Criticizing the Rental Price Cap, Economist Malmendier Describes It as "Akin to a Religious Declaration"
Newly-minted Chancellor Friedrich Merz has pledged to inject fresh momentum into Germany's ailing economy, disclosing a series of measures aimed at strengthening the economy during a recent appearance on ARD Tagesthemen. The linchpin of the economic recovery plan, as outlined by Economy Minister Katharina Reiche (CDU), is to institute more favorable energy pricing for heavy industries.
In Brussels, Reiche appealed for subsidies on Wednesday, as the German government focuses on reinvigorating steel, chemical, and automotive sectors. Persistent issues within these sectors include scarce skilled labor, inadequate housing, an inefficient pension system, and a less-than-helpful European Union that places added burdens on the economy.
Economist Ulrike Malmendier, already a member of the Council of Economic Experts and the first German to hold a professorship outside the country, offers counsel to the new administration. She has frequently appeared on talk shows, delving into under-discussed German dilemmas. In a recent interview with the Berliner Zeitung, she proposed potential solutions to the skilled worker quandary and championed the value of private capital for Germany.
The government's Economic Experts Committee has issued a warning to politicians: "The state should interfere less."
Regarding the notion that Germans work too little, Malmendier acknowledges a deficiency in volume but primarily attributes it to demographic aging. She advocates for recruiting more foreign-trained professionals, noting that recognition of foreign qualifications presents a significant barrier to integration. The West Balkan expansion, an experiment that proved successful in allowing job-seeking immigrants into the country, offers a potential template for Malmendier.
She contends that Germany must take a bolder approach to labor market integration and applauds the West Balkan model. To resolve the skilled worker shortage, Malmendier maintains that the private sector should play a more substantial role.
Malmendier cites housing shortages in Berlin as a factor deterring international Companies such as Amazon and Warner Music from setting up shop in the city, remarking that the USA takes a more proactive approach by constructing the housing they require.
Addressing the ongoing housing crisis, Malmendier asserts that excessive regulations could be significantly reduced. For instance, harmonizing building codes across states could prove challenging yet beneficial. She suggests that a better approach would be to provide subsidies to help address the issue, rather than maintaining rent control policies that offer limited incentives for residential construction.
The local housing market is acutely feeling the crunch, with a 60% drop in permits for duplex homes. Similar concerns about inadequate retirement provisions plague Germany, as experts stress the urgent need to tackle the "cultural hurdle" in adopting private pension provisions.
- Economist Ulrike Malmendier, partially addressing the issue of skilled labor shortage, believes that the private sector should play a more substantial role in resolving it.
- Malmendier also proposes a reduction in excessive regulations, such as harmonizing building codes across states, to address housing shortages that deter international companies from investing in cities like Berlin.
- In relation to the ongoing housing crisis and inadequate retirement provisions, Malmendier contends that providing subsidies could be a better approach to offering incentives for residential construction and the adoption of private pension provisions.
