The 61st Annual Meeting of the Ifo Institute took place in the Grosse Aula of the University of Munich on 23 June 2010. After welcoming words by University President Prof. Bernd Huber, Ifo President Hans-Werner Sinn presented the latest Ifo economic forecast, with special reference to the euro rescue package and the impact of the decisions made in Brussels on the euro countries. The keynote address was delivered by Martin Zeil, Bavarian State Minister for Economic Affairs, Infrastructure, Transport and Technology on budget consolidation and taxation policies. This was followed by a panel discussion, chaired by Gaby Dietzen, on the necessity of budget consolidation and possibilities for tax reform. Participants were Prof. Paul Kirchhof, University of Heidelberg, Joachim Poß, deputy chairman of the SPD parliamentary group, Prof. Hans-Werner Sinn and Prof. Wolfgang Wiegard, member of the Council of German Economic Experts.
Kai Carstensen, Wolfgang Nierhaus, Klaus Abberger, Christian Breuer, Teresa Buchen, Steffen Elstner, Christian Grimme, Steffen Henzel, Nikolay Hristov, Michael Kleemann, Johannes Mayr, Wolfgang Meister, Georg Paula, Anna Stangl, Klaus Wohlrabe and Timo Wollmershäuser
The world economy has gained traction this year, supported by expansionary monetary policy and government economic stimulus programmes. The dynamics of the recovery vary considerably according to countries and regions, however. Especially in Asia, the world economic climate measured by the Ifo Institute has improved greatly. Also in North America the climate indicator has risen and is now slightly above its long-term average. In Western Europe, on the other hand, it remains almost unchanged and has not yet reached its long-term average. The German economy, on the other hand, remains on a recovery course. Although output was noticeably dampened in the winter half year 2009/10 by special factors, leading indicators such as the Ifo Business Climate show that the basic tendency of economic activity is still directed upwards. In June a majority of firms in manufacturing reported a positive business situation for the first time since autumn 2008, after a long period in which the negative appraisals clearly predominated. The recovery is currently driven by exports, boosted by demand especially from Asia. The German economy, which because of its export orientation was particularly affected by the recent recession, is now profiting to a large extent from the world economic recovery. For 2010 a 2.1% increase in GDP is expected. In the coming year domestic economic activity will also gain momentum. To be sure, the German federal government during its closed meeting on 6/7 June 2010 embarked on a consolidation course and economic stimulus programmes are expiring, both of which taken alone have dampening effects. However, this is offset by the positive signal that the German state is beginning to consolidate its budgets in accordance with the balanced-budget stipulations ("debt brake") in the German Constitution. In a time of great distrust vis-à-vis public debtors, this might lead to a growth of confidence among German consumers and investors, who in addition will continue to profit from extremely low interest rates. On the whole, total economic output is expected to grow by 1.5% in 2011. The economic recovery will also positively influence the labour market. On average for the year, employment will increase by 80,000 and by 120,000 next year. Unemployment numbers will decline by 190,000 in both 2010 and 2011. The government budget deficit as a percentage of nominal GDP is anticipated to be 4.2% this year. Next year, as a result of the further economic recovery and a more favourable situation on the labour market, it will fall to 3.4% of GDP. The consolidation programme of the federal government will contribute noticeably to this development. The structural deficit will amount to 3.5% in 2010 and fall to 2.9% in 2011.
Luise Röpke, Max März and Jana Lippelt
Millions of litres of oil are flowing daily from the wellhead of the destroyed Deepwater Horizon drilling platform into the Gulf of Mexico - and an end is not in sight. The current oil catastrophe has touched off a wide discussion on the risks and utility of offshore drilling for oil. Particularly risky are deep and very-deep water drilling. Despite the evident risks and often expressed reservations, oil companies are increasingly planning the exploration of new off-shore oil deposits. This article presents an overview of current offshore drilling in its geographical, economic and political context.
Erich Gluch
According to the results of the quarterly survey of the Ifo Institute, the business climate for freelance architects remains favourable a the beginning of the second quarter of 2010. The survey participants assessed their current business situation somewhat more favourably than in the previous quarter, but their business expectations are not as confident as they were three months ago. Although the share of optimistic architects has risen from 16 to 17 percent, the share of sceptics increased from 18 to 20 percent. On balance the architects still maintain an unbroken confidence regarding business developments in the coming six months.
Klaus Abberger
The Ifo Business Climate for industry and trade in Germany improved slightly in June. The firms are once again more satisfied with their current business situation. With regard to the business expectations for the coming half year, however, for the second month in succession they are somewhat less optimistic. Nevertheless, the business expectations continue to be confident. The economic recovery continues. The Ifo Employment Barometer for German industry and trade fell insignificantly in June after having risen eight months in succession. The employment indicator has thus stabilised in positive territory.
In English published as: Results of the June 2010 Ifo Business Survey (Summary) (PDF, ca. 250 kb).
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