Following the 1990s post-reunification period and since the beginning of monetary union, Germany's current account has grown substantially. In the crisis years, Germany’s lost about 15 percentage points of GDP in its external investments, but the position continues to grow nevertheless. What are the drivers behind Germany’s current account surplus?
Improvement in institutional quality, particularly concerning the rule of law, is the most essential and urgent structural reform the EU can make. Without it, the obtrusive lack of trust in the EU – which has thus far hampered expansionary and reformist efforts – will persist.
The new Merkel government has to reduce the dependencies on exports by stimulating domestic growth forces in Germany and Europe. At the same time, Berlin should push for a more ambitious national and European innovation policy as well as a robust European foreign trade policy.
Better-than-expected growth performance reflects the underlying positive changes in the Greek economy – but net investment is in fact negative, while Greece has various institutional weaknesses. Further improvements must be made regarding Greece’s attractiveness to foreign direct investment. A new (at least precautionary) financial assistance programme would improve trust in continued reforms and also address eventual public debt financing difficulties.
The western Balkan economies are already closely integrated with the EU; the EU is their largest trade partner, their largest source of incoming foreign investment and other financial flows, and the main destination for outward migration. Monetary and financial systems in the region are strongly dependent on the euro. Progress in EU accession can further strengthen economic ties between six western Balkan countries and the EU, with benefits for both sides.
Just how exposed is Europe’s automotive sector to a potential escalation in the EU-US trade war?
Given its geographical location, the region is important to the EU in terms of security, stability, trade and transit routes. The Western Balkan countries’ economic and political prospects and their future within a European framework should remain one of the top priorities for the EU.
Poland’s issue of a green bond earlier this month was the country’s second financing of this type, and the first ever repeat issue by a sovereign. It has revived the debate as to whether there should be a single regulatory standard to certify the environmental quality of financial assets. This will be a key issue for the EU’s sustainable finance strategy which is due to be released shortly.
Major recent reform of US tax laws represents a serious challenge to Germany, highlighting several weaknesses in the country's economy. The formation of Germany's coalition government represents an opportunity to discuss its own tax changes, which could remedy current problems and stimulate a sustainable domestic boom.
The final document on the German coalition agreement will have significant consequences for the European Union and the Eurozone. Bruegel director Guntram Wolff gives his assessment of the agreement's key features in this episode of 'The Sound of Economics'
Testimony of Bruegel's director during the hearing of the Commissions for the EU and for foreign relations, defense and armed forces of the French Senate on 24 January 2018
China's recent announcement of reforming its financial market has received little enthusiasm from the U.S. despite its potential benefits. The lack of a clear agenda regarding its economic rival has pushed the Trump administration to minor any significant progress of China's reform, and to maintain focus on strategic issues.