Weidmann: Tap into the opportunities presented by digitalisation
Bundesbank President Jens Weidmann has spoken out in favour of strengthening the forces of growth and boosting productivity in Europe. However, it is up to economic policymakers to make this happen, he said during a speech at the Bundesbank’s Capital City Reception in Berlin. In particular, Mr Weidmann continued, it is important to tap into the opportunities presented by digitalisation:
“through a suitable infrastructure, education, and, not least, market economy conditions such as modern competition law”. He called the “Competition Law 4.0 Commission” launched by the Federal Ministry of Economics an important initiative in this connection.
In Mr Weidmann’s view, the rigid fee schedules in self-employed professions offer additional scope for boosting productivity. What is more, he cautioned, isolationist tendencies in the field of foreign investment could be more of a hindrance than a stimulus for economic growth.
Demographic trends putting long-term growth at risk
But demographic change is dampening long-term growth, commented Mr Weidmann, explaining that Germany’s ageing population will reduce the number of potential workers and also place substantial burdens on social security systems and public finances. The Bundesbank President singled out the statutory retirement age as one possible lever to keep the impact of demographic change on the statutory pension insurance scheme in check. Life expectancy has been rising steadily to date, meaning longer and longer pension-drawing periods but stagnant contribution periods.
“This all points in favour of raising the retirement age beyond 67,” he noted, adding that studies show that higher life expectancy also means better health.
Criticism of Italy justified
Monetary policy needs to return to normal and interest rates will then rise again, the Bundesbank President explained in his speech – and it is the highly indebted countries that will feel the strain. In this context, Mr Weidmann pointed to Italy’s high debt-to-GDP ratio, which has been at more than 130% for years. Italy has already announced that it will raise the deficit ratio to 2.4% next year. Mr Weidmann warned of the impact of this move, saying that it
“would have a significant knock-on effect on the structural balance, and the extremely high level of debt would – at best – slip slightly”. The European Commission, he went on, has thus been very critical of Italy’s latest budget plans and the breach of the rules outlined therein, and rightly so.
Dialogue about central bank issues
The Bundesbank’s Capital City Reception aims to further strengthen dialogue about central bank issues in Germany's capital city and provides a networking opportunity for individuals from the political arena in Berlin. Around 250 guests attended, among them members of the Bundestag’s Financial and Budget Committees as well as representatives of various ministries, academic institutions, and associations.