Band 14, Heft 3-4

This article summarizes the key proposals of the report by the Liikanen Commission. It starts with an explanation of a crisis narrative underlying the Report and its proposals. The proposals aim for a revitalization of market discipline in financial markets. The two main structural proposals of the Liikanen Report are: first, for large banks, the separation of the trading business from other parts of the banking business (the “Separation Proposal”), and the mandatory issuing of subordinated bank debt thought to be liable (the strict “Bail-in Proposal”). The credibility of this commitment to private liability is achieved by strict holding restrictions. The anticipated consequences of the introduction of these structural regulations for the financial industry and markets are addressed in a concluding part.

This article reflects on the prospects for an effective banking union to complement the European Monetary Union by (I) reviewing the recent European bank supervision and resolution experience, (II) extending the discussion to general incentive problems underlying regulatory failure in banking, (III) describing five necessary conditions for satisfactory regulatory performance, and (IV) highlighting some specific problems with the new bank recovery and resolution directive

The management of the euro crisis, i.e. the ECB’s lender of last resort activities for crisis countries and crisis banks, as well as the establishment of the European Stability Mechanism and a European banking union, has been severely criticized by economists following the German ordo-liberal tradition. They argue that crisis management violates key principles of economic policy, namely the principle of liability and the principle of stable money. Accordingly, euro crisis management undermines private sector confidence in the market economy and in the currency. This article argues that this view neglects the fact that the crisis itself reflects a loss of confidence. Thus, crisis management has to restore confidence first, which can only be achieved by measures that inherently conflict with ordo-liberalism. As a result, the critique of euro crisis management is misplaced as ordo-liberal principles provide a useful guideline for economic policies only after confidence has been restored.

This article argues that Europe’s fiscal policy institutions and Europe’s financial regulation should be designed consistently. The article discusses ways to make the European no bail out rules more credible. One way of achieving this is to facilitate the restructuring or recapitalization of banks. This in turn is made easier through the availability of central public funds of appropriate size. The article also discusses ways to improve European sanctioning mechanisms and constitutional rules for fiscal policy choices.

Several countries in the euro area still face a competitiveness problem. This problem is to a considerable extent due to wage growth in the past that was excessive, relative to productivity growth and relative to the performance of their competitors. As a result, firms in these countries invest less than desirable to create new jobs. This article reconfirms price and cost considerations at the core of competitiveness and explains why this concept is of fundamental importance in a monetary union. It explains how wage growth could be misguided in the past in the euro area and discusses policy options ahead. In doing so, it highlights the economic and political economy challenges of adjusting wage policy between surplus and deficit countries. The article also touches upon structural competitiveness issues and outlines the scope for reform in this area.

We analyze the future retirement incomes for current working cohorts in Germany both in absolute (replacement level) and in relative (replacement rate) terms. Due to the fundamental reforms of the statutory pension system implemented since 2001, it is necessary to include all relevant sources of retirement incomes, especially private (Riester-pension) and occupational pension schemes. For this purpose we use methods of data combination to draw information from several large sample data sets. As a by-product, this allows us to investigate regional disparities in future old age incomes.

There is an intensive debate about old-age poverty in Germany that has induced political parties to develop proposals for higher pensions of poor pensioners in light of the federal elections of September 2013. In addition, several proposals from economists aim at reforming the pension system in a way that mitigates old-age poverty. In this paper, we consider these proposals in a computable general equilibrium model in order to derive their effects on the income distribution, on employment, on the capital stock and on GDP. Our results indicate that negative employment, capital and GDP effects are induced by such reforms as compared to the alternative of basic means-tested social welfare in oldage. Moreover, the strongest beneficiaries would be the currently higher age employees with low income and much less the respective younger employees, while younger and higher age employees with high and medium incomes will lose.

This study analyses the theoretical and empirical effects of an inclusion of self-employed persons in the German Pension System. First, the theoretical consequences for the contribution rate are analyzed using a simple OLG model. Second, the implications for the contribution rate are simulated for different scenarios using the pension simulation model MEA-Pensim. It appears that in the short and middle run the inclusion of the self-employed persons leads to a reduction of the contribution rate. The degree of this temporary effect depends essentially on the assumed contribution assessment basis, the size and characteristics of the included group of people (all self-employed persons or only the self-employed persons without employees), and the age at which for older currently self-employed persons a preservation of the status quo will be established (inclusion of self-employed persons under the age of 50 or the age of 30). The maximal contribution rate effect arises with 1.3 percent points by including all self-employed persons with the net income as contribution basis. In this case the standard pension level would be 2.1 percent points higher. In the long run (until 2060) and independently of the underlying assumptions the contribution rate reaches the same level compared to a status quo scenario where the self-employed persons are still exempt. Given a higher life expectancy for the selfemployed their inclusion increases the contribution rate slightly in the long run. In terms of people who are already insured by the German pension system the reform has positive effects with regard to efficiency. Furthermore the equal treatment between generations improves for those who are already insured.

This article provides empirical information on the relationship between German economists’ activities in the fields of economic policy advice on the one hand and top research on the other hand. We have analyzed (a) whether top journal publications by German economists deal with particular economic issues of the German economy or society and (b) which economists are active in economic policy activities at all. To analyze the latter question we have analyzed (i) the lists of expert studies commissioned by the German Ministries of Finance, of Economic Affairs and of Labor and Social Policy, (ii) the list of experts invited to hearings of corresponding committees of the Bundestag (the Federal German Parliament) and (iii) the articles published in Wirtschaftsdienst, a German economic policy magazine. As our analysis shows, economists active in these types of policy advice are typically not top researchers as measured by their publication records. At the same time our content analysis (a) of articles published by German economists in top journals shows that the vast majority of these articles do not deal with issues of particular relevance for Germany. The analysis suggests that, in Germany, research and policy advice activities can be characterized by a strong division of labor among economists.