From 15 to 17 November 2002, a conference on the medium- and long-term impact of terrorism on the world economy took place at the Tutzing Academy, organised by Prof. Peter Hampe and Dr. Martin Held of the Political Academy in Tutzing. Prof. Michael Huether, DGZ-Deka Bank, described the consequences for economic policy and structural change. Dr. Joachim Ahrens, University of Göttingen, stressed the necessity of credible policy-making and implementation. Dr. Wilhelm Ruprecht and Dr. Michael Wolgast, Federation of the German Insurance Industry, presented the results and the reaction of terrorism on the insurance industry. Dr. Willi Leibfritz, OECD, examined the effects of terrorism on national economies.
Wolfgang Ochel
Labour market reform is overdue. In the course of 2002 several fundamental proposals were submitted - from the Ifo Institute, the Hartz Commission and the German Council of Economic Advisers - that suggest using loan employment to provide jobs in the first labour market. In the public debate the proposals of the Hartz Commission received the greatest attention. They include the expansion of commercial loan employment and the creation of personnel-service agencies (PSA). These measures should make a positive contribution to the reduction of unemployment. However, the number of beneficiaries should be limited and the PSA should not be too generously subsidised, to prevent fiscal constraints.
Frank Westermann
A credit crunch for private firms is contributing to the present slowdown in economic growth in Germany, in the opinion of Frank Westermann, Ph.D., of the University of Munich. Smaller firms in particular are affected, while large firms have an increasing number of alternative possibilities of outside financing. According to Westermann this development is reminiscent of the beginning of the bank crisis in Japan in the early 1990s. With regard to the scale of the problem, the two countries are hardly comparable, but the causes and the trends in macroeconomic variables show a remarkable similarity.
Hans-Dieter Karl
According to a study carried out by the Federation of German Electric Power Providers (VDEW) and the Ifo Institute in Spring 2002, the enterprises of the electricity supply industry increased their investments in Germany by ca. 13% in 2001 to €3.9 billion. This increase over the previous year was in all three investment sectors: whereas spending on power stations increased at an above-average pace, investments in the other sectors grew less noticeably. According to plans of the electricity supply enterprises (EVU), investments in 2002 will increase by 17% to €4.55 billion. Since the EVU currently anticipates only small increases in power consumption and adjustments to the new competitive conditions will continue, investments will be reduced in the medium-term. In 2006, at the end of the planning period, investments should stand at approximately €3 billion.
Oscar-Erich Kuntze
In Switzerland, economic growth stagnated in 2002. On the labour market the situation deteriorated perceptibly, and the decrease of employment, noticeable since Autumn 2001, continued. The annual average unemployment rate increased to 2.8%. Consumer prices rose only insignificantly by 0.6%. In 2003 real GDP will increase by approximately 1%, and the situation on the labour market will improve towards the end of the year. The unemployment rate at mid-year will increase to 3¾% and consumer prices will be ¾% higher than in 2002. In 2004 GDP will expands by around 1¾%, employment will increase slightly and the unemployment rate will fall somewhat. Prices will increase by around 1%.
Jan-Egbert Sturm and Wolfgang Nierhaus
The main objective of most central banks in the world including the European Central Bank is the safeguarding of stable prices. Measured by price trends for goods and services, the central banks in most industrialised countries have been quite successful in recent years. The strong price fluctuations for assets present a different picture: share prices have declined but real estate prices have clearly increased. Thus, some economists are arguing for an expanded definition of the inflation goal in which asset prices are included. A multi-country macroeconomic model shows that monetary policy in Europe from 1994 to 2001 would have been more restrictive under these conditions. But on the whole, the effects of a broader definition of the inflation goal are very small.
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