Tag Archives: Germany

Europe Does Its Bit

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Apart from the human tragedy dimension, the events which are unfolding in and around New Orleans will have an economic impact which in a globalised world can ripple through each and every economy. Fears that gasoline shortages could produce a recession in the US are going the rounds. James Hamilton of Econbrowser probably has the best coverage (here and here) while Dave Altig at MacroBlog is following the debate around the blogs (here, and here). Personally I’m taking a this is serious but lets keep calm view.

As Econbrowser argues the real problem is not with crude prices as such, but with the more short term issue of gasoline prices at the pump. The big problem is that the US has a large strategic crude reserve, but no gasoline reserve, while we, here in Europe, do have large stocks of gasoline. So it was a welcome surprise to open the FT in my browser this morning and read this report:

“European countries were on Thursday preparing to release emergency stockpiles of petrol as the US confirmed that some refineries hit by Hurricane Katrina would remain shut for several months. Earlier US officials had estimated the closures at only one to two weeks…..

Germany has assured the IEA that it would release stocks if asked to participate if needed. Germany holds the largest number of barrels of petrol in public storage. These extra barrels could hit the markets within one or two days. France, Spain and Italy also have large emergency gasoline reserves.”

And now AP has just reported that Germany is about to send supplies, while earlier Reuters had a similar story from Spain.

Optimism On The German Economy

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Both New Economist and MacroBlog seem very upbeat about the prospects for the German economy. Macroblog cites Bloomberg and says “Things are definitely looking up“. New Economist is rather more guarded, pointing to the IMF forecast, and the recent Federal Statistics Office announcement that second quarter growth came in at 0%. But New Economist find faith in an (old) Economist view that things are getting better in Germany’s surprising economy (ask Doug on the main page about the surprising bit 🙂 ). As New Economist says “Of course the Economist can get it wrong, but in thbis case maybe they’re onto something”, while as Edward replies “of course the IMF can get it wrong, but in this case maybe they’re onto something”

The Financial Times definitely comes down on the side of the optimism camp, but in their case with significant prudence:

However, fears Germany?s election system might result in a fractious ?grand coalition? between the CDU and Social Democrats may have damped expectations more recently and economists remain cautious about the strength of any German upswing. Holger Schmieding, economist at Bank of America, warned that expectations were fickle and that ?the economic upswings heralded by major surges in the ZEW in mid-2002 and early 2004 both turned out to be disappointingly shallow and short-lived?.

As for me, well, for my part
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The SPD Opens The Door

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The SPD, in the shape of its President Franz M?ntefering, has opened the door – not to swarms of locusts, or hedge fund executives but to the CDU, and its leader Angela Merkel. M?ntefering said at the weekend he would back a grand coalition with the opposition CDU should the German chancellor Gerhard Schr?der lose next month’s general election. Of course, the consensus opinion is that this would just about kill the reform process stone dead. Morgan Stanley’s Elga Bartsch has a reasoned explanation for this view here (NB, you see I don’t only malign her. Hint: try Googling for “Elga Bartsch”).

Survey: Germany’s (likely) upcoming election

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While the more important part of Germany’s electorate seems to be treating the ongoing campaign as some kind of diversion from a rather rainy summer, there is also, according to a poll published in the Frankfurter Allgemeine today, a common understanding that the upcoming federal election – the one that will take place on September 18 if the constitutional court confirms President Koehler’s decision to dissolve the Bundestag – is a particularly important one.

Given this sentiment and the most unusual way the elections were called, it is not entirely surprising that, in addition to the usual pollsters, political scientists concerned with electoral research are having a busy summer. One of them is my friend Thorsten Faas at the University Duisburg-Essen, who is currently asking Germans to spend a couple of minutes filling out an online survey at www.wahlumfrage2005.de (in German).

So if you’re entitled to vote in Germany, are interested in the kind of questions political scientists might ask to make you reveal all your self-contradicting political opinions, and have a couple of minutes to spare for the progress of science, why not take the survey. I already did, and it didn’t hurt…

Something Worries Me About Peter Bofinger

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Really I realise I have been remiss in another important sense. I have long assumed that in fact the decision to reduce deficits was taken due to the coming fiscal pressure from ageing. This certainly was the background to the discussion. However now I look at the details of the SPG this area is not mentioned (as far as I can see) and the other – the free rider and associated – is the principal consideration.

So those who criticize the bureaucratic and infexible nature of the ECB are in the right to this extent. Of course the underlying demographics *should* be part of the pact, but that is another story.

I find myself in a tricky situation, since I am deeply sceptical that the euro can work, and now after the French vote even more so, but since it has been set in motion, the best thing is obviously to try and make it work (even while doubting). So I am thinking about all this. Obviously I should try and write a longer post making this clearer.

The SGP was adopted at the Amsterdam Council 1997. A history of the implementation of the pact, and a summary of the debate over the new pact can be found here. The Stability and Growth Pact was designed as a framework to prevent inflationary processes at the national level. For this purpose it obliges national governments to follow the simple rule of a balanced budget or a slight surplus.

Now if we go back to the origins of the pact, to the communication of the European Commission on 3 September 2004, you will find the following:

“As regards the debt criterion, the revised Stability and Growth Pact could clarify the basis for assessing the “satisfactory pace” of debt reduction provided for in Article 104(2)(b) of the Treaty. In defining this “satisfactory pace”, account should be taken of the need to bring debt levels back down to prudent levels before demographic ageing has an impact on economic and social developments in Member States. Member States’ initial debt levels and their potential growth levels should also be considered. Annual assessments could be made relative to this reference pace of reduction, taking into account country-specific growth conditions.”

Now curiously I have found nothing in Bofingers argument which seems even to vaguely recognise this background.

A good starting point for this topic would be the conference “Economic and Budgetary Implications of Global Ageing held by the Commission in March 2003.

The European Council in Stockholm of March 2001
agreed that ?the Council should regularly review the
long-term sustainability of public finances, including the
expected strains caused by the demographic changes
ahead. This should be done both under the guidelines
(BEPGs) and in the context of the stability and
convergence programmes.?

This document on the history of EU thinking on ageing and sustainability is incredible.
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Narodwagen?

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BusinessWeek spills a lot of ink on the rise of the car industry in Central and Eastern Europe. The idea that a lot of manufacturing is headed east is nothing new, but to see the numbers and changes laid out so explicitly gives a much clearer idea of the challenges that Western societies are facing.

Volkswagen [in Germany has] the highest labor costs in the industry — close to $50 an hour for a 28-hour workweek, some 20% over the already high average wage for German auto workers. In contrast, Slovaks [at another VW factory] cost $6 an hour and work a 40-hour week, netting VW annual personnel cost savings of $1.8 billion, according to analysts at Germany’s Bank Sal. Oppenheim. If [Thomas] Schmall [chairman of VW Slovakia] needs to boost production suddenly to meet a surge in demand, the new shifts can be arranged overnight. In Germany, negotiations with unions to alter work-time models can take up to six months and cost more in overtime premiums.

Ouch.
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Life Expectancy in East and West Germany

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After so many days of posting topics related one way or another with death, perhaps it is better to get back to life. One good excuse for doing this could be the 25th International Population Conference organised by the International Union for the Scientific Study of Population and which opened yesterday in Tours, France.

You can find the full conference agenda here, and there are topics to suit all tastes for those who are interested.

Over the next few days I’ll post on one or two of the workshop topics which catch my eye, and today it’s a paper by German-based researcher Marc Luy, entitled “A new hypothesis for explaining the mortality gap between eastern and western Germany” (Only extended abstract available online at present).
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