Redaktion

Adapting to a changing world: monetary policy, structural reforms, and digitalization in Germany Introduction Ladies and gentlemen, I am delighted to be at the Frankfurt School and grateful for the opportunity to contribute to this important discussion. The topic of today’s event reminds me of a recent meeting in Washington D.C., where we discussed the potential impact of policies under a new administration. The actions taken by Europe, and specifically Germany, will play a crucial role in shaping the future. I will address three key questions in this discussion: the current state of monetary policy in the Eurozone, the impact of geopolitics on monetary policy, and the necessary structural reforms in Germany for sustainable growth. 1. Monetary policy and the natural rate Let’s start with the state of monetary policy in the Eurozone and its pursuit of price stability. Inflation has significantly decreased over the past few years, with the current headline rate at 2.4%, down from a peak of 10.6% in October 2022. The European Central Bank (ECB) projects a gradual decline in inflation towards the 2% target by 2026. Despite this progress, it is too early to claim victory over inflation. Core inflation and services inflation remain elevated, with uncertainties surrounding future developments. The ECB has adjusted key interest rates several times to support the economy. The concept of the natural rate of interest, or r-star, is often used to gauge the appropriateness of monetary policy. However, estimating r-star is complex and uncertain, making it a limited tool for policy decisions. While it may not offer precise guidance in the short term, r-star provides a valuable framework for long-term perspectives. 2. Geoeconomic fragmentation In addition to economic uncertainties, geopolitical tensions and trade policy uncertainties have increased, impacting monetary policy decisions. The rise in uncertainty requires policymakers to consider risk scenarios in addition to baseline projections. For example, the Bundesbank has assessed the potential impact of increased tariffs by the US and retaliatory measures by trading partners, highlighting the risks to economic activity and trade. As we navigate these challenges, it is essential for policymakers to remain vigilant and adaptable to the changing global landscape. By addressing these issues, we can ensure sustainable growth and stability in the German and Eurozone economies. Check against delivery. Adapting to a changing world: monetary policy, structural reforms, and digitalization in Germany While the impact on the euro area may be less pronounced compared to the US economy, it is still significant. The ECB Governing Council should continue to make decisions based on new data rather than committing to a fixed interest rate path to maintain flexibility and optionality. The recent increase in uncertainty in Europe coincides with a period of geoeconomic fragmentation, leading to a rise in harmful trade interventions since 2020. Trade interventions, including protectionist measures like tariffs and subsidies, have doubled since 2020, with trade-distorting subsidies making up the majority. The number of protectionist measures has risen globally, particularly in the US and China, with many being reciprocal in nature. This trend poses a risk of self-reinforcing protectionist measures that could harm global trade dynamics. Despite these challenges, global trade integration remains close to pre-crisis levels, but regional trade is increasing. The shift towards regional trade agreements reflects a departure from the rules-based global trade order. Structural reforms are necessary in Germany to address weak economic growth, driven by issues like high energy prices, labor shortages, and lack of innovation. Reforms in energy policy and investment in green technologies can improve the business environment and stimulate growth. Implementing a uniform carbon price across sectors and complementary measures can effectively reduce greenhouse gas emissions and support the transition to a low-carbon economy. Addressing labor shortages through policy measures like raising the retirement age and improving childcare facilities can also boost economic growth. Adapting to a changing world: Addressing Monetary Policy, Structural Reforms, and Digitalization in Germany. Anpassung an eine sich verändernde Welt: Geldpolitik, Strukturreformen und Digitalisierung in Deutschland Adapting-to-a-changing-world-monetary-policy-structural-reforms-and.png

Adapting to a changing world: monetary policy, structural reforms, and digitalization in Germany Introduction Ladies and gentlemen, I am delighted to be at the Frankfurt School and grateful for the opportunity to contribute to this important discussion. The topic of today’s event reminds me of a recent meeting in Washington D.C., where we discussed the potential impact of policies under a new administration. The actions taken by Europe, and specifically Germany, will play a crucial role in shaping the future. I will address three key questions in this discussion: the current state of monetary policy in the Eurozone, the impact of geopolitics on monetary policy, and the necessary structural reforms in Germany for sustainable growth. 1. Monetary policy and the natural rate Let’s start with the state of monetary policy in the Eurozone and its pursuit of price stability. Inflation has significantly decreased over the past few years, with the current headline rate at 2.4%, down from a peak of 10.6% in October 2022. The European Central Bank (ECB) projects a gradual decline in inflation towards the 2% target by 2026. Despite this progress, it is too early to claim victory over inflation. Core inflation and services inflation remain elevated, with uncertainties surrounding future developments. The ECB has adjusted key interest rates several times to support the economy. The concept of the natural rate of interest, or r-star, is often used to gauge the appropriateness of monetary policy. However, estimating r-star is complex and uncertain, making it a limited tool for policy decisions. While it may not offer precise guidance in the short term, r-star provides a valuable framework for long-term perspectives. 2. Geoeconomic fragmentation In addition to economic uncertainties, geopolitical tensions and trade policy uncertainties have increased, impacting monetary policy decisions. The rise in uncertainty requires policymakers to consider risk scenarios in addition to baseline projections. For example, the Bundesbank has assessed the potential impact of increased tariffs by the US and retaliatory measures by trading partners, highlighting the risks to economic activity and trade. As we navigate these challenges, it is essential for policymakers to remain vigilant and adaptable to the changing global landscape. By addressing these issues, we can ensure sustainable growth and stability in the German and Eurozone economies. Check against delivery. Adapting to a changing world: monetary policy, structural reforms, and digitalization in Germany While the impact on the euro area may be less pronounced compared to the US economy, it is still significant. The ECB Governing Council should continue to make decisions based on new data rather than committing to a fixed interest rate path to maintain flexibility and optionality. The recent increase in uncertainty in Europe coincides with a period of geoeconomic fragmentation, leading to a rise in harmful trade interventions since 2020. Trade interventions, including protectionist measures like tariffs and subsidies, have doubled since 2020, with trade-distorting subsidies making up the majority. The number of protectionist measures has risen globally, particularly in the US and China, with many being reciprocal in nature. This trend poses a risk of self-reinforcing protectionist measures that could harm global trade dynamics. Despite these challenges, global trade integration remains close to pre-crisis levels, but regional trade is increasing. The shift towards regional trade agreements reflects a departure from the rules-based global trade order. Structural reforms are necessary in Germany to address weak economic growth, driven by issues like high energy prices, labor shortages, and lack of innovation. Reforms in energy policy and investment in green technologies can improve the business environment and stimulate growth. Implementing a uniform carbon price across sectors and complementary measures can effectively reduce greenhouse gas emissions and support the transition to a low-carbon economy. Addressing labor shortages through policy measures like raising the retirement age and improving childcare facilities can also boost economic growth. Adapting to a changing world: Addressing Monetary Policy, Structural Reforms, and Digitalization in Germany. Anpassung an eine sich verändernde Welt: Geldpolitik, Strukturreformen und Digitalisierung in Deutschland

Redaktion marzo 11, 2025
Please note that the following text is based on a speech and may have been slightly altered...
Mehr lesen Leer más acerca de Adapting to a changing world: monetary policy, structural reforms, and digitalization in Germany Introduction Ladies and gentlemen, I am delighted to be at the Frankfurt School and grateful for the opportunity to contribute to this important discussion. The topic of today’s event reminds me of a recent meeting in Washington D.C., where we discussed the potential impact of policies under a new administration. The actions taken by Europe, and specifically Germany, will play a crucial role in shaping the future. I will address three key questions in this discussion: the current state of monetary policy in the Eurozone, the impact of geopolitics on monetary policy, and the necessary structural reforms in Germany for sustainable growth. 1. Monetary policy and the natural rate Let’s start with the state of monetary policy in the Eurozone and its pursuit of price stability. Inflation has significantly decreased over the past few years, with the current headline rate at 2.4%, down from a peak of 10.6% in October 2022. The European Central Bank (ECB) projects a gradual decline in inflation towards the 2% target by 2026. Despite this progress, it is too early to claim victory over inflation. Core inflation and services inflation remain elevated, with uncertainties surrounding future developments. The ECB has adjusted key interest rates several times to support the economy. The concept of the natural rate of interest, or r-star, is often used to gauge the appropriateness of monetary policy. However, estimating r-star is complex and uncertain, making it a limited tool for policy decisions. While it may not offer precise guidance in the short term, r-star provides a valuable framework for long-term perspectives. 2. Geoeconomic fragmentation In addition to economic uncertainties, geopolitical tensions and trade policy uncertainties have increased, impacting monetary policy decisions. The rise in uncertainty requires policymakers to consider risk scenarios in addition to baseline projections. For example, the Bundesbank has assessed the potential impact of increased tariffs by the US and retaliatory measures by trading partners, highlighting the risks to economic activity and trade. As we navigate these challenges, it is essential for policymakers to remain vigilant and adaptable to the changing global landscape. By addressing these issues, we can ensure sustainable growth and stability in the German and Eurozone economies. Check against delivery. Adapting to a changing world: monetary policy, structural reforms, and digitalization in Germany While the impact on the euro area may be less pronounced compared to the US economy, it is still significant. The ECB Governing Council should continue to make decisions based on new data rather than committing to a fixed interest rate path to maintain flexibility and optionality. The recent increase in uncertainty in Europe coincides with a period of geoeconomic fragmentation, leading to a rise in harmful trade interventions since 2020. Trade interventions, including protectionist measures like tariffs and subsidies, have doubled since 2020, with trade-distorting subsidies making up the majority. The number of protectionist measures has risen globally, particularly in the US and China, with many being reciprocal in nature. This trend poses a risk of self-reinforcing protectionist measures that could harm global trade dynamics. Despite these challenges, global trade integration remains close to pre-crisis levels, but regional trade is increasing. The shift towards regional trade agreements reflects a departure from the rules-based global trade order. Structural reforms are necessary in Germany to address weak economic growth, driven by issues like high energy prices, labor shortages, and lack of innovation. Reforms in energy policy and investment in green technologies can improve the business environment and stimulate growth. Implementing a uniform carbon price across sectors and complementary measures can effectively reduce greenhouse gas emissions and support the transition to a low-carbon economy. Addressing labor shortages through policy measures like raising the retirement age and improving childcare facilities can also boost economic growth. Adapting to a changing world: Addressing Monetary Policy, Structural Reforms, and Digitalization in Germany. Anpassung an eine sich verändernde Welt: Geldpolitik, Strukturreformen und Digitalisierung in Deutschland
Die russische Energiekrise hat zu einem Mangel an billigen Gasen geführt, was die Produktionskosten erhöht hat. Der Aufstieg Chinas als Konkurrent hat die deutsche Industrie unter Druck gesetzt und den Export von Autos stark beeinträchtigt. Mangelnde Investitionen in langfristige Projekte wie Hochgeschwindigkeits- und Internet-Eisenbahnlinien haben die Infrastruktur beeinträchtigt. Ein Mangel an qualifizierten Fachkräften, insbesondere in Bereichen wie Informatik und Pflege, belastet die Unternehmen. Die Bürokratie in Deutschland verlangsamt Genehmigungsverfahren und schafft unnötige Hindernisse für Unternehmen. En una antigua fábrica de automóviles Opel se ha instalado un centro logístico de DHL como símbolo del cambio estructural de la economía alemana.

Die russische Energiekrise hat zu einem Mangel an billigen Gasen geführt, was die Produktionskosten erhöht hat. Der Aufstieg Chinas als Konkurrent hat die deutsche Industrie unter Druck gesetzt und den Export von Autos stark beeinträchtigt. Mangelnde Investitionen in langfristige Projekte wie Hochgeschwindigkeits- und Internet-Eisenbahnlinien haben die Infrastruktur beeinträchtigt. Ein Mangel an qualifizierten Fachkräften, insbesondere in Bereichen wie Informatik und Pflege, belastet die Unternehmen. Die Bürokratie in Deutschland verlangsamt Genehmigungsverfahren und schafft unnötige Hindernisse für Unternehmen.

Redaktion marzo 11, 2025
Dieser Artikel wurde ursprünglich in englischer Sprache veröffentlicht Hier sind 5 Hauptgründe, warum die deutsche Wirtschaft Schwierigkeiten...
Mehr lesen Leer más acerca de Die russische Energiekrise hat zu einem Mangel an billigen Gasen geführt, was die Produktionskosten erhöht hat. Der Aufstieg Chinas als Konkurrent hat die deutsche Industrie unter Druck gesetzt und den Export von Autos stark beeinträchtigt. Mangelnde Investitionen in langfristige Projekte wie Hochgeschwindigkeits- und Internet-Eisenbahnlinien haben die Infrastruktur beeinträchtigt. Ein Mangel an qualifizierten Fachkräften, insbesondere in Bereichen wie Informatik und Pflege, belastet die Unternehmen. Die Bürokratie in Deutschland verlangsamt Genehmigungsverfahren und schafft unnötige Hindernisse für Unternehmen.

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