the previous quarter. There are a growing number of signs that the world economy is stabilising. Details

May 8, 2013: The Ifo Economic Climate Indicator for the euro area remains at a low level. Assessments of the current economic situation are slightly less favourable than in the last survey. Expectations for the six-month economic outlook improved only slightly. An economic recovery has not yet started. Details

May 4, 2013: The Ifo Business Climate Index for German trade and industry declined once again in April. The business climate indices for Eastern Germany and Saxony also fell sharply. Saxon survey participants were notably far less positive about their current business situation than in March. They also expressed greater pessimism than last month about their six-month business outlook. Details

May 1, 2013: The Ifo Export Climate improved in March 2013, reaching -0.55 points. The increase in the export climate is due to an improvement in pricing competitiveness. This, in turn, can be attributed to the weakening of the euro against the US dollar in March. The euro depreciated by 3% against the US dollar in March versus the previous month. Details

Apr 30, 2013: Credit constraints for German trade and industry edged downwards by 0.1 percentage points compared to March. Around a fifth of the companies surveyed reported a restrictive credit policy on the part of banks. Despite recent developments in the euro crisis, there have been no significant changes in the favourable financial environment of German companies. Details

Apr 30, 2013: The Ifo Employment Barometer for German trade and industry, including the service sector, fell in April. German companies are very cautious about recruiting additional staff. Details

Apr 29, 2013: The Ifo Business Climate for Eastern German trade and industry clouded over considerably in April. Eastern German survey participants assessed their current business situation considerably less optimistically than last month. They also expressed greater caution about their six-month business outlook. After a strong start to the year, the Eastern German economy is losing momentum slightly. Details

Apr 24, 2013: The Ifo Business Climate Indicator for the German service sector fell considerably in April. Assessments of the current business situation were significantly less positive than last month. The service providers surveyed were also slightly less optimistic about their business outlook. They nevertheless plan to recruit additional staff. Details

Apr 24, 2013: The Ifo Business Climate Index for German industry and trade fell in April. Although the majority of companies assessed their current business situation as good, they were far more cautious than last month. Their expectations regarding future business developments were also lower. The German economy is taking a breather. Details

Apr 10, 2013: After last month’s sharp rise, the Ifo Business Climate Index for German trade and industry edged downwards in March. The climate indicators for Eastern Germany and Saxony also deteriorated this month. Saxon survey participants remain thoroughly satisfied with their current business situation, but are far more pessimistic about their future business developments. Details