Europe Foreign Trade and International Economic Relations

Helmut Kohl Was Right

Economists criticize his decisions on German reunification and the euro, but he understood better the relationship between politics and economics.

Helmut Kohl’s death earlier this month has revived a contentious debate over his legacy. Although the former chancellor of Germany is widely considered to be a political genius, conventional wisdom holds that his economic policy was a failure. It’s time to reassess that view. Kohl was smarter on economics than many professional economists are willing to admit.

The arguments that … [continue reading]

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Currency and Financial Markets ECB Europe

Statement on the ECB council meeting (June 8, 2017)

The ECB has now cautiously started its monetary policy reversal, even if only through words rather than deeds. The change in communication is an important step in the right direction.

Many in Germany consider the ECB’s exit as too slow. Many underestimate the importance of the ECB decision, which signals a sustained monetary policy tightening for the first time in more than ten years. The ECB is right in preparing the exit gradually and not abruptly in order not to … [continue reading]

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Business Cycles, Growth, Economic Structure Currency and Financial Markets ECB Economic Policy Europe Macroeconomics

Statement on the ECB council meeting (April 27, 2017)

It is wise for the ECB to stick to its policy strategy and not let itself be impressed by criticism from Germany. The pressure from Germany for the ECB to end its expansionary policy stance prematurely has increased. The ECB is right to resist the pressure from Germany as the economic and financial risks for the euro area are still significant.

The ECB is only gradually getting closer to meeting its price stability mandate as in particular core inflation is … [continue reading]

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Europe Foreign Trade and International Economic Relations

America First, But Germany Second

If Trump wants a Europe that takes care of its own needs, he needs a strong partner in Berlin.

Donald Trump’s relationship with Angela Merkel has gotten off to a rocky start. Trump has, effectively, singled out Germany and its chancellor as his main nemesis in Europe. He has criticized her for her policy toward refugees, for an unfair trade policy, and for a lack of leadership in Europe. For its part, the German government, alongside many of its European … [continue reading]

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Economic Policy Election2017 Europe inequality ZEIT ONLINE op-ed column

Trump’s brand of populism feeds on frustration and fear

January 20, 2017 is a historic day, with Donald Trump’s entry into office as the 45th U.S. President marking the beginning of a new era. Yet his inauguration is accompanied, at least among certain political circles, by a widespread anticipation of his failure – as well as the belief that it’s only a matter of time until everyone else catches on.

The prospect of a Trump presidency is generating collective concern around the globe: since he was elected in … [continue reading]

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Currency and Financial Markets ECB Europe

Statement on today’s meeting of the Council of the European Central Bank (ECB)

The ECB is right to orientate its policy towards price stability at the mid-term and not to react to short-term price movements. Calls for an early exit of the ECB’s expansive policy are misplaced and premature. The price dynamics of the past two months mainly reflect a normalization of energy prices. The euro area economy remains weak and unemployment rates are too high to allow for a quick return to price stability and for an end to the expansive monetary … [continue reading]

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Business Cycles, Growth, Economic Structure Currency and Financial Markets ECB Economic Policy Europe Foreign Trade and International Economic Relations

Germany’s Misunderstood Trade Surplus

Now that Germany’s current-account surplus has reached a record €270 billion ($285 billion), or close to 8.7% of GDP, the ongoing debate about its economic model has intensified. Eurozone politicians and Donald Trump’s administration in the United States are each blaming the other for the economic imbalance; and all are blaming the euro.

Trump’s administration, for its part, has attacked Germany for exporting too much, and accused it of manipulating the euro. In fact, Germany’s trade surplus has little to … [continue reading]

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Election2017 Europe

A German debate over the future of Europe is long overdue

The op-ed was first published on FT.com on February 28, 2017.

The emergence of Martin Schulz as the centre-left Social Democrats’ (SPD) candidate for chancellor has fundamentally altered the dynamics of German politics. It is also changing the debate in Germany on inequality and the future of Europe in ways that will have a significant impact across the continent.

Germany is regarded as an economic success story. Unemployment is at its lowest level since reunification, while the trade surplus has … [continue reading]

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ECB Europe Monetary Policy

Statement on the ECB decision

The ECB decision is wise and balanced. It may disappoint many in Germany. The extension of the PSPP programme was inevitable as the risks to the euro area economy are still huge and the ECB is likely to miss its price stability mandate through 2019.

The ECB decision is wise as it leaves all options open. The ECB is introducing more flexibility through the changes to the PSPP programme. The ECB decision implies a longer period of low interest rates … [continue reading]

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ECB Europe

Statement on today’s meeting of the Council of the ECB, October 20, 2016

The ECB decision bears no major surprises. Draghi did not contradict market expectations of an extension of the QE program to be announced in December. Such an extension has thus become even more likely. I do not expect a reduction in the monthly purchases by the ECB. Such a step would disappoint market expectations and could trigger undesired market reactions. The latest economic news are not encouraging and give little cause for a fundamental change in monetary policy.

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