German exports have expanded extremely strongly in recent years. On the National Accounts definition real exports have risen by an average of around 9 1/2 % since 2004. Over the same period Germany’s share of real world trade has risen from 8.8 % to 9.4 %, having slipped slightly at the beginning of the new millennium. The gains have been made even though exporters have been grappling with a persistently strong euro for some time now. In the last two years alone the euro rose by some 30 % against the dollar, pushing up the cost of German exports by the same percentage in purely arithmetical terms. This undermines the German economy’s price competitiveness. Against this backdrop, how can Germany’s success on the export front in recent years be explained?

In addition to our annual European Growth and Jobs Monitor, which measures the progress made with respect to the Lisbon Strategy, we plan, from now on, to highlight what we believe to be particularly promising growth drivers in another annual feature.This time, the growth driver in question is infrastructure investment. There is a clear connection between infrastructure, or public investment, on the one hand and economic growth on the other. Globalization, public-sector financing woes and efficiencyconsiderations support the use of public-private partnerships for the implementation and running of infrastructure projects. Education spending shares many characteristics with infrastructure investment, and should, in the main, be not only viewed as such, but also recorded as such in terms of statistics to a greater extentt han hitherto.

A much-worked piece of economic wisdom says: “If the United States sneezes, the rest of the world catches a cold”. This implies that even a slight economic setback in the US has distinctly negative fallout on business elsewhere. To what extent can this correlation be empirically demonstrated?

Most economists currently put growth in German production potential at 1 to 1.5 %. This is consistent with the average economic growth of 1.3 % seen in the period 1995 to 2005. Ist here a chance of quickly reverting to a permanently higher growth path? We believe so. All in all, in our base scenario trend GDP growth of around 2 1/4 % should be reached in a few years’ time, reflecting substantial medium-range momentum relative to latter-year growth rates.

At first sight it seems plausible that investment in the new east European EU member states leads to corresponding job losses in Germany. But one fact arguing against this theory is that Germany records surpluses in trade with the CEE countries, in contrast to what one would actually expect from the relocation of production. Many of the production facilities outsourced to eastern Europe - particularly in the automotive industry - produce for export; if anything, they therefore tend to strengthen the German parent companies in the long run.

At first sight it seems plausible that investment in the new east European EU member states leads to corresponding job losses in Germany. But one fact arguing against this theory is that Germany records surpluses in trade with the CEE countries, in contrast to what one would actually expect from the relocation of production. Many of the production facilities outsourced to eastern Europe – particularly in the automotive industry – produce for export; if anything, they therefore tend to strengthen the German parent companies in the long run.

Born of necessity – no party having secured a clear majority after the September 22, 2005 elections to the Bundestag – the Grand Coalition has now been in office for a good eight months. With the mainstream parties in Germany already comprising such myriad schools of thought in themselves as to make compromise difficult, big parties in coalition fear a serious loss of profile. And they are probably not entirely wrong. Nonetheless, it is widely hoped that a grand coalition will push through decisions pointing the way for the future. Unlike the previous administration, there are now clear majorities in both houses of parliament, Bundestag and Bundesrat. After only eight months it is too early to pass definitive judgment on the Coalition’s work as a whole, but sufficient time has certainly elapsed to issue a first-semester report card.

Due not least to soaring oil prices, prices and interest rates are rising around the globe. Nonetheless, long-term bond yields remain low. Will the rise in interest rates continue and what are the possible explanations?

Following decades of rising prosperity private households have now accumulated total gross assets to the tune of almost EUR 10 trillion and more and more older people have their stake. As personal wealth grows in Germany, so transfers of inherited assets are becoming increasingly important. Real property, financial assets and durables worth a good EUR 1 trillion are expected to be bequeathed by 2010. This means that each year wealth holdings in excess of total saving by the household sector will be transferred. While legacies do not create new wealth in macroeconomic terms, substantial structural shifts can nevertheless take place at the individual level.

High growth rates, broadly stable prices and dynamic external trade have characterized the economic situation in the emerging markets during the past few years. Part of their success was owed to the rapid expansion in world trade and high commodity prices, spurring the fortunes of Latin America in particular. Despite a number of worrying trends, the emerging markets are well placed for the years ahead. Over the period under review 2006-2012 we expect growth rates in these countries to remain high. Asia will record the strongest momentum, led by China and India. Economic growth in central and eastern Europe will also remain robust. Latin America will probably see somewhat lower growth rates but amid enhanced macroeconomic stability.

The Allianz Indicator condenses a host of different trends into one overall index (hard indicators: crude oil price, retail sales, production figures; monetary indicators: stock index, real exchange rate, yields; soft indicators: consumer confidence, purchasing managers’ index). This provides pointers to global economic momentum. Regional indices for the USA, the euro area and Japan as well as hard, monetary and soft sub-indices increase the informative value of the Allianz World Indicator.

Interest rates are among the most difficult factors to forecast on the financial markets. Setting short-term fluctuations aside (within a single month, for example) and concentrating on trend interest rates, macroeconomic variables become increasingly important. But which of these are key to the rate trend? Which determinants tend to play a less important or temporary part?