Hanns-Werner Sinn, the president of the „Ifo-Institut für Wirtschaftsforschung“ does not see the VAT increase on January 1st, 2007 as a threat to the economic development and specifically to the German internal boom which is a key for the consumer habits of the people. Particularly, since a portion of retailers and the industry have already implemented the increase in the course of this year.

Professor Hanns-Werner Sinn independently publishes his assessments and he is not obligated to any institution. Thus, he less often than other research economists and analysts has to correct his findings. On November 8th, 2006, the Financial Times Deutschland wrote according to the assessment of the commerce experts, the investment boom in the German economy is going to continue almost undamped, despite the VAT increase in 2007, the business-cycle dynamics are strong enough to overcome this burden.

On September 15th, 2006, in BriefLetter 16, work week 37, we also commented on the topic VAT increase and we feel confirmed in our opinion, that the VAT increase is barely going to affect the economic development in Germany. Possible, for skilled crafts this might mean a short-term stagnation of orders in the beginning of the year 2007. However, this should not really impact the profitability of skilled craftsmen, because currently they are calculating somewhat generously.

We are more concerned with the political situation in Germany. After the last Bundestags elections in 2005, I personally was of the opinion that a grand coalition would be able to get a grip on Germany’s problems quicker than a varicoloured government. However, the reality we are facing today is dampening our optimism. The way I see it, the reason for this is that our Chancellor is rather serving German social democracy than her own party and its constituents. When she says today that her promises and goals had been rejected by the voters and thus she is forced to work with the coalition and what the SPD allows, than Angela Merkel should abdicate from her office as German Chancellor, if she is as consequent as she claims to be.

Save, save, save. This is a cause many businesses have taken up. However, the way of doing this could be less dilettante in many businesses. And most of all, the responsibility should not be left first and foremost to the employees, who are reminded of their duties continuously through layoffs and reduction of labor costs. It is simply not true, that it is the level of wages and salaries which is endangering the competitiveness of retail and industry. The short-windedness of many managers suffer from today while pursuing their tasks, the dwindling courage to approach something new in order to achieve a distinct market position, are much more often the reason for these undesirable developments. Many of the restructuring processes are going to have catastrophic consequences medium to long term. This is why it is wrong when the press and analysts rejoice, while thousand of jobs are being lost, factories are closing and irretrievable material and immaterial values are destroyed, just to quickly patch up balance sheets.