OCT
17
0

Press Release: Compromise on the Financial Equalisation Scheme – A Dark Day for German Federalism

Der Streit von Gebern und Nehmern wird durch eine vertikale Zuweisung von Umsatzsteuer an die Länder und großzügigere vertikale Bundeszuweisungen entschärft. Prof. Dr. Friedrich Heinemann kommentiert dazu: "Keines der zentralen Probleme im gegenwärtigen System wird gelöst. Die Länder bleiben am Tropf einer für den Wähler undurchschaubaren Finanzierung aus einem kollektiven Steuertopf. Immer noch kann sich ein Land, das sich wirtschaftsfeindlich verhält und nicht genügend für Investitionen und Beschäftigung tut, in die Hängematte der Solidarität fallen lassen." Dass der Ausgleich jetzt vertikal durch den Bund und nicht mehr horizontal durch Zahlungen zwischen den Ländern  erfolgt, entschärft das Anreizproblem in keiner Weise. "Die Reform ist mutlos und schwächt den deutschen Föderalismus weiter. Sie ist für die Länder politisch bequem, weil der Bund die Rechnungen zahlt und Ministerpräsidenten keine Verantwortung für Steuern übernehmen müssen", so Heinemann.

Die Politik sollte daher nicht beim jetzt gefundenen Kompromiss stehen bleiben. Heinemann verweist auf ein vom ZEW erarbeitetes Reformmodell. Im vom ZEW für den "Konvent für Deutschland" erarbeiteten Reformmodell eines "Verantwortungsföderalismus" erhalten die Länder die Möglichkeit, im Rahmen eines Korridors Zu- und Abschläge auf die Einkommensteuer zu erheben. Dies wäre ein wirklicher Durchbruch für mehr finanzpolitische Vernunft: "Mit mehr Steuerautonomie der Länder würden Wähler in einem Landtagswahlkampf nicht mehr nur höhere Ausgaben fordern, sondern auch nach der Gegenfinanzierung fragen".

Dass die Länder mit dem jetzt erzielten Kompromiss und der größeren Bundesbeteiligung ihre Verhandlungsziele weitgehend erreicht haben, ist für Heinemann kein Sieg, sondern ein schwarzer Tag für den deutschen Föderalismus. "Wenn ab 2020 die Schuldenbremse jegliche Neuverschuldung verbietet, dann geraten die Länder endgültig in die völlige Abhängigkeit von Steuereinnahmen, über die sie selber keine Kontrolle haben. In finanzpolitischer Hinsicht sind die Länder dabei, den Föderalismus abzuschaffen".

 

Für Rückfragen zum Inhalt

Prof. Dr. Friedrich Heinemann, Telefon 0621/1235-150, E-Mail This email address is being protected from spambots. You need JavaScript enabled to view it.

OCT
16
0

Business insolvencies down by 17.5% in July 2016

WIESBADEN – German local courts reported 1,805 business insolvencies in July 2016, which was a decline of 17.5% compared with July 2015. The Federal Statistical Office (Destatis) reports this on the basis of provisional results. This means that since December 2015, the number of business insolvencies recorded each month was lower than in the same month a year earlier.

Basic data and long time series are available in tables Insolvency proceedings (enterprises) (52411-0004) and Insolvency proceedings (other debtors) (52411-0009) in the GENESIS-Online database.

For further information:Michael Ziebach,tel: 49 (0) 611 / 75 28 11,contact form

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OCT
16
0

Social security funds record deficit of 1.3 billion euros in the 1st half of 2016

WIESBADEN – In the first six months of 2016, the social security funds recorded a cash deficit (as defined in public finance statistics) of 1.3 billion euros. The Federal Statistical Office (Destatis) also reports that the deficit was 3.4 billion euros lower than in the first half of 2015. 

The revenue of the social security funds totalled 293.4 billion euros in the first six months of 2016. This is an increase of 4.2% on the first half of 2015. Expenditure increased by 3.0% to 294.7 billion euros.

For further information:Jennifer Schmitt,tel: +49 (0) 611 / 75 29 65,contact form

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OCT
16
0

Maritime transport down 2% in the 1st half of 2016

WIESBADEN – In the first six months of 2016, the weight of seaborne goods loaded and unloaded decreased by 2%, or 3 million tonnes, compared with the first half of the previous year. The Federal Statistical Office (Destatis) reports that 148.8 million tonnes of goods were handled in German sea ports in that period.

For further information:Anja Stratmann,tel: +49 (0) 611 / 75 44 80,contact form

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OCT
16
0

Consumer prices in September 2016: +0.7% on September 2015

Highest inflation rate since May 2015

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WIESBADEN – Consumer prices in Germany were 0.7% higher in September 2016 than in September 2015. The inflation rate - as measured by the consumer price index - thus has gradually increased in the second half of the year. In July and August 2016, it had been +0.4% each. An inflation rate of +0.7% was last recorded in May 2015. Compared with August 2016, the consumer price index rose just slightly by 0.1% in September 2016. The Federal Statistical Office (Destatis) thus confirms its provisional overall results of 29 September 2016.

The development of energy prices (–3.6% on September 2015) had a downward effect on the overall rise in prices in September 2016, as had been the case in the preceding months. Compared with the previous two months, the decrease of energy prices slowed slightly year on year (July 2016: –7.0%, August 2016: –5.9%). In September 2016, the prices of both motor fuels (–3.5%) and household energy (–3.7%) for consumers were down on a year earlier. Among the household energy products, the price decrease was largest for heating oil (–12.5%). Decreases were also recorded for charges for central and district heating (–8.1%), gas prices (–3.2%) and solid fuel prices (–0.8%). Only electricity prices rose on the same month a year earlier (+0.7%). Excluding energy prices, the inflation rate in September 2016 would have been +1.2%.

The rise in food prices (+0.4%) in September 2016 was lower than the overall inflation rate. In September 2016, prices were up on a year earlier especially for edible fats and oils (+6.5%, including butter: +12.0%, and olive oil: +9.4%). Higher prices were observed, among other things, for fruit (+3.5%), and fish and fish products (+3.1%). Consumers paid markedly less for dairy products (–6.0%, including curd: –17.8%; UHT milk: –11.7%; sliced cheese: –6.9%).

The prices of goods (total) fell by 0.1% in September 2016 compared with September 2015, the main reason being the decrease in energy prices (–3.6%). Prices were also down for consumer electronics (−2.9%) and clothing (−1.0%). Besides total food prices, however, year-on-year prices were up for some goods, such as jewellery, clocks and watches (+2.9%), tobacco products (+3.3%), and newspapers and periodicals (+3.9%).

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OCT
16
0

Inheritance tax 2015: 42.4 billion euros of business assets were transferred

On 8 September, the Mediation Committee of the German Bundestag and Bundesrat convened for the first time to discuss the reform of inheritance tax. The discussions focus on the question in how far company assets will be exempted from inheritance tax in future. At the end of 2014, the Federal Constitutional Court declared the exemption regulations regarding company heirs unconstitutional.

In 2015, the Länder received a total of 6.3 billion euros of inheritance and gift tax, which was a new record level. The receipts were up by 15.4% compared with the previous year.

In 2015, the assessed property transfers by gift or inheritance amounted to 102.0 billion euros. Other property and business assets accounted for 42.4 billion euros each and, in terms of value, were the most important types of property transferred (41.6% each). On the whole, there were 15,832 cases in which business assets were transferred by gift or inheritance in 2015. In 231 cases (1.5%), these business assets amounted to more than 26 million euros. However, taken together, these cases accounted for 25.7 billion euros, or 60.6%, of all business assets transferred.

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OCT
15
0

U.S. Fed Chair Yellen Speaks

Chair Janet L. YellenAt "The Elusive 'Great' Recovery: Causes and Implications for Future Business Cycle Dynamics" 60th annual economic conference sponsored by the Federal Reserve Bank of Boston, Boston, MassachusettsMacroeconomic Research After the CrisisWatch live: https://www.bostonfed.org/live

Extreme economic events have often challenged existing views of how the economy works and exposed shortcomings in the collective knowledge of economists. To give two well-known examples, both the Great Depression and the stagflation of the 1970s motivated new ways of thinking about economic phenomena. More recently, the financial crisis and its aftermath might well prove to be a similar sort of turning point. Today I would like to reflect on some ways in which the events of the past few years have revealed limits in economists' understanding of the economy and suggest several important questions I hope the profession will try to answer. Some of these questions are not new, though recent events have made them more urgent. Appropriately, some are addressed by the papers prepared for this conference. Pursuing answers to these questions is vital to the work of Federal Reserve and other economic policymakers, and the Fed is likewise engaged in ongoing research to seek answers.

The Influence of Demand on Aggregate Supply

The first question I would like to pose concerns the distinction between aggregate supply and aggregate demand: Are there circumstances in which changes in aggregate demand can have an appreciable, persistent effect on aggregate supply?

Prior to the Great Recession, most economists would probably have answered this question with a qualified "no." They would have broadly agreed with Robert Solow that economic output over the longer term is primarily driven by supply--the amount of output of goods and services the economy is capable of producing, given its labor and capital resources and existing technologies. Aggregate demand, in contrast, was seen as explaining shorter-term fluctuations around the mostly exogenous supply-determined longer-run trend.1 This conclusion deserves to be reconsidered in light of the failure of the level of economic activity to return to its pre-recession trend in most advanced economies. This post-crisis experience suggests that changes in aggregate demand may have an appreciable, persistent effect on aggregate supply--that is, on potential output.2

The idea that persistent shortfalls in aggregate demand could adversely affect the supply side of the economy--an effect commonly referred to as hysteresis--is not new; for example, the possibility was discussed back in the mid-1980s with regard to the performance of European labor markets.3 But interest in the topic has increased in light of the persistent slowdown in economic growth seen in many developed economies since the crisis. Several recent studies present cross-country evidence indicating that severe and persistent recessions have historically had these sorts of long-term effects, even for downturns that appear to have resulted largely or entirely from a shock to aggregate demand.4 With regard to the U.S. experience, one study estimates that the level of potential output is now 7 percent below what would have been expected based on its pre-crisis trajectory, and it argues that much of this supply-side damage is attributable to several developments that likely occurred as a result of the deep recession and slow recovery.5 In particular, the study finds that in the wake of the crisis, the United States experienced a modest reduction in labor supply as a result of reduced immigration and a fall in labor force participation beyond what can be explained by cyclical conditions and demographic factors, as well as a marked slowdown in the estimated trend growth rate of labor productivity. The latter likely reflects an unusually slow pace of business capital accumulation since the crisis and, more conjecturally, the sharp decline in spending on research and development and the very slow pace of new firm formation in recent years.6

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OCT
15
0

U.S. Core Retail Sales MoM

ADVANCE MONTHLY SALES FOR RETAIL AND FOOD SERVICES SEPTEMBER 2016The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for September, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $459.8 billion, an increase of 0.6 percent (±0.5%) from the previous month, and 2.7 percent (±0.9%) above September 2015. Total sales for the July 2016 through September 2016 period were up 2.4 percent (±0.5%) from the same period a year ago. The July 2016 to August 2016 percent change was revised from down 0.3 percent (±0.5%)* to down 0.2 percent (±0.2%)*.

Retail trade sales were up 0.6 (±0.5%) from August 2016, and up 2.2 percent (±0.7%) from last year. Nonstore retailers were up 10.6 percent (±1.6%) from September 2015, while Food services and drinking places were up 6.1 percent (±3.3%) from last year.

The advance estimates are based on a subsample of the Census Bureau’s full retail and food services sample. A stratified random sampling method is used to select approximately 4,700 retail and food services firms whose sales are then weighted and benchmarked to represent the complete universe of over three million retail and food services firms. For an explanation of the measures of sampling variability included in this report, please see the Reliability of Estimates section on the last page of this publication.

The Advance Monthly Sales for Retail and Food Services for October is scheduled to be released November 15, 2016 at 8:30 a.m. EST.

For customized retail time series estimates by industry, visit the Census Bureau’s web site at www.census.gov/timeseries.

To learn more about this release and the other indicators the U.S. Census Bureau publishes, join us for the Investigating Economic Indicators Webinar Series. For more information, visit http://www.census.gov/econ/webinar.

To receive the latest updates on the nation’s key economic indicators, download the America’s Economy app for Apple and Android smartphones and tablets.

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OCT
15
0

FOMC Meeting Minutes

September 20-21, 2016

A joint meeting of the Federal Open Market Committee and the Board of Governors was held in the offices of the Board of Governors of the Federal Reserve System in Washington, D.C., on Tuesday, September 20, 2016, at 1:00 p.m. and continued on Wednesday, September 21, 2016, at 9:00 a.m.1 PRESENT:

Janet L. Yellen, ChairWilliam C. Dudley, Vice ChairmanLael BrainardJames BullardStanley FischerEsther L. GeorgeLoretta J. MesterJerome H. PowellEric Rosengren Daniel K. Tarullo Charles L. Evans, Patrick Harker, Robert S. Kaplan, Neel Kashkari, and Michael Strine, Alternate Members of the Federal Open Market Committee Jeffrey M. Lacker, Dennis P. Lockhart, and John C. Williams, Presidents of the Federal Reserve Banks of Richmond, Atlanta, and San Francisco, respectivelyBrian F. Madigan, SecretaryMatthew M. Luecke, Deputy SecretaryDavid W. Skidmore, Assistant SecretaryMichelle A. Smith, Assistant SecretaryMichael Held, Deputy General CounselRichard M. Ashton, Assistant General CounselSteven B. Kamin, EconomistThomas Laubach, Economist David W. Wilcox, Economist Thomas A. Connors, Troy Davig, Michael P. Leahy, Stephen A. Meyer, Ellis W. Tallman, Geoffrey Tootell, and William Wascher, Associate Economists Simon Potter, Manager, System Open Market Account Lorie K. Logan, Deputy Manager, System Open Market Account Robert deV. Frierson, Secretary of the Board, Office of the Secretary, Board of Governors Matthew J. Eichner,2 Director, Division of Reserve Bank Operations and Payment Systems, Board of Governors James A. Clouse, Deputy Director, Division of Monetary Affairs, Board of Governors; Maryann F. Hunter, Deputy Director, Division of Banking Supervision and Regulation, Board of Governors David Bowman, Andrew Figura, Joseph W. Gruber, Ann McKeehan, and David Reifschneider, Special Advisers to the Board, Office of Board Members, Board of Governors Trevor A. Reeve, Special Adviser to the Chair, Office of Board Members, Board of Governors Linda Robertson, Assistant to the Board, Office of Board Members, Board of Governors Eric M. Engen, Joshua Gallin, and Michael G. Palumbo, Senior Associate Directors, Division of Research and Statistics, Board of Governors Michael T. Kiley, Senior Associate Director, Division of Financial Stability, and Senior Adviser, Division of Research and Statistics, Board of Governors Antulio N. Bomfim, Ellen E. Meade, and Joyce K. Zickler, Senior Advisers, Division of Monetary Affairs, Board of Governors David López-Salido, Associate Director, Division of Monetary Affairs, Board of Governors Elizabeth Klee and Jason Wu, Assistant Directors, Division of Monetary Affairs, Board of Governors; Shane M. Sherlund, Assistant Director, Division of Research and Statistics, Board of Governors; Paul R. Wood, Assistant Director, Division of International Finance, Board of Governors Penelope A. Beattie,3 Assistant to the Secretary, Office of the Secretary, Board of Governors David H. Small, Project Manager, Division of Monetary Affairs, Board of Governors Sophia H. Allison,2 Special Counsel, Legal Division, Board of Governors Jonathan E. Goldberg and Francisco Vazquez-Grande, Senior Economists, Division of Monetary Affairs, Board of Governors Paul Dozier,2 Senior Financial Analyst, Division of International Finance, Board of Governors Randall A. Williams, Information Manager, Division of Monetary Affairs, Board of Governors Mark A. Gould, First Vice President, Federal Reserve Bank of San Francisco David Altig, Kartik B. Athreya, and Daniel G. Sullivan, Executive Vice Presidents, Federal Reserve Banks of Atlanta, Richmond, and Chicago, respectively Mary Daly, Evan F. Koenig, Susan McLaughlin,2 and Paolo A. Pesenti, Senior Vice Presidents, Federal Reserve Banks of San Francisco, Dallas, New York, and New York, respectively David Andolfatto, Vice President, Federal Reserve Bank of St. Louis Thomas D. Tallarini, Jr., Assistant Vice President, Federal Reserve Bank of Minneapolis Satyajit Chatterjee, Senior Economic Advisor, Federal Reserve Bank of Philadelphia Cindy Hull,2 Markets Officer, Federal Reserve Bank of New York Selection of Committee Officer By unanimous vote, the Committee selected Michael Held to serve as deputy general counsel, effective September 20, 2016, until the selection of his successor at the first regularly scheduled meeting of the Committee in 2017. Revisions to Documents Governing Foreign Currency Operations The manager of the System Open Market Account (SOMA) briefed the Committee on a staff proposal to revise the documents governing the System's foreign currency operations, including the Authorization for Foreign Currency Operations (Foreign Authorization), the Foreign Currency Directive (Foreign Directive), and the Procedural Instructions with Respect to Foreign Currency Operations (Procedural Instructions). The objectives of the proposal were to simplify the organization of the documents, to better reflect the current operating environment, and to clarify guidance provided to the Federal Reserve Bank selected by the Committee to execute open market transactions (Selected Bank). The staff proposed incorporating the material in the Foreign Authorization, Foreign Directive, and Procedural Instructions into a new authorization and directive that would parallel the domestic authorization and directive; the Procedural Instructions document would no longer be necessary. The proposed Foreign Authorization was structured by operation type, including standalone spot and forward transactions; warehousing of funds for the Exchange Stabilization Fund; reciprocal currency arrangements, and standing dollar and foreign currency liquidity swaps; and foreign currency holdings. Proposed substantive changes to procedures and governance included the removal of the Selected Bank's ability to independently decide, within limits, to enter into standalone spot and forward transactions, the addition of a provision for the Foreign Currency Subcommittee (Subcommittee) to give additional guidance to the Selected Bank regarding management of SOMA foreign currency holdings, and the incorporation of procedures that would allow decisions to be made promptly under circumstances in which the normal procedures would not be feasible. Additionally, the definition of and provisions governing the Subcommittee were removed from the Foreign Authorization and incorporated into the Committee's Rules of Procedure and Rules of Organization, as appropriate. By unanimous vote, the proposed Foreign Authorization, Foreign Directive, Rules of Organization, and Rules of Procedure were approved, and the Procedural Instructions were rescinded.4

AUTHORIZATION FOR FOREIGN CURRENCY OPERATIONS(As amended effective September 20, 2016) IN GENERAL

The Federal Open Market Committee (the "Committee") authorizes the Federal Reserve Bank selected by the Committee (the "Selected Bank") to execute open market transactions for the System Open Market Account as provided in this Authorization, to the extent necessary to carry out any foreign currency directive of the Committee: To purchase and sell foreign currencies (also known as cable transfers) at home and abroad in the open market, including with the United States Treasury, with foreign monetary authorities, with the Bank for International Settlements, and with other entities in the open market. This authorization to purchase and sell foreign currencies encompasses purchases and sales through standalone spot or forward transactions and through foreign exchange swap transactions. For purposes of this Authorization, foreign exchange swap transactions are: swap transactions with the United States Treasury (also known as warehousing transactions), swap transactions with other central banks under reciprocal currency arrangements, swap transactions with other central banks under standing dollar liquidity and foreign currency liquidity swap arrangements, and swap transactions with other entities in the open market. To hold balances of, and to have outstanding forward contracts to receive or to deliver, foreign currencies. All transactions in foreign currencies undertaken pursuant to paragraph 1 above shall, unless otherwise authorized by the Committee, be conducted: In a manner consistent with the obligations regarding exchange arrangements under Article IV of the Articles of Agreement of the International Monetary Fund (IMF).1 In close and continuous cooperation and consultation, as appropriate, with the United States Treasury. In consultation, as appropriate, with foreign monetary authorities, foreign central banks, and international monetary institutions. At prevailing market rates.

STANDALONE SPOT AND FORWARD TRANSACTIONS

For any operation that involves standalone spot or forward transactions in foreign currencies: Approval of such operation is required as follows: The Committee must direct the Selected Bank in advance to execute the operation if it would result in the overall volume of standalone spot and forward transactions in foreign currencies, as defined in paragraph 3.C of this Authorization, exceeding $5 billion since the close of the most recent regular meeting of the Committee. The Foreign Currency Subcommittee (the "Subcommittee") must direct the Selected Bank in advance to execute the operation if the Subcommittee believes that consultation with the Committee is not feasible in the time available. The Committee authorizes the Subcommittee to direct the Selected Bank in advance to execute the operation if it would result in the overall volume of standalone spot and forward transactions in foreign currencies, as defined in paragraph 3.C of this Authorization, totaling $5 billion or less since the close of the most recent regular meeting of the Committee. Such an operation also shall be: Generally directed at countering disorderly market conditions; or Undertaken to adjust System balances in light of probable future needs for currencies; or Conducted for such other purposes as may be determined by the Committee. For purposes of this Authorization, the overall volume of standalone spot and forward transactions in foreign currencies is defined as the sum (disregarding signs) of the dollar values of individual foreign currencies purchased and sold, valued at the time of the transaction.

WAREHOUSING

The Committee authorizes the Selected Bank, with the prior approval of the Subcommittee and at the request of the United States Treasury, to conduct swap transactions with the United States Exchange Stabilization Fund established by section 10 of the Gold Reserve Act of 1934 under agreements in which the Selected Bank purchases foreign currencies from the Exchange Stabilization Fund and the Exchange Stabilization Fund repurchases the foreign currencies from the Selected Bank at a later date (such purchases and sales also known as warehousing).

RECIPROCAL CURRENCY ARRANGEMENTS, AND STANDING DOLLAR AND FOREIGN CURRENCY LIQUIDITY SWAPS

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OCT
15
0

Yellen, Macroeconomic Research After the Crisis

Chair Janet L. Yellen At "The Elusive 'Great' Recovery: Causes and Implications for Future Business Cycle Dynamics" 60th annual economic conference sponsored by the Federal Reserve Bank of Boston, Boston, Massachusetts October 14, 2016

Macroeconomic Research After the Crisis

Watch live: https://www.bostonfed.org/live

Extreme economic events have often challenged existing views of how the economy works and exposed shortcomings in the collective knowledge of economists. To give two well-known examples, both the Great Depression and the stagflation of the 1970s motivated new ways of thinking about economic phenomena. More recently, the financial crisis and its aftermath might well prove to be a similar sort of turning point. Today I would like to reflect on some ways in which the events of the past few years have revealed limits in economists' understanding of the economy and suggest several important questions I hope the profession will try to answer. Some of these questions are not new, though recent events have made them more urgent. Appropriately, some are addressed by the papers prepared for this conference. Pursuing answers to these questions is vital to the work of Federal Reserve and other economic policymakers, and the Fed is likewise engaged in ongoing research to seek answers.

The Influence of Demand on Aggregate SupplyThe first question I would like to pose concerns the distinction between aggregate supply and aggregate demand: Are there circumstances in which changes in aggregate demand can have an appreciable, persistent effect on aggregate supply?

Prior to the Great Recession, most economists would probably have answered this question with a qualified "no." They would have broadly agreed with Robert Solow that economic output over the longer term is primarily driven by supply--the amount of output of goods and services the economy is capable of producing, given its labor and capital resources and existing technologies. Aggregate demand, in contrast, was seen as explaining shorter-term fluctuations around the mostly exogenous supply-determined longer-run trend.1 This conclusion deserves to be reconsidered in light of the failure of the level of economic activity to return to its pre-recession trend in most advanced economies. This post-crisis experience suggests that changes in aggregate demand may have an appreciable, persistent effect on aggregate supply--that is, on potential output.2 

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