Why the government is suddenly listening more to the top economists

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Berlin It is now almost a ritual, and yet Germany’s top economists are thrilled every week for this appointment. Every Thursday at 5 p.m., the leading German economists connect with the Federal Ministry of Finance via Webex for an hour and a half for a video conference. “For me it’s the highlight of the week,” says one economist.

Politicians and economists then discuss “Coronomics”, the economy in the time of Corona: Are the rescue programs in politics practical for the economy? Are the states in excessive debt? And what could the next easing steps look like? These are the economic questions of that time. And the economists are right in the middle of the discussion instead of just being there.

Economists such as Clemens Fuest, Marcel Fratzscher and Jens Südekum not only populate the big TV talk shows and are featured daily on the radio and newspapers. The economists also advise the federal government behind the scenes at every crisis step. Cooperation has never been closer. But how big is your influence on politics? Similar to that of virologists? Is there even too close now?

In any case, the times when the economic policies hit the federal government hard and demanded a “realignment of economic policy” are over. Conversely, politics is far from the harsh criticism of the economic future from earlier days.

The former SPD economics minister Sigmar Gabriel liked to accuse economists of being blind to reality and ordoliberalism, that they were more “astrologers” than economists. Former finance minister Wolfgang Schäuble (CDU) also liked to blasphemy against the contradicting advice of economists and preferred to surround himself with lawyers on the executive staff of his ministry.

Olaf Scholz has been looking for exchanges with economists on a regular basis since taking office

Instead of resenting each other, politics and economics are now working hand in hand in the corona crisis. Wolfgang Schmidt (SPD), State Secretary in the Federal Ministry of Finance, has arranged the regular exchange.

His minister Olaf Scholz (SPD) has been regularly looking for an exchange with economists since taking office. Scholz met often for dinner with a round of the SPD-related economist Henrik Enderlein, and at the ministry’s summer festivals you could also see a number of top economists drinking a beer. Scholz ’cabinet colleague Peter Altmaier (CDU) also seeks scientific advice in the corona crisis and invited 18 top economists to a video interview.

The trigger for the regular meetings in the Ministry of Finance was the appearance of seven economists: Peter Bofinger, Sebastian Dullien, Gabriel Felbermayr, Clemens Fuest, Michael Hüther, Jens Südekum and Beatrice Weder di Mauro presented a paper on March 11 at the federal press conference to save the Economy in the corona crisis. Two days later, the group sat with Scholz in the ministry and discussed the situation with the management of the house. From then on, people met regularly.

The seven economists form the hard core, but there are also other economists like Jörg Rocholl, President of the ESMT University, Bundesbank Vice President Claudia Buch or Isabel Schnabel from the European Central Bank. The group often consists of around 15 experts who cover the entire political spectrum.

Jakob von Weizsäcker, Head of the Policy Department at the Federal Ministry of Finance, will moderate the event. State Secretaries Schmidt and Jörg Kukies often join in, as do high-ranking officials from the Chancellery and the Ministry of Economic Affairs.

There is always one main topic in the rounds. A circuit at the beginning of the crisis, for example, was devoted to the design of state guarantees for corporate loans. In another, the former way of doing business, Weder di Mauro, spoke on the subject of foreign debt. Last Thursday, the discussion centered on ways out of the shutdown and on the WSF corporate rescue package.

Nobody wants to talk openly about the discussions

In addition, sub-groups exchange information on special topics. “I actually have contact with the ministry every day,” says one economist, wondering as he says it.

It is not only to be noted that he feels honored to be in constant contact with the political decision-makers in this historical crisis. Economists learn of some ideas earlier than the public and have the impression that they can influence decisions.

That’s why nobody wants to talk openly about the discussions. The group has guaranteed strict confidentiality. “There is generally a very large, honest openness,” enthuses an economist. He had never seen ministerials go into discussions and talk openly without a ready-made solution.

Another professor sees this more matter-of-factly: “In times of crisis, that’s always the case.” Politicians also sought advice in the financial crisis.

But one thing is fundamentally different from then, says Finance Secretary Schmidt. He witnessed the financial crisis in the Ministry of Labor. At that time, many economists said that they could only assess the crisis policy in three to five years.

“So the rearview mirror was set perfectly, only the windshield was taped shut. This did not really help us in the acute crisis, ”says Schmidt. “It is very different today, the economists are much more practice-oriented and are also confident about assessing the future.”

At the beginning of the crisis, the rescue programs could be subjected to a “reality check” with the experts. “In addition, the economists help us a lot to develop a better feeling for the situation,” says Wolfgang Schmidt. The economist Moritz Schularick, for example, spoke about what lessons can be learned from previous crises.

In fact, the economists’ influence is probably limited

It is interesting that many suggestions from politicians and economists went in the same direction, says Schmidt. When it comes to the question of how big the influence is, there is certainly envy among economists. The union-affiliated IMK and the employer-related IW, who recently surprisingly allied themselves on issues, have the largest, says an economist: “If I had to give a lecture on interest groups and lobbying with the help of information, I would find my illustrative material there.”

“Economists have an impact, but of course politics cannot accept every proposal 1: 1 – there are often other factors to consider,” says Schmidt. Politicians must always keep an eye on political majorities, acceptance and communicability when making decisions.

In fact, the economists’ influence is probably rather limited. In any case, the coalition committee’s decisions were not too close to their proposals. Short-time work benefits have been expanded rather than being increased only for low earners. Most economists find the value added tax cut for innkeepers wrong. And their demand to grant companies generous tax loss carryforwards has largely gone unheeded.

Therefore, there is no danger that the close involvement of economists will jeopardize the independence of science. “There is a lot of discussion and criticism in the rounds. The topic of daycare and school closures, for example, was pretty high, ”says an economist.

This Thursday, too, is a topic on the agenda that could be quite controversial: the European Reconstruction Fund. The economists are looking forward to it.

More: This is what government tax aid for the economy looks like.

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