German unemployment dropped by a non-seasonally adjusted 156,800 in September. Officially, 3.031 million Germans are unemployed. This is the lowest level since November 2008. In seasonally-adjusted terms, unemployment dropped by 40,000, pushing the seasonally-adjusted unemployment rate further down to 7.5%, from 7.6% in August.
On time for the 20th anniversary of German reunification, the German labour market has become a real success story. This has not always been the case. The reunification shock, a rigid labour market and slack in the economy had sent unemployment rates to double-digit levels for many years. The drop in unemployment from 12% in 2005 to the current level should be a good lesson for other countries, showing that structural reforms can yield positive results. But a lot of stamina is required.
Looking ahead, today’s labour market report bodes well for private consumption. Dropping unemployment numbers should bring psychological support for consumers, increasing the feel-good-factor. Even more important for private consumption, employment has been increasing since the beginning of the year and this trend should continue. Employment expectations are close to historical highs and the official vacancy index, BA-X, has returned to its pre-crisis level.
The German labour market has defied many sceptics and it is hard to find reasons why the current trend on the labour market should not continue. Even the reduction of the short-time work schemes does not affect the positive trend. With the current tail wind, it should not take long before unemployment will drop below the psychological threshold of 3 million. The good-news-show will continue.
Thursday, September 30, 2010
Wednesday, September 29, 2010
Now or never
The European Commission today presented its proposals to beef up fiscal surveillance in Europe. As expected, the proposals hinge on three pillars: a prominent role on debt, stricter sanctions and a new focus on competitiveness, trying to improve both the preventive and the corrective arm of the current Stability and Growth Pact.
As regards the preventive part, annual expenditure growth should not exceed medium-term GDP growth anymore. Countries not sticking to this rule could be penalised with a fine of 0.2% of GDP. Decisions on this fine should be taken with a “reverse voting” mechanism. This means that a sanction will be automatic but could be turned down by the Council (European governments). In the current setting, the Council always has to approve verdicts from the Commission.
As regards the corrective arm, more focus should be given to debt. The Commission proposes to make sanctions possible against countries where government debt exceeds 60% of GDP and where at the same time the debt ratio is not improving over a three-year period. The Stability and Growth Pact already foresaw the option of an “excessive debt procedure” but this procedure had never been made operational. In addition, sanctions should not come at the end of the ride as it is the case in the current setting but immediately when an excessive deficit or debt procedure is started. Again, the procedure of “reverse voting” should be applied.
Finally, the Commission came also up with a framework to tackle macroeconomic balances. Parallel to the procedure on deficits and debt, a new excessive imbalance procedure should be introduced. Based on a set of indicators, the Commission and the Council should identify imbalances and address them, eventually even with sanctions.
All in all, the Commission’s proposals are a bold and balanced step towards a better fiscal framework. Not all proposals will see the light of legal action or will get watered down in some horse trading with national governments. In particular the excessive imbalance procedure rather looks like an intellectual hobby horse but will be hard to implement. Moreover, whether sanctions of 0.2% of GDP really scare off governments from running deficits is rather unlikely. (Temporarily) taking away voting rights would probably have a bigger impact. On a more positive note, the focus on debt will be essential in avoiding a second sovereign debt crisis in the future. Moreover, the idea of reverse voting is charming as it cleverly turns around the burden of proof.
With today’s proposals the Commission tries to take the lead in the debate, putting enormous pressure on the Council Working Group under Van Rompuy. The proposals underline the urgency and the fact that the window of opportunity to sharpen the current framework might me small. The Commission proposals are probably the best possible upgrade of the fiscal framework without entering a fiscal union. More is hardly possible. Now national governments have to react. It is now or never.
As regards the preventive part, annual expenditure growth should not exceed medium-term GDP growth anymore. Countries not sticking to this rule could be penalised with a fine of 0.2% of GDP. Decisions on this fine should be taken with a “reverse voting” mechanism. This means that a sanction will be automatic but could be turned down by the Council (European governments). In the current setting, the Council always has to approve verdicts from the Commission.
As regards the corrective arm, more focus should be given to debt. The Commission proposes to make sanctions possible against countries where government debt exceeds 60% of GDP and where at the same time the debt ratio is not improving over a three-year period. The Stability and Growth Pact already foresaw the option of an “excessive debt procedure” but this procedure had never been made operational. In addition, sanctions should not come at the end of the ride as it is the case in the current setting but immediately when an excessive deficit or debt procedure is started. Again, the procedure of “reverse voting” should be applied.
Finally, the Commission came also up with a framework to tackle macroeconomic balances. Parallel to the procedure on deficits and debt, a new excessive imbalance procedure should be introduced. Based on a set of indicators, the Commission and the Council should identify imbalances and address them, eventually even with sanctions.
All in all, the Commission’s proposals are a bold and balanced step towards a better fiscal framework. Not all proposals will see the light of legal action or will get watered down in some horse trading with national governments. In particular the excessive imbalance procedure rather looks like an intellectual hobby horse but will be hard to implement. Moreover, whether sanctions of 0.2% of GDP really scare off governments from running deficits is rather unlikely. (Temporarily) taking away voting rights would probably have a bigger impact. On a more positive note, the focus on debt will be essential in avoiding a second sovereign debt crisis in the future. Moreover, the idea of reverse voting is charming as it cleverly turns around the burden of proof.
With today’s proposals the Commission tries to take the lead in the debate, putting enormous pressure on the Council Working Group under Van Rompuy. The proposals underline the urgency and the fact that the window of opportunity to sharpen the current framework might me small. The Commission proposals are probably the best possible upgrade of the fiscal framework without entering a fiscal union. More is hardly possible. Now national governments have to react. It is now or never.
Friday, September 24, 2010
Thursday, September 9, 2010
Consumptie alleen maakt niet gelukkig
Duitsland verwacht weer eens een hete herfst. Niet vanwege het weer. Dat is daar net zo slecht als in België. Nee, net zoals in de herfst van 2007 en het voorjaar van 2008 zetten de Duitse vakbonden in op een stevige loonstijging. Twee jaar geleden zorgden hoge looneisen nog voor Europees hoofdschudden. Nu moeten hogere Duitse lonen een zegen zijn voor Europa. Na jaren van abstinentie zijn de Duitsers toe aan hogere lonen. De panacee voor een zelf-dragend herstel is het echter niet.
Na de zomervakantie kwam de grootste Duitse vakbond, de IG Metall, met de officiële eisen voor de loononderhandelingen: een loonstijging van 6%. Absurd, komt meteen het automatisch reflex van de werkgevers. Het herstel is nog veel te broos voor hogere lonen. Maar ja, heeft iemand ooit een werkgever in de industrie gehoord, die loonstijgingen toejuicht? Nee, zelfs niet in goede tijden.
Hogere lonen kunnen op dit moment helpen om de sukkelende particuliere consumptie in Duitsland eindelijk op gang te brengen. De reële lonen zijn al meer dan tien jaar nauwelijks meer gestegen. Bovendien is het aantal van werknemers in lage lonen banen in de laatste jaren meer dan verdubbeld. Natuurlijk kan niemand ondernemers dwingen tot loonsverhogingen, zelfs niet de politiek. In het tijdperk van globalisering verdwijnen banen snel naar het buitenland als het cost-benefit plaatje niet meer klopt. Toch is de Duitse regering niet machteloos. De regering kan direct en indirect invloed uitoefenen op de loononderhandelingen. Het minimumloon blijft een directe en efficiënte maatregel. Aangepast per sector en regio kan het minimumloon een ondergrens zetten voor het loonniveau en daarmee de trend stoppen van een brede waaier aan lonen. Via gunstige afschrijvingsregels of investeringsincentives kan de politiek mogelijke emigratie van banen voor zijn.
En dat is niet eens alles. Consumptie alleen maakt niet gelukkig en loonstijgingen en meer consumptie alleen leiden niet tot houdbare economische groei. Kijk maar naar de Amerikaanse economie. Om de Duitse economie op het pad van een houdbaar herstel te brengen is meer nodig. Innovatie, een groeiende dienstensector, onderzoek en ontwikkeling en onderwijs zijn essentieel. Dit kan alleen met visie en strategie. Hiervoor moet de Duitse regering na de heisa rond Bundesbanker Sarrazin en het kernergiedossier weer aandacht besteden aan de economie.
Begunstigd door economische meevallers en de wind in de zeilen heeft Duitsland een unieke mogelijkheid om de economie klaar te stomen voor de toekomst. Anders zijn hogere lonen alleen de vonk, maar niet het echte vuur, en al snel uitgeblazen door de internationale concurrentie.
Deze column verscheen eerder in het Belgische dagblad "De Tijd".
Na de zomervakantie kwam de grootste Duitse vakbond, de IG Metall, met de officiële eisen voor de loononderhandelingen: een loonstijging van 6%. Absurd, komt meteen het automatisch reflex van de werkgevers. Het herstel is nog veel te broos voor hogere lonen. Maar ja, heeft iemand ooit een werkgever in de industrie gehoord, die loonstijgingen toejuicht? Nee, zelfs niet in goede tijden.
Hogere lonen kunnen op dit moment helpen om de sukkelende particuliere consumptie in Duitsland eindelijk op gang te brengen. De reële lonen zijn al meer dan tien jaar nauwelijks meer gestegen. Bovendien is het aantal van werknemers in lage lonen banen in de laatste jaren meer dan verdubbeld. Natuurlijk kan niemand ondernemers dwingen tot loonsverhogingen, zelfs niet de politiek. In het tijdperk van globalisering verdwijnen banen snel naar het buitenland als het cost-benefit plaatje niet meer klopt. Toch is de Duitse regering niet machteloos. De regering kan direct en indirect invloed uitoefenen op de loononderhandelingen. Het minimumloon blijft een directe en efficiënte maatregel. Aangepast per sector en regio kan het minimumloon een ondergrens zetten voor het loonniveau en daarmee de trend stoppen van een brede waaier aan lonen. Via gunstige afschrijvingsregels of investeringsincentives kan de politiek mogelijke emigratie van banen voor zijn.
En dat is niet eens alles. Consumptie alleen maakt niet gelukkig en loonstijgingen en meer consumptie alleen leiden niet tot houdbare economische groei. Kijk maar naar de Amerikaanse economie. Om de Duitse economie op het pad van een houdbaar herstel te brengen is meer nodig. Innovatie, een groeiende dienstensector, onderzoek en ontwikkeling en onderwijs zijn essentieel. Dit kan alleen met visie en strategie. Hiervoor moet de Duitse regering na de heisa rond Bundesbanker Sarrazin en het kernergiedossier weer aandacht besteden aan de economie.
Begunstigd door economische meevallers en de wind in de zeilen heeft Duitsland een unieke mogelijkheid om de economie klaar te stomen voor de toekomst. Anders zijn hogere lonen alleen de vonk, maar niet het echte vuur, en al snel uitgeblazen door de internationale concurrentie.
Deze column verscheen eerder in het Belgische dagblad "De Tijd".
Wednesday, September 8, 2010
High-flyer touches base
Industrial data shows that the high-flyer of the second quarter has been brought back down to earth, supporting the ECB’s cautiousness.
The third quarter has started on a negative note as the first batch of real economic data brought back a good dose of realism. Retail sales, new orders, and exports were all down and only industrial production showed some meagre growth. However, there is no need to panic. The industrial recovery is not over. But it will continue at a slower pace.
German industrial production only grew by 0.1% MoM in July. This was already the second consecutive month with disappointing industrial numbers. However, this pause of the upswing should remain temporary. Leading indicators, richly filled order books, the drop in short-work schemes and anecdotal evidence of labour shortages all point towards a renewed pick-up in industrial production in the coming months.
Exports also took the expected break after an impressive surge in the second quarter, dropping by 1.5% MoM. As imports at the same dropped by 2.2%, the trade surplus still improved. Looking ahead, German exports will have to deal with two downward risks: slower global demand and fiscal consolidation in other Eurozone countries. While these risks are for real, we do not expect them to choke off the export recovery. First of all, demand from emerging Asia and, in particular, China should remain stable and even demand from other industrialised countries should not entirely be dismissed. Secondly, German manufacturers could also benefit from a possible next investment initiative in the US. Finally, the impact of fiscal consolidation in the Eurozone on German exports should be marginal. The share of the Eurozone periphery countries in total German exports is still small. In the first half of this year, exports to Spain, Portugal, Greece and Ireland only totalled slightly more than 5% of total German exports.
Latest German data were a harsh reminder of the inevitable growth slowdown in the second half of the year. The slowdown of industrial activity also shows that a transition towards more self-sustained growth is not only desirable but really necessary. As long as even the recovery in the Eurozone’s showcase economy is not on solid footing, the ECB has no reason at all to change its current cautiousness.
The third quarter has started on a negative note as the first batch of real economic data brought back a good dose of realism. Retail sales, new orders, and exports were all down and only industrial production showed some meagre growth. However, there is no need to panic. The industrial recovery is not over. But it will continue at a slower pace.
German industrial production only grew by 0.1% MoM in July. This was already the second consecutive month with disappointing industrial numbers. However, this pause of the upswing should remain temporary. Leading indicators, richly filled order books, the drop in short-work schemes and anecdotal evidence of labour shortages all point towards a renewed pick-up in industrial production in the coming months.
Exports also took the expected break after an impressive surge in the second quarter, dropping by 1.5% MoM. As imports at the same dropped by 2.2%, the trade surplus still improved. Looking ahead, German exports will have to deal with two downward risks: slower global demand and fiscal consolidation in other Eurozone countries. While these risks are for real, we do not expect them to choke off the export recovery. First of all, demand from emerging Asia and, in particular, China should remain stable and even demand from other industrialised countries should not entirely be dismissed. Secondly, German manufacturers could also benefit from a possible next investment initiative in the US. Finally, the impact of fiscal consolidation in the Eurozone on German exports should be marginal. The share of the Eurozone periphery countries in total German exports is still small. In the first half of this year, exports to Spain, Portugal, Greece and Ireland only totalled slightly more than 5% of total German exports.
Latest German data were a harsh reminder of the inevitable growth slowdown in the second half of the year. The slowdown of industrial activity also shows that a transition towards more self-sustained growth is not only desirable but really necessary. As long as even the recovery in the Eurozone’s showcase economy is not on solid footing, the ECB has no reason at all to change its current cautiousness.
Sunday, September 5, 2010
Pragmatismus statt Prinzipien
Europa hat in der Krise schon viele Prinzipien über Bord geworfen und dafür Kritik eingesteckt. Euroländer dürfen nicht für die Schulden von anderen gerade stehen. Oder die EZB darf keine Staatsanleihen kaufen. Diese Prinzipien gibt es nicht mehr. Fordert die Krise jetzt ein neues Opfer? Die einheitliche Geldpolitik?
Die EZB hat jahrelang gepredigt, dass sie sich nicht am Schicksal einzelner Euro-Länder orientiert, sondern nur an Entwicklungen des gesamten Euroraums. Diese Zeiten sind vorbei. Spätestens seit der Sitzung vom letzten Donnerstag heißt es nicht mehr “one-size-fits-all”, sondern “many-sizes-for-all”. Der jetzige Aufschwung macht deutlich, dass es diesen gesamten Euroraum im Augenblick nicht gibt. Während die Kernländer der Währungsunion, angeführt von Deutschland, auf dem guten Weg zu einem selbst-tragenden Aufschwung sind, hinkt die Euro-Peripherie deutlich hinterher. An diesem Bild wird sich auch so schnell nichts ändern. Haushaltskonsolidierung und Strukturreformen werden noch ein Weile eine Wachstumsbremse für Länder der Euro-Peripherie sein.
Die EZB muss diese Entwicklung tolerieren. Nur so findet der Euroraum zu einem neuen Gleichgewicht. Die EZB wird nicht noch mal so schnell auf deutsche Lohnabschlüsse reagieren wie noch 2008. Die ganze Aufmerksamkeit der EZB geht darum jetzt zu den Schwachstellen des Euroraums. Neben den Wachstumsunterschieden ist das, trotz erfolgreichem Stresstest im Juli, das Finanzsystem. Vor allem Banken aus Ländern am Rande des Euroraums hängen noch immer am Tropf der EZB. Ob sie will oder nicht, die EZB kann die unbegrenzte Liquiditätsversorgung für die Banken noch nicht zurückdrehen. Es wäre eine Gefahr für das Finanzsystem und den Aufschwung. Darum kündigte EZB Präsident Trichet am Donnerstag an, Banken bis auf weiteres so viel Geld leihen, wie sie wollen.
Die EZB tut gut daran, sich im Augenblick mehr den Schwachstellen des Euroraums zu widmen als deutschen Inflationsgespenstern hinterherzujagen. Pragmatismus statt Prinzipien.
Dit stuk verscheen eerder in het Duitse weekblad "Euro am Sonntag".
Die EZB hat jahrelang gepredigt, dass sie sich nicht am Schicksal einzelner Euro-Länder orientiert, sondern nur an Entwicklungen des gesamten Euroraums. Diese Zeiten sind vorbei. Spätestens seit der Sitzung vom letzten Donnerstag heißt es nicht mehr “one-size-fits-all”, sondern “many-sizes-for-all”. Der jetzige Aufschwung macht deutlich, dass es diesen gesamten Euroraum im Augenblick nicht gibt. Während die Kernländer der Währungsunion, angeführt von Deutschland, auf dem guten Weg zu einem selbst-tragenden Aufschwung sind, hinkt die Euro-Peripherie deutlich hinterher. An diesem Bild wird sich auch so schnell nichts ändern. Haushaltskonsolidierung und Strukturreformen werden noch ein Weile eine Wachstumsbremse für Länder der Euro-Peripherie sein.
Die EZB muss diese Entwicklung tolerieren. Nur so findet der Euroraum zu einem neuen Gleichgewicht. Die EZB wird nicht noch mal so schnell auf deutsche Lohnabschlüsse reagieren wie noch 2008. Die ganze Aufmerksamkeit der EZB geht darum jetzt zu den Schwachstellen des Euroraums. Neben den Wachstumsunterschieden ist das, trotz erfolgreichem Stresstest im Juli, das Finanzsystem. Vor allem Banken aus Ländern am Rande des Euroraums hängen noch immer am Tropf der EZB. Ob sie will oder nicht, die EZB kann die unbegrenzte Liquiditätsversorgung für die Banken noch nicht zurückdrehen. Es wäre eine Gefahr für das Finanzsystem und den Aufschwung. Darum kündigte EZB Präsident Trichet am Donnerstag an, Banken bis auf weiteres so viel Geld leihen, wie sie wollen.
Die EZB tut gut daran, sich im Augenblick mehr den Schwachstellen des Euroraums zu widmen als deutschen Inflationsgespenstern hinterherzujagen. Pragmatismus statt Prinzipien.
Dit stuk verscheen eerder in het Duitse weekblad "Euro am Sonntag".
Thursday, September 2, 2010
ECB postpone exit once again
Despite upward revisions to the growth forecasts, ECB president Trichet tried to strike a cautious note in today’s meeting. As expected, rates remained on hold. As also expected, with thanks to Bundesbank president Weber, the ECB today announced an extension of its liquidity measures with full allotment until early next year. As a consequence, liquidity provision will remain ample, a next exit attempt will at the earliest only start in the first quarter of next year and rate hikes are still a distant future.
As regards the ECB’s assessment of the economy, ECB president Trichet tried to send a two-sided message. On the one side, the ECB sees a “positive underlying momentum” in the Eurozone economy since the recovery started and the ECB’s staff projections were significantly revised upwards. For 2010, the ECB now expects GDP growth of 1.6%, from 1.0% in June. For 2011, GDP growth is now expected at 1.4%, from 1.2%. On the other side, Trichet stressed prevailing uncertainty and even cautioned against too much optimism. In the Governing Council’s view, risks to the latest staff projections were slightly tilted to the downside.
As regards inflation, Trichet reiterated the almost traditional distinction between headline inflation and domestic price pressures. While strong global growth and energy prices could still lead to higher headline inflation, the ECB expects domestic price pressure to remain low. In the latest ECB staff projections, headline inflation is expected to come in at 1.6% in 2010, from 1.5% in June, and at 1.7% in 2011, from 1.6%.
While the ECB’s macro assessment did not bring any surprises and can be summarised as “a gradual sub-potential recovery without risks to price stability”, the ECB presented the official postponement of its liquidity exit. As expected, the ECB will provide unlimited liquidity until the first quarter of 2011. One-week and one-month refinancing operations will be offered at full allotment at least until 18 January 2011. Full allotment will also be applied to the monthly 3-month LTROs until the end of the year. Last but not least, the ECB will also carry out three fine-tuning operations on 30 September, 11 November and 23 December to smoothen out the expiring 6-month and 12-month refinancing operations. These measures are too big to only tackle the end-of-the-year problem for banks. They show that, despite the positive stress tests in July, the ECB is still concerned about the health of the financial system.
All in all, after Axel Weber’s comments almost two weeks ago, today’s meeting was almost predetermined to become a damp squib. Even the extension of the liquidity measures did not come as a surprise anymore. Today’s meeting and particularly the decision on the liquidity programme shows that the ECB still does not trust the recovery and the health of the financial system. The attempt to enter the exit lane has once again been postponed.
As regards the ECB’s assessment of the economy, ECB president Trichet tried to send a two-sided message. On the one side, the ECB sees a “positive underlying momentum” in the Eurozone economy since the recovery started and the ECB’s staff projections were significantly revised upwards. For 2010, the ECB now expects GDP growth of 1.6%, from 1.0% in June. For 2011, GDP growth is now expected at 1.4%, from 1.2%. On the other side, Trichet stressed prevailing uncertainty and even cautioned against too much optimism. In the Governing Council’s view, risks to the latest staff projections were slightly tilted to the downside.
As regards inflation, Trichet reiterated the almost traditional distinction between headline inflation and domestic price pressures. While strong global growth and energy prices could still lead to higher headline inflation, the ECB expects domestic price pressure to remain low. In the latest ECB staff projections, headline inflation is expected to come in at 1.6% in 2010, from 1.5% in June, and at 1.7% in 2011, from 1.6%.
While the ECB’s macro assessment did not bring any surprises and can be summarised as “a gradual sub-potential recovery without risks to price stability”, the ECB presented the official postponement of its liquidity exit. As expected, the ECB will provide unlimited liquidity until the first quarter of 2011. One-week and one-month refinancing operations will be offered at full allotment at least until 18 January 2011. Full allotment will also be applied to the monthly 3-month LTROs until the end of the year. Last but not least, the ECB will also carry out three fine-tuning operations on 30 September, 11 November and 23 December to smoothen out the expiring 6-month and 12-month refinancing operations. These measures are too big to only tackle the end-of-the-year problem for banks. They show that, despite the positive stress tests in July, the ECB is still concerned about the health of the financial system.
All in all, after Axel Weber’s comments almost two weeks ago, today’s meeting was almost predetermined to become a damp squib. Even the extension of the liquidity measures did not come as a surprise anymore. Today’s meeting and particularly the decision on the liquidity programme shows that the ECB still does not trust the recovery and the health of the financial system. The attempt to enter the exit lane has once again been postponed.
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