The growth drivers in Europe are the southern European countries: Greece, Portugal, Spain and, to a certain extent, Italy. We have a clear south-north divide. The countries in southern Europe have done their homework after the euro crisis, and have become better business locations. In Germany, on the other hand, we have not made any progress with reforms for a long time, which is now causing us problems. Southern Europe is also less affected by the strong headwind blowing in the face of German industry from China. And Southern Europe is benefiting from a specific fiscal stimulus, primarily financed by the EU's post-pandemic programme.

In order to revitalise the economy in the short term, we are primarily dependent on foreign trade stimuli for the time being. However, this will probably not happen until spring next year. In the USA, we are currently experiencing a soft landing of the economy. This means a short phase – from around the end of 2024 to the beginning of 2025 – in which economic growth in the US is below the 2% trend. As far as China is concerned, we hope that the headwinds for European industry will not become any stronger.

Anything that boosts consumer confidence, and encourages them to translate their growing purchasing power into buying, would be a good thing. In this context, my wish would be that the federal government would announce its goals for the rest of its term of office. The ongoing internal dispute is now a factor that is depressing the mood in Germany. Private households‘ propensity to spend, and companies’ willingness to invest, are suffering as a result. The 4% fall in equipment investment in the second quarter was drastic. It is a wake-up call for politicians to improve location and investment conditions as quickly and comprehensively as possible. Even the chief economists within the Bankenverband are now losing confidence that the upturn will come soon.

In my view, the modernisation of public administration is particularly urgent. Planning and authorisation procedures in public administration must become faster. This also applies to our courts. Of course, it would help if we were to streamline the requirements for these procedures overall, i.e. make them more straightforward and more transparent. We also need a modern and functional public infrastructure. This is only possible with more investment. We must also push ahead with digitalisation and need a clear perspective for competitive energy prices in the long term. Energy prices in Germany are still too high compared to the rest of Europe.

That's right, we also need to tackle corporate taxation. We need corporate taxation that is competitive by international comparison. And there is another point that is important to me: we must ensure that social security contributions – the so-called non-wage labour costs of companies – do not rise sharply again. The high non-wage labour costs were a significant reason why Germany became the sick man of Europe in the late 1990s.

I believe that the pressure to relocate production due to energy prices is now easing somewhat. Energy prices have fallen. Economists view the fact that production in energy-intensive sectors has risen again as a small ray of hope in the economic picture. For example, in the chemical industry. However, companies that have decided to invest less in Germany due to the high energy prices will probably essentially realise their plans. We will, therefore, see an inevitable loss of industrial substance and jobs as a result of the energy price shock. And yet, the more we improve the conditions in terms of energy supply and other essential factors, the less industrial value creation we will lose overall.

From my personal point of view, it would be, for example, a green light from the German government for fracking. I was born in Emsland, where there is capacity. Simply signalling that this technology is permitted, and that the approval processes are moving forward quickly, could make a big difference to energy prices and companies' expectations regarding future energy prices. Provided there is the political will, this could be realised quickly.

We expect a slight increase in unemployment. There is also a specific structural shift: there is still a desperate need for labour in parts of the service sector. Be it in care, be it in the catering industry. There is likely to be a further increase in employment here, which will partly compensate for the loss of jobs in industry. However, the industry will also endeavour to retain skilled workers for as long as possible. In recent years, many companies have learnt how difficult it is to recruit skilled workers. And demographically, we will have an increasing shortage of skilled labour.

I recently took a closer look at the Skilled Labour Immigration Act: There really is a lot of good in it. It is now essential that the opportunities and objectives of the law are also implemented quickly also in their administration. The federal government has actually taken a big step in this direction.

We are hoping for new impetus from politicians, particularly in the areas we have already mentioned: Deregulation, modernisation of public administration and – hopefully – more competitive taxation of companies. Coherent concepts for these areas would be a significant step forward.

The outcome of the Congressional elections is also essential for the US economy. If the two houses of Congress remain in different hands, they would essentially block each other. There would then presumably be somewhat less fiscal stimulus for the US economy in future. In view of the high national debt in the United States, that would actually be the right thing to do.

If Trump were to win and at the same time obtain a clear majority in both houses of Congress, a significant tax cut could be expected. This could boost the economy in the short term, but would have negative consequences for national debt in the long term. In addition, the US Federal Reserve could hardly lower its interest rates any further in the event of a new, strong fiscal stimulus. This means that citizens would pay for a higher fiscal stimulus with higher interest rates on their mortgages. In addition, more trade barriers and less immigration, as well as more significant political pressure on the central bank, could be expected. These are risks that could weaken the US growth trend.

Protectionist measures and trade tensions are negative for Europe and especially for Germany.

Geopolitical risks will remain high in the coming year but will hopefully not escalate dramatically.

The slight increase in global trade is partly due to the fact that China is increasingly pushing onto the global market. China has built up overcapacity with many subsidies and is offering additional production cheaply – or too cheaply – on the world market. We must be careful not to become too dependent on cheaper imports from China. And in the event of blatant trade distortions caused by subsidies, the EU is called upon to agree on joint measures.

The extent to which it should intervene is a controversial question among economists. In addition to purely trade policy considerations, geostrategic considerations also play a role. However, the EU's view of China is tending to become more critical.

Measured against the core rate, inflation is still relatively high. In this respect, the majority of economists at the German banking associations can understand why the central banks are proceeding cautiously, and why the US Federal Reserve hesitated for a long time before now lowering interest rates. On the other hand, the euro economy is developing somewhat weaker than expected. The current economic outlook, therefore, suggests that the ECB should perhaps have acted a little sooner. However, many economists believe that the ECB is well advised to proceed carefully and cautiously due to the stubborn services inflation. We expect it to continue to do so in the coming months.

The Fed has started with a big move. However, it is also starting from a reasonably high interest rate level of just over 5%, which gives it more room for manoeuvre on the downside. However, it will probably slow the pace somewhat. We believe it is likely that there will be two small interest rate hikes of a quarter of a per cent this year. Next year will continue with small steps. The majority in our group expect the end of interest rate cuts at a rate of around 3.5%. As services inflation is also likely to remain stubborn in the USA, I think it would be good if the Fed were to stop at a key interest rate of around 4%.