Economy

Finnish experiment on unconditional basic income: first steps into a new economic model

Finland attracted attention at the end of 2016, not because the Finnish economy had gradually recovered from many years of recession and structural problems. Rather it was due to the fact that the country is running an experiment on unconditional basic income. This is a fiscal policy transfer concept based on the fundamental idea that every citizen should receive the same fixed amount of state aid, regardless of their financial standing and age. The transfer, which will replace other social benefits such as unemployment benefit, social benefit, pension or child support, is unconditional. While some people are focused on reducing the red tape, streamlining and modernisation of the welfare state, other see it mainly as the financial freedom offered by the basic insurance that should create scope for professional self-fulfilment, independence and innovation. Regardless of the outcome of the experiment in Finland, the debate will continue and intensify. Advancing digitisation…

China’s economy picks up somewhat – albeit only temporarily

The Chinese economy appeared astonishingly robust last year. While, at 6.7%, economic growth in 2016 was lower than it has been for a good quarter of a century, it was only slightly down on the previous year’s growth of 6.9 per cent. As a result, the government was easily able to comply with the target range for economic growth introduced a year ago, which currently amounts to between 6.5 and 7%. Over the course of the entire past year, growth seemed to be almost “set in stone”, at 6.7%. According to official figures, it even seems to have accelerated slightly in the final quarter. As the Chinese Office for Statistics announced this morning, GDP growth was a little higher, at 6.8%, in the fourth quarter than in the previous quarters, meaning that it slightly exceeded market expectations. It was also the first time for two years that Beijing announced a…

Austria: essentially no Agenda 2010

In his eagerly-awaited debut keynote speech yesterday the Austrian Chancellor Kern unveiled his “Plan A” for Austria. Kern sees the programme for “affluence, security & good spirits” that he outlined in the speech as an ambitious longer-term social democratic plan that is intended to tackle Austria’s structural problems, above all its increased unemployment.   Ahead of the speech a lot had been written suggesting that Kern would unveil a visionary programme based substantially on Germany’s Agenda 2010, which Schröder, the Social Democratic Chancellor at the time, had pushed through in the years 2003 to 2005.   But Kern’s message falls far short of the high claims that have been touted around in the past. As regards the contents of the plan, Kern tries to close the gap between business-minded reforms and welfare feel-good policies. In concrete terms, the Chancellor talks about taking the pressure off the economy by cutting non-wage…

Global economic growth in 2017: recovery with risks

In its latest outlook for global economic growth the World Bank is very optimistic for the coming year. After a weak 2016 it expects growth to recover in the industrialised countries, but above all it forecasts an improvement in the emerging markets, which last year were marred in some cases by ongoing crises, for example in Brazil, Argentina and Russia. In 2017 these countries are expected to stage a recovery, albeit a rather faltering one. And while in China growth will probably also continue to decline slowly in 2017, in India it is likely to accelerate again in the course of the year after the problems caused by economic policy. However, the World Bank’s economists also emphasize the risks that hang over the outlook. These lie mostly in the realm of economic policy. Admittedly, the Brexit vote and the outcome of the US presidential elections have not yet had any…

German cabinet proposes credit brake resolution and refines the residential property credit directive

Just before Christmas, the German cabinet resolved to put the brakes on residential property mortgage finance – and at the same time, is also giving it added momentum. However, while the credit brake will only come into effect once it is actually activated by the German Financial Supervisory Authority (BaFin), the refinements to the residential property mortgage directive are likely to directly eliminate the associated imbalance in property lending. The residential property credit directive which was introduced in March 2016 greatly vexed banks and savings banks, since the transposition of the 2014/17 EU directive into national law was more stringent than the European Parliament had provided for. The creditworthiness assessment regulations provoked the greatest consternation. In accordance with the provisions, the assessment will no longer be based mainly on the collateral of the property to be financed, so that in future, mortgage finance can only be granted if the borrower…

Spain: Economic upswing backed by reform policies

The Spanish economy has managed until now to continue its strong recovery course virtually uninterrupted. In the third quarter, the Spanish National Statistics Office estimated the quarter-on-quarter growth rate for gross domestic product (GDP) at 0.7 percent. While slightly lower than in the preceding quarters, it still leaves Spain the almost undisputed leader among the member states of the eurozone. Economic growth for the whole of 2016 is expected to slightly exceed the 3 percent mark. What makes this all the more surprising is that for a long time the country had only been ruled by a caretaker government. Yet this period without government does not appear to have harmed the country in any way. Instead, the Rajoy government launched crucial reforms between 2012 and 2015 and thereby created the conditions to enable the economy to fall back into step again. The country can now reap the rewards of the…

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