ZEW Survey Among Financial Market Experts - Consolidate and Not Stimulate the Economy

Now is the right time for politicians to change the course from stimulating the economy, e.g. by providing loan and bail-out programmes, to a policy of savings. This is the opinion of 263 financial market experts who were surveyed by the Centre for European Economic Research (ZEW) in its monthly ZEW Financial Market Test.

About three quarters of survey participants consider consolidating the German federal budget the highest priority at the moment. Only 24 percent of financial market experts consider measures which stimulate the economy necessary. This indicates a clear support of the German government's policy of savings. However, only 50 percent of the experts hold the opinion that the budget deficit will be significantly reduced by the government’s planned saving package. 50 percent are convinced that additional savings are mandatory to reach the goal of disburdening the German federal budget by some 80 billion euros by 2014.

Ninety-two percent of experts recommend cutting back subsidies in order to save money. Furthermore, a majority of 67 percent recommends that the reduced VAT rate of seven percent is to be increased to the regular VAT rate of 19 percent. Only 21 percent of experts support the increase of the income tax, whereas 48 percent consider such a measure to be the wrong choice. The financial market experts' opinions differ in further saving measures in the social sector. Supporters and opponents of further cutbacks in the social budget balance each other.

The experts are rather reserved to give their opinion on possible consequences of savings on the German stock market. Almost 80 percent expect that consolidating the economy will not affect the company values.

For further information please contact

Dr. Christian David Dick, E-mail: dick@zew.de