Newsletter March 2020

A firm culture of presence is now giving way to social distancing in many German companies. Though the coronavirus crisis shows just how well working from home can function in Germany, it also shows the catching up that could be done. In almost all private sector companies to date, the potential for employees to work remotely has not yet been fully realised, especially in administrative professions, IT, natural sciences, and trade and commerce. These are the results of a short expert report from ZEW Mannheim together with the Institute for Employment Research (IAB).

Facts and fake news, working and welfare, interest rates and savings, start-ups and the green economy, labour markets and refugees – these are just some of the challenges facing our society and economy. We are more in need of innovative ideas than ever before, particularly from the younger generation. The YES! – Young Economic Summit, Germany’s biggest school competition based on social and economic issues, returns for 2020. Five teams of students from schools in Baden-Württemberg, Rhineland-Palatinate, Hesse and Saarland took part in the Southwest region kick-off in the week of 10–19 March 2020.

The downward trend of the German Real Estate Financing Index (DIFI) of ZEW and JLL continues in the first quarter of 2020. The index fell 3.7 points to a level of minus 18.9 after the surveyed experts again gave a worse assessment of the financing situation both for the past six months as well as for the coming six months. Only the sub-indicators for stationary retailers show a clear improvement, but still remain in negative territory.

At the centre of the debate about the possible expansion and restructuring of the EU budget lies the distinction between net contributors and recipients among EU Member States. Even though the concept of net operating balances is by no means suitable for reflecting the added value of the EU as a whole or for its Member States, these annual indicators still receive much political attention. ZEW Mannheim, on behalf of the European Parliament and together with the European Policy Centre, discusses the main points of criticism regarding the net operating balance concept, and possible alternatives for it.

At its meeting today, the supervisory board of ZEW Mannheim elected Ulrich Steinbach as its new chair. Steinbach is the successor of Theresia Bauer, Minister of Science, Research and the Arts of Baden-Württemberg, and has been Ministerial Director and head of the Baden-Württemberg Ministry of Science, Research and the Arts since September 2016. Dr. Ralf Krieger, member of the executive board at Freudenberg SE, will continue to serve as vice-chair.

The coronavirus pandemic continues to leave a deep mark in the growth forecasts for China for 2020 and 2021, with the growth forecasts for real gross domestic product (GDP) dropping heavily again after an already significant decline in the previous month. This is the main result of the March survey (9–18 March 2020) among international financial market experts for China. The survey is regularly conducted by ZEW Mannheim and Fudan University (Shanghai) on the basis of the China Economic Panel (CEP).

The Governing Council of the European Central Bank (ECB) has launched a new comprehensive asset purchase programme to stabilize the eurozone in the coronavirus crisis. An initial sum of 750 billion euros will be used to purchase government, corporate and bank bonds until the end of the year. In contrast to the previous government bond-buying programme, the ECB capital key now serves only as a benchmark for the purchases. The ECB explicitly reserves the right to deviate from this key temporarily.

In addition, requirements regarding the minimum credit quality of the bonds will be suspended, with the result that, unlike in the previous programme, Greek government bonds can now also be purchased. Professor Friedrich Heinemann, head of the Research Department “Corporate Taxation and Public Finance” at ZEW Mannheim, comments on this matter.

The coronavirus hits the world economy: financial market experts expect the pandemic to put a major strain on the global real gross domestic product (GDP). This is likely to have a particularly severe impact on the German economy. The forecasts vary, however, with regard to the individual sectors. This is the result of a special question featured in the most recent ZEW Financial Market Survey conducted with 170 financial market experts. The survey was carried out by ZEW from 9 to 16 March 2020.

With the coronavirus pandemic starting to spread and take its toll on the German economy, many businesses find themselves in less than ideal conditions, as they go into the crisis with low credit ratings. Industries like the gastronomy sector, automotive suppliers and the construction sector have the highest shares of small companies with weak credit scores. These are the results of calculations conducted by ZEW Mannheim and the economic research division of Creditreform, Neuss, with data from the Mannheim Enterprise Panel, which is based on the databases of Creditreform.

In March, the ZEW Indicator of Economic Sentiment for Germany plunged by 58.2 points to minus 49.5 points, the largest drop since the survey was started in December 1991. The assessment of the economic situation in Germany has also worsened significantly compared to the previous month, with the corresponding indicator currently standing at minus 43.1 points, 27.4 points lower than in February. This combination of strongly negative values for the indicators of both the economic sentiment and the assessment of the current situation has only been witnessed once – during the financial crisis in autumn of 2008.

Whereas the Italian government recently issued a nationwide lockdown due to the spread of the coronavirus ordering people to leave their homes only for work or health reasons, the rest of Europe is also threatened by the effects of the pandemic. In the light of the EU’s health ministers still trying to find consensus on launching a joint procurement process for the purchase of medical supplies, the need for such processes to come into effect is all the more urgent. Dr. Adriano De Leverano, economist in the Junior Research Group “Economics of Public Procurement” at ZEW Mannheim, comments on this matter.

Anyone who lived in East Germany before reunification still has narrower income chances 30 years later than a person of the same age and similar family circumstances from West Germany. Along with regional origin, however, the education level and occupation of the parents also play an important role in determining someone’s income chances. Overall, the observed inequality of opportunity in Germany has not decreased since the early 1990s, but has instead slightly increased. These are the results of a study by ZEW Mannheim and the University of Florence as part of the research programme Strengthening Efficiency and Competitiveness in the European Knowledge Economies (SEEK).

Today, the European Commission presented the European Climate Law in Brussels. Martin Kesternich, deputy head of the ZEW Research Department “Environmental and Resource Economics, Environmental Management” at ZEW Mannheim and professor of economics at the University of Kassel, shares his views on the goals and measures of the proposed law.

On 1 March 2020, the new Skilled Workers’ Immigration Act will enter into force in Germany. This new legislation aims to facilitate migration for university graduates and vocationally trained individuals coming from non-EU countries. With this measure, the federal government hopes to reduce the skills shortage. Dr. Katrin Sommerfeld, head of the Junior Research Group “Integration of Migrants and Attitudes Towards the Welfare State (IMES)” at ZEW Mannheim, comments on this matter.

Skills shortages are stifling the innovative potential of German companies. This effect is particularly pronounced among companies experiencing a lack of vocationally trained workers, forcing many companies to abandon innovation projects. There is a particularly high demand for professionally trained specialists in the areas of production and IT. On the other hand, a lack of academic staff is less often to blame for the failure of innovation projects. If the German economy is to maintain its capacity for innovation, policymakers and businesses will have to invest more heavily in vocational training.

Today, around one in two companies in the information economy have a social media presence, which they primarily use for advertising and marketing while neglecting the innovation potential of these networks. Companies still make far too little use of this communication channel to obtain constructive customer feedback as a means of improving their products and services. These are the results of a special assessment published in the latest Business Survey in the Information Economy, for which ZEW Mannheim surveyed around 1,000 companies in the German information economy.

Our publications are available to download in PDF format. PDF files can be viewed using, among others, Acrobat Reader, which you can download for free at https://acrobat. adobe. com/us/en/acrobat/pdf-reader. html

Bowen Xiao, Xiaodan Guo, Ying Fan, Sebastian Voigt, and Lianbiao Cui
Climate Policies Under Dynamic International Economic Cycles: A Heterogeneous Countries DSGE Model

Florence Blandinières, Daniela Steinbrenner, and Bernd Weiß
Which Design Works? A Meta-Regression Analysis of the Impacts of R&D Tax Incentives

This issue contains a Focus on Innovation with the following articles: Innovation Expenditure by Companies in Germany Rises Again

Philipp Grunau, Susanne Steffes, and Stefanie Wolter
Homeoffice in Zeiten von Corona
In vielen Berufen gibt es bislang ungenutzte Potenziale (Home Office in Times of Corona: Potential in Many Professions Not Yet Fully Realised)

Irene Bertschek, Thomas Niebel, and Christian Rammer
IKT-Branche 2018, Volkswirtschaftliche Kennzahlen, Innovations- und Gründungsgeschehen (ICT Sector 2018, Economic Indicators, Innovation and Start-Up Activity)

Innovation Indicators for the Chemical Industry 2020

Innovation Survey 2020 for Berlin

Integrated Economic Analysis of Climate Change Protection and Local Air Pollution

Public Country-by-Country Reporting – Update 2020

SEEK Project 2020: Carbon Neutral Courier Services by Voluntary Carbon Offsets – A Survey Among the Polish Population

SEEK Project 2020: Firms Going Digital: Evidence and Policy Implications

Working Hours Fluctuation, Career Outcomes, and Fertility Decisions

In order to support the nationwide containment measures against the coronavirus, ZEW is examining to what extent the events listed here can take place virtually. Individual dates may be postponed. The current status of the events can be found in the ZEW Events Calendar. If you have any questions, please don’t hesitate to contact our event team at event@zew.de.

Speaker: Daniel Sturm (London School of Economics and Political Science (LSE), United Kingdom)
Location of the event: Transmission via video conference

Speaker: Chiara Lacava (Goethe University Frankfurt)
Location of the event: Transmission via video conference

Location of the event: Ulcinj, Montenegro

Tenure-Track Postdoctoral Researcher (100 %, f/m/d) for the Research Department “Digital Economy”

Picture Credits: news article of 20.03.2020: ZBW, press release of 19.03.2020: Anna Logue Fotografie / ZEW, Personalia article of 18.03.2020: Anna Logue Fotografie, press release of 13.03.2020: iStock.com/Photo Beto, news article of 12.03.2020: JLL and ZEW, press release of 11.03.2020: iStock.com/LeoPatrizi, news article of 04.03.2020: iStock.com/inakiantonana, press release of 27.02.2020: iStock.com/yoh4nn, press release of 26.02.2020: iStock.com/ipopba
 
All further pictures: ©ZEW