15.7.2011 Why is it raining when I am leaving Sweden? Puzzled.

14.7.2011

Time to say goodbye! After three exciting years in Sweden I am about to move back to Germany where I will start my new job as the Inspector General of the Foreign Service, based in Berlin, in mid August. If you would like to continue to follow my blog, please go to www.joachim-ruecker.de or joachimruecker.wordpress.com

Have a great summer!

12.7.2011

Grattis to my Swedish friends for reaching the Semi-finals in the Women’s World Cup Germany 2011 tournament! I will cheer for Sweden tomorrow and who knows- maybe on Sunday when I will be in Frankfurt to watch the Final.

On a different note:the German government coalition has decided on moderate income tax cuts, at least in principle. The main focus will be on making the tariff a bit more linear around the “middle class belly” in order to avoid “cold progression” (which is the metaphor for over-proportionate tax increases caused by inflation).

Since we do not (yet) enjoy a budget surplus in Germany (Sweden is the role model), there is of course a debate on whether debt-financed tax cuts (“deficit-spending”) are advisable at all. I look at it this way: Keynesian deficit-spending has had its renaissance in the crisis years and is now once again regarded as a pragmatic instrument, provided it is not overdone. Recent research suggests, however, that the multiplier of “stimulating” state expenditure has been below 1 (Tobias Cwik/Volker Wieland: Keynesian Government Spending Multipliers and Spillovers in the Euro Area, EZB Working Paper Series Nr 1267, November 2010). So if a certain degree of deficit-spending is still ok in principle to further strengthen growth an employment, moderate tax cuts could even be superior to additional state expenditure, especially since they would favor domestic demand over booming exports. But even if this view is not shared and deficit-reduction targets, as required by Germany’s constitutional “debt-brake”, take center stage, it could still be argued that moderate tax cuts can partly finance themselves since an economy is not a zero-sum-game. The partial self-financing depends, of course, on whether people believe that the debt-financed tax cuts are sustainable and in this sense credible. In this context, it could be argued that the more tax cuts are percieved to be infringing on the fixed deficit-reduction targets the less credible they are. This brings me to the conclusion that it might still be worthwhile to look at the current temporary 5,5% point levy on income tax. Its temporary nature means that, in the longer run, it is not available anyhow to support a balanced budget as per constitutional requirements, hence a possible advanced phase-out might have a good chance of not being percieved as infringing on the deficit-reduction targets.

29.6.2011

“Germany’s energy turnaround and nuclear phase-out – an ambitious agenda” ist the title of my seminar presentation next Tuesday at “Almedals veckan” (the “Swedish Davos”) in Visby on the beautiful island of Gotland. Your are most welcome to attend this event which will take place on Tuesday 5th July at 10.00 a.m.  in the garden of the governor’s residence (Länsstyrelsens trädgård).

On a totally different note, I confess being fascinated by Professor Paul Kirchhof from the University of Heidelberg who, after almost a decade of hard work, has just presented his “opus magnum”, a proposal on making the German tax system more just, more simple and more transparent. He proposes to do away with 33 000 different norms, including any number of exceptions and loopholes, and go back to 146 paragrafs and three main taxes:

• income (25% flat on personal as well as corporate income; 0% on basic income),
• value added (19% as is; with simplifications in the sales tax direction) and
• inheritance (10% flat with possibility to defer).

According to Paul Kirchhof the revenue from this transparent system should be at least the same as now (the catchword is revenue neutrality); in the initial phase a “safety margin” of 3 percentage points could be added to the income tax rate. The effects on income distribution is expected to be positive, i.e. favoring smaller and medium incomes. The local corporate tax (Gewerbesteuer) would be replaced by a variable local levy on the income tax.

30.5.2011

The government coalition in Germany has decided on the main features of the nuclear energy phase out in Germany. The last nuclear power plant will go off the grid no later than 2022. The decision was based on the findings of two commissions and detailed transition scenarios. Now the ball will be in the court of the legislators (Bundestags and Bundesrat).

17.5.2011

Yesterday, Germany’s “National Platform on Electro-Mobility” handed over their latest report to the Chancellor. The goal is to make Germany the leading market for electro-mobility – or to re-invent the car more than 100 years after its invention (in the case of Mercedes-Benz it is 125 years, to be precise). The Federal Minister for the Environment Norbert Röttgen welcomed the German industry’s commitment to generate electricity for electric cars from renewable sources only.

Just recently I have read Ian McEwan latest novel “Solar”, great reading in many regards. As a layperson, I am still wondering which concept of e-cars will prove to be more efficient in the long term: battery cars or fuel-cell cars? If there was a way to produce cheap and clean hydrogen – as the novel suggests – I would actually bet on the fuel-cell concept.

16.5.2011

Today’s “DER SPIEGEL” has an article on the Swedish approach to final storage of nuclear waste (the SKB’s Österhammar project). I find it quite good.

On a different note, the German debate on the book “Germany Does Away With Itself” by an author called Thilo Sarrazin is still ongoing. In my view, the book is much overrated. My suggested executive summary: “Whatever is correct is not new and what is new is not correct”. In any case, the latter refers in particular to grotesque elements of 19th century biological determinism, inheritability of intelligence etc. applied to today’s Muslim immigration. With such views, understandably, the author’s continued membership in the Social Democratic Party was challenged. In April, however, a party arbitration committee decided that he can stay because he declared, in essence, that he “never intendend to suggest that social-Darwinist theories should be implemented in political practice”… What a relief…

When the Social Democrats in Baden Württemberg met in Sindelfingen on 7 May to approve the coalition contract with the Greens they also took the opportunity to express their dissatisfaction with this particular outcome. They have a point, I think.