Front Matter Page

IMF Country Report No. 14/217

GERMANY

SELECTED ISSUES

July 2014

This Selected Issues paper on Germany was prepared by a staff team of the International Monetary Fund. It is based on the information available at the time it was completed on June 26, 2014.

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Front Matter Page

GERMANY

SELECTED ISSUES

June 26, 2014

Approved By

The European Department

Contents

• I. THE GERMAN CURRENT ACCOUNT: A RETROSPECTIVE

• A. Background

• B. The Evolution of Household Net Savings

• C. Drivers of German Corporate Sector Net Savings

• D. Conclusions

• TABLE

• 1. Nonfinancial Corporate Sector: Change in Selected Variables

• REFERENCES

• II. THE INTRODUCTION OF MINIMUM WAGE IN GERMANY: SOME CONSIDERATIONS

• A. Why a Minimum Wage in Germany?

• B. The Case for and Against the Minimum Wage

• C. Assessing the Impact of Minimum Wage in Germany

• D. Future Decisions about the Minimum Wage

• BOX

• 1. Germany’s In-Work Benefit System

• TABLES

• 1. Selected Studies on Labor Demand Elasticities and Minimum Wage Impact in Germany

• 2. Summary of Minimum Wage Systems in Select Advanced Economies

• REFERENCES

• III. WHICH POLICIES CAN BOOST GERMAN GROWTH AND REDUCE THE CURRENT ACCOUNT SURPLUS?

• A. Higher Public Investment

• B. Accommodative Regional Monetary Policy

• C. Implementation Delays

• D. Financing

• E. Higher Private Investment

• F. Service Sector Reforms

• FIGURES

• 1. Higher Public Spending

• 2. Higher Public Investment

• 3. Higher German Public Investment With and Without Time-to-Build

• 4. Financing Public Investment

• 5. Higher Private Investment

• 6. Services Sector Reforms

• APPENDIX FIGURES

• 1. Private Investment

• 2. Public Investment

• REFERENCES

• IV. SERVICES SECTOR PERFORMANCE AND PRODUCT MARKET REGULATION

• FIGURE

• 1. Services Sector Performance

• References

• V. RECENT HOUSING MARKET DEVELOPMENTS

• TABLE

• 1. Institutional Characteristics of Selected National Mortgage Systems

• FIGURE

• 1. Recent Housing Market Developments

• REFERENCES

• VI. THE GERMAN MACROPRUDENTIAL FRAMEWORK

• BOXES

• 1. Germany’s Current Macroprudential Toolkit

• 2. The usefulness of LTV, DTI and DSTI instrument

• REFERENCES

• VII. THE GERMAN LIFE INSURANCE SECTOR: CONFRONTING THE CHALLENGE OF LOW INTEREST RATES

• A. The German Life Insurance Sector

• B. The Challenge of Low Interest Rates

• TABLES

• 1. Life Insurance Market Shares, 2012

• 2. Gross Technical Provisions, Capital, and Reserves, 2005-2012

• 3. Life Insurers’ Investment Assets, 2005-2012

• 4. Selected European Countries: Guaranteed Rate in Life Insurance Policies, 2013

• REFERENCES

• VIII. REGULATORY AND SUPERVISORY ISSUES

• IX. CHALLENGES FOR THE BANKING SECTOR AND THE ECB COMPREHENSIVE ASSESSMENT

• FIGURES

• 1. Mixed Picture on Profitability

• 2. Robust Risk-Based Capital Ratios, But Weaker Leverage Ratios

• 3. Mixed Picture on Funding

• 4. Relatively Strong Asset Quality Overall