Public private partnerships (PPPs) have become increasingly popular in Germany in recent years. The breadth of PPP projects extends from federal highways to schools, administration buildings, hospitals, swimming pools etc. Does this model lead to an optimisation of costs and profits or is it a risk factor for the public sector? Gerold Krause-Junk, University of Hamburg, sees PPPs as a way of easing the conflict between efficiency and distribution goals: "The allocative task is then to a large extent left to private suppliers or to those that apply market-economy strategies. The state retains its distributive tasks." For Frank Littwin, Ministry of Finance of Northrhine-Westfalia, PPP projects are no panacea and provide no major contribution to budget consolidation, but they do offer much more cost transparency and promote free-market decisions. And last but not least they are an important instrument for the modernisation of the public administration. Dietrich Budäus and Birgit Grüb, University of Hamburg, point out the problems associated with measuring the efficiency of PPP projects. And for Lars P. Feld and Jan Schnellenbach, University of Heidelberg, whether PPPs make financial sense or not depends on the details of the co-operation. The public sector in particular should take its long-term follow-up costs into consideration when it seeks co-operation partners in the private sector.
Gebhard Flaig, Wolfgang Nierhaus, Ina Becker, Steffen Henzel, Oliver Hülsewig, Erich Langmantel, Johannes Mayr, Wolfgang Meister, Monika Ruschinski, Dirk Ulbricht and Timo Wollmershäuser
On 14 December 2006 the Ifo Institute presented its economic forecast for 2007 and 2008 at its year-end press conference. As 2006 comes to an end, the German economy is experiencing a strong economic expansion that began at the beginning of 2005. The driving force of the boom continues to be foreign demand, which has expanded robustly as a result of the buoyant world economy, despite this year's strong revaluation of the euro vis-à-vis the US dollar. Export growth in 2006 is likely to be around 10.5%, the largest increase since 2000. But unlike 2005, domestic economic activity is now also buoyant. Investments in buildings and equipment have expanded robustly in the current year. Private consumption, which at a share of 59% of nominal GDP is the most important component on the expenditure side, expanded for this first time since 2001. All in all, total economic output in 2006 will grow by 2.5%, after 0.9% in the previous year. However, this year there were fewer working days than last year. Adjusting for this calendar variation, growth in GDP will amount to 2.7% this year. A turnaround on the labour market has also occurred. The number of the seasonal- and calendar-adjusted hours worked increased strongly in the second and third quarters of 2006. In the wake of increasing capacity utilisation, about 350,000 additional jobs (seasonally adjusted) have been created since the beginning of the year. In the coming year, economic activity will be considerably dampened initially by the massive increase in taxes and fiscal charges, but a continuation of the upswing will then follow. Growth in investments in plant and equipment and in commercial construction will remain quite robust in 2007. All in all, real GDP will expand by 1.9% in 2007, or, after calendar adjustments, by 2.0%. The situation on the labour market will continue to improve. In the course of 2007, a decrease in unemployment of 200,000 is expected, which corresponds to a decline of average annual unemployment of 380,000. At 2.3% the inflation rate will be clearly higher than this year (+1.7%). The government deficit will decrease by a further €30 billion, corresponding to 1.3% of GDP. In 2008 overall capacity utilisation will continue to increase, although the expansive forces will become somewhat weaker during the year. Real GDP will increase by 2.3%, or by 2% after calendar adjustments. After the effect of the VAT increase has run its course, an inflation rate of around 1½% is expected. Unemployment should fall over the course of the year by around 100,000, which, on average for the year, means 150,000 fewer unemployed persons.
Horst Penzkofer
Exhibitors and visitors of trade-fair events as well as participants of congresses are the demanders of services that induce output and employment effects in very different sectors of the economy. Trade-fairs and congresses thus add additional spending power to the region and make an important contribution to the region's economy. The Ifo Institute already calculated the aggregate economic and employment effects of the Leipzig trade fairs and congresses for the years 1994 to 1997 and 2002. On the basis of these studies and using the total spending of trade fair exhibitors and visitors of all Leipzig trade fairs in 2005 as well as the total expenses of congress participants and exhibitors in 2004, the Ifo Institute quantified the direct and indirect production and employment effects as well as the induced tax revenue. The results of the study show that the economic effects of the fairs, congresses as well as special events at the Leipzig trade-fair site play an important economic role that should not be underestimated: More than 4,800 persons in the new states have found employment from the events at the Leipzig trade-fair site.
Peter Jäckel
The results of the latest Ifo Investment Survey in eastern Germany show that an increase in investments of 17 percent to nearly €8 billion is expected for 2006. Enterprises in electrical engineering account for the largest share, with plans to invest nearly one fifth of this sum. Total investment growth in 2006 will be reduced somewhat by the clear decline in investments in road vehicle construction (minus 11 percent). For 2005 the Ifo Investment Survey shows an investment decline of 17 percent or €1.25 billion. This is primarily due to the special situation in the paper producing industry, which reduced its investments by five sixths after completing several major projects in 2004.
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