Our studio guest this week: Thomas Straubhaar

Director of the Hamburg Institute of International Economics DW-TV: Well, this new stimulus package is not praised by everyone. Some analysts would rather prefer tax reductions instead. One of them, I believe, is Thomas Straubhaar of the Hamburg Institute of International Economics (check!!!) and he's here with us today. Hello! Would you say that the money for infrastructure projects, like the one we've just seen in this report, is money well spent? Thomas Straubhaar: Not with regard to the short run. I mean, in the long run, yes, of course. But in the short run it will come too late. What we need is a stimulus for this year -- not for next year -- and most of the money will be spent next year. So it will be too late for the severe problems that the world economy and the German economy has this year. So I think we should have done better. DW-TV: But don't you think that a stimulus package like this one is, at its best, a short term aid -- or can it really restore the economy in the long term? Thomas Straubhaar: Yeah, that's the problem. On the other hand, as we have seen, the construction industry in Germany has declined quite substantially in the last couple of years and now they don't have the capacities to expand so quickly, so it means that they cannot spend the money this year. So for the basic economy I think this impulse, this stimulus will be rather small. What we need is a much stronger impact for this year, because this year we have the economic problems. DW-TV: So you're not a fan of this latest stimulus package. Let's take a closer look at where the money exactly is going to: Well, we already mentioned that the lion's share goes into infrastructure projects. Then there is this new car incentive, the so-called "scrapping bonus" for the car industry. There also will be some tax reductions and then, there's another very interesting point: The government also offers a loan guarantee of up to 100 billion euros. That's interesting because we talk of a 50 billion euro stimulus package - so where does the other 50 billion come from? Thomas Straubhaar: Yes, but basically these loan guarantees will not become active. They are just for security -- like an insurance when small and medium-sized enterprises will have difficulty getting other credits. So instead of the private money they will have state money, but that will be only a small fraction of the whole budget of 100 billion that is now under discussion. DW-TV: Well, let's face it: When the economy was booming, wage packages pretty much stayed the same -- they certainly didn't double. Now that the economy is cooling and all the big companies are crying out for help, wages remain the same. So, people don't seem to be that affected. Thomas Straubhaar: Yes, that's right. Actually we have the good situation in Germany that the impact of the good times of 2006 to 2008 is arriving right now in private households. The increase in their wages is active this year. So I think this is a good compensation for the loss in investments and consumption from the world economy. So I think that's one of the stabilizing factors for the German economy this year. DW-TV: Last question: Will there be a stimulus package number three? Thomas Straubhaar: I don't hope so, because you can't do it every time. You have one chance and now the chance has come. Either it will be helpful and effective, or not. There is no second chance for a stimulus package. DW-TV: Thomas Straubhaar, thank you very much for joining us! (Interviewer: Monika Jones)

DW-World | February 17, 2009

Tags:. .monika. .impulse. .hamburg. .fraction. .hello