Comment
Interest Rate | United States | Interest rate policy | Federal Reserve Bank

As expected, the US Federal Reserve has made no change to the federal funds rate after raising it from 0.75 to 1.0 per cent back in March 2017. What has come to the fore of the debate surrounding monetary policy now is the timing and speed of the Reserve’s efforts to shrink the size of its balance sheet by reducing its stockpile of bonds. Professor Friedrich Heinemann, head of the ZEW Research Department "Corporate Taxation and Public Finance" at the Centre for European Economic Research (ZEW), offers his view on the matter.

Information Economy
Business survey | Germany | Information Services

In the first quarter of 2017 the majority of firms in the information economy are in an optimistic economic mood. This is according to the ZEW sentiment indicator, which currently stands at 66.8 points. This assessment of the economic situation is just as positive as in the fourth quarter of 2016. Economic sentiment is currently at the highest it has been among knowledge-intensive service providers for many years. This is the result of a survey among firms in the German information economy, conducted by the Mannheim Centre for European Economic Research (ZEW) in March 2017.

Comment
Monetary policy decisions | Interest Rate | Interest rate policy | Monetary Policy | ECB
The ECB sticks to its current extremely expansive monetary policy.

Despite increasing economic and political confidence in the eurozone, the European Central Bank (ECB) is still yet to reach the point of changing its outlook regarding its monetary policy and has continued to suggest that even lower ECB interest rates are on the cards. Professor Friedrich Heinemann, head of the "Corporate Taxation and Public Finance" Research Department at the Mannheim Centre for European Economic Research (ZEW), comments on the ECB's decision.

ZEW Lunch Debate in Brussels
ZEW Lunch Debates | Fiscal policy | European Commission | European Fiscal Board
The European Fiscal Board was set up to advise the EU Commission on fiscal matters.

In the recent past, the credibility of the Stability and Growth Pact (SGP) has increasingly suffered from the European Commission's broad interpretation of SGP regulations. Up until now, political forbearance has prevented sanctions from being imposed according to the rules. The European Fiscal Board (EFB), which was set up by the EU Commission in 2016, offers opportunities for improvement. In cooperation with international research partners, the Centre for European Economic Research (ZEW), Mannheim, investigated how the EFB functions and made proposals how to strengthen the EFB in its role as an impartial counterpart to the European Commission. Today, these proposals were presented at the ZEW Lunch Debate entitled "Making the Most of the European Fiscal Board" in Brussels.

Comment
Tax reform | Corporate taxation | United States

The Trump administration has specified first details of their long-announced tax reform. Accordingly, the reform seeks to cut corporate tax rates to 15 per cent, down from 35 per cent. For now, this tax cut will, however, not be combined with a border adjustment tax on all imports. Professor Friedrich Heinemann, head of the "Corporate Taxation and Public Finance" Research Department at the Mannheim Centre for European Economic Research (ZEW), comments on the reform.

China Economic Panel
China Economic Panel | Business survey | Greater China | Short-term forecast | Cyclical indicator | China
In April, the CEP Indicator has once again improved and is now at 17.7 points.

According to the current survey for April (5 April – 19 April 2017), the economic outlook for China has improved by 3.2 points. The CEP Indicator, which reflects the expectations of international financial market experts regarding China’s macroeconomic development over the coming twelve months, is currently at 17.7 points (March 2017: 14.2 points). This is the third consecutive time that the indicator rises. As a result, the CEP Indicator has now significantly exceeded the long-term average of 5.4 points. Due to this development, the highest level recorded since the introduction of the survey (21.4 points in June 2014) seems to be within reach.

Comment
Public Budgeting | Germany | Public Budget | Public Debt | Investment

Under the balanced budget amendment (or "debt brake") in Germany’s Basic Law, as of 2020 the federal states will be forced to balance their budgets and as of last year the limit on the total national deficit is set at 0.35 per cent of the gross domestic product. Barely three years before the amendment fully comes into effect, the Alliance 90/ The Greens fraction in the German Bundestag has moved to attach an investment rule to the balanced budget amendment. The rule would force the federal government to offset at least a depreciation in public assets through investment. Professor Friedrich Heinemann at the Centre for European Economic Research (ZEW) in Mannheim, today offered his thoughts on this motion in the Bundestag as an invited expert at the public hearing of the Budget Committee. In his statement Heinemann called for greater transparency through independent councils rather than new regulations.

Research
Trade | Tax Policy | Export | United States | Tax reform | Import | Tax planning
The EU would have to expect fatal consequences from the enforcement of the US tax plans.

Over the course of the next few weeks, US President Donald Trumps will finally have to take a stand regarding his tax policy plans. He had announced a "historic tax reform", the details of which he now plans to specify. Against this backdrop, Christoph Spengel and Friedrich Heinemann examined the US tax plans of the Republican Party in a study by the Centre for European Economic Research (ZEW), Mannheim. Their message: If Trump translates these plans into actions, this could lead to an international fiscal chaos with unforeseeable consequences for trade, investment, and exchange rates.

Research
M&A report | M&A | United Kingdom | Europe | M&A activity | Brexit

Although the UK has now officially decided to leave the European Union, British companies continue to be highly attractive to foreign companies. Judging by the number of mergers and acquisitions (M&A) of British companies, M&A activities have apparently remained largely unaffected by the Brexit vote in June 2016 since neither a drop nor an increase in M&A was witnessed. By contrast, the financial volume of M&A transactions reached an absolute record high following the Brexit vote. These are the findings of studies carried out by the Centre for European Economic Research (ZEW), Mannheim, on the basis of the Zephyr database of Bureau van Dijk.

Research
Transition to work | Field of study | Students | Occupational qualification | Highly skilled labour
The risk of overqualification for university graduates in Germany varies depending on the field of study, academic achievement as well as success in the labour market.

Although a tertiary degree is often considered a crucial step towards a successful professional career, many highly qualified young professionals in Germany have been unable to find employment which is appropriate to their level of education. A study by the Centre for European Economic Research (ZEW) in Mannheim shows that even after ten years of labour market experience, one out of seven university graduates in Germany is overqualified, i.e. they hold a position which is below their qualification level. The risk of overqualification varies, however, depending on the field of study, academic achievement as well as labour market success.

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