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On July 1, 1990, when capital controls in the European Economic Community were removed, the path was paved for the introduction of the euro. This path was marked by a compromise between two schools of thought-those who assumed that the creation of the European Central Bank would be followed by greater economic convergence and political integration, and those who saw the single currency as the coronation of European cooperation and economic convergence. In the initial years following the introduction of the single currency, the compromise as set down in the Maastricht Treaty-the speedy introduction of the single currency, on the one hand, and better cooperation in fiscal policy matters on the other-neither strengthened the institutional foundations of the monetary union nor advanced the political integration process. This resulted in economic divergence and tension in the euro area, which in recent years culminated in a severe crisis. It was only in response to this crisis that some of the necessary changes to the institutional structures of the monetary union were made. There is much evidence to suggest that, when the monetary union was originally being created, such tension and even crisis situations were consciously tolerated because of the stimulus for deeper integration this would provide. Such political maneuvering is very risky, however, since it can lead to the loss of public support for the integration process, thereby threatening the very existence of the common currency. To advance the European project, it is imperative that governments do not rely on the momentum inherent in crisis situations, but instead press ahead with the next stages of integration and take an active approach to bolstering the institutional foundations of the currency union.

A European transfer system could contribute to stabilization of the euro area by synchronizing business cycles in the monetary union, thus simplifying the common monetary policy. Such a system is proposed here in the form of a European unemployment insurance scheme. Compared to other forms of fiscal transfer systems, this has some advantages: by putting the focus on short-term unemployment, an automatic link between payments and the cyclical situation of a member state is ensured, making the system relatively robust against political manipulation. Furthermore, this set-up will most likely prevent a case in which countries systematically become net recipients or net contributors. Therefore, the risk of permanently creating transfers to single countries is low. While a European unemployment insurance system would not be suitable for removing or eliminating structural discrepancies between countries (such as those that caused the euro crisis), cyclical imbalances within a monetary union would be effectively dampened, at not much additional administrative cost. Such a system could thus become an important stabilizing element for the member states of the European Monetary Union.

Compared to last year, the German economy is weakening noticeably. Orders from abroad are decreasing and domestic companies are holding back on investments. However, capacity utilization remains high-also because the government will boost the incomes of private households next year. However, above all, incomes are rising noticeably due to the positive situation in the labor market: the unemployment rate will fall to 5.2 percent this year and 4.9 percent next year. All in all, the German economy will grow by 1.9 percent this year and 1.7 percent in 2019.

This year and next, global GDP will grow more strongly than expected. The growth rate should be just under four percent. In developed economies, the continuing improvement in the job market situation will drive consumption. Corporate investment activity will also gain momentum. Over the forecast horizon, a slowly rising inflation rate and somewhat tighter monetary policy will gradually slow private consumption down. Emerging countries are able to maintain somewhat more robust growth. Production is expanding again in China. In Brazil and Russia, stabilizing prices of raw materials and decreasing inflation rates are supporting economic momentum. Uncertainty about the US government's economic policy and the geopolitical conflict involving North Korea are current risks for the world economy.

The political conditions for growth are currently dominated by increased uncertainty; this is particularly weighing on investment activity and slowing down the global economy. DIW Berlin is lowering its forecast slightly for this year and the next to 4.1 percent and 3.9 percent, respectively. However, global expansion appears to remain intact. In developed economies, primarily the good labor market situation is supporting consumption. In the United States, higher growth than at the beginning of the year is expected due to fiscal stimulus. The outlook for the euro area has deteriorated recently, however. Many emerging countries are also under greater pressure-in addition to domestic issues mainly caused by a tightening of international financial conditions. Over the course of the rest of the year, the rise in global interest rates, the first labor shortages in developed economies, and a further gradual deceleration of growth in China are expected to slow down the global economy more. The main risks for the continuation of the global upswing are primarily the United States' protectionism and political uncertainties in the euro area.

The global economy is likely to grow by over four percent this year and somewhat less next year. DIW Berlin has slightly raised its forecast for both years. Developed economies as well as emerging markets are experiencing an upturn; however, growth rates are likely to be slightly lower in the future. One reason for the sound global economy is the fact that the labor market situation is steadily improving, leading to an increase in private consumption. Along with fiscal stimuli in the form of tax cuts and government spending programs, more private consumption is also likely to trigger corporate investment activities. Monetary policy remains expansionary, but gradual increases in interest rates in major economies as well as the European Central Bank's (ECB) phasing-out of government bond purchases may somewhat curb growth in the U.S. and the euro area. This would also weaken the expansion in emerging economies. Risks to global growth stem from protectionist activities in the United States as well as political uncertainty in Europe.

The German economy is in the midst of a robust economic cycle: the number of employed persons has reached historic highs and is still increasing powerfully; private household income is on the rise; and the public coffers are overflowing. Inflation is rising only gradually, partly because capacities are not overburdened. The mood is bright among consumers and firms alike, with economic development distributed across the board: the service sector is benefiting from consumers' more liberal spending habits, while industry is profiting from the robust exports. Yet uncertainties remain high- and this is also why companies continue to hold back on expanding their domestic capital stock. The Brexit negotiations-which include the future of trade relations-are also fraught with considerable uncertainty; as well, foreign trade could also suffer if the U.S. government implements stronger protectionist measures. No significant acceleration in investment-as would be expected given the current economic conditions-is apparent.

The German economy will grow by 2.4 percent this year, especially due to strong foreign demand. Brisk investment activity continues in this economic climate; stimulus from foreign trade, however, is weakening somewhat. Despite strong consumer demand in the coming quarters, employment and economic output growth are losing momentum. However, stimulus measures from the new federal government will increase income and thus private households' consumption. With 1.9 percent growth in 2019, overall economic capacity will remain well utilized.

The global economy is expected to grow by four percent annually over the next two years. This is a slight increase in the German Institute for Economic Research forecast in comparison to that of the fall. The upswing will gain momentum in both developed and emerging economies. Private consumption will play a pivotal supporting role as investment continues to grow rapidly around the globe. Despite the high level of unemployment in some countries, the euro area is experiencing stable growth, though its investment could be more dynamic. In China, cutting back overcapacity in manufacturing should suitably curb expansion. And a somewhat less expansive monetary policy emanating from the USA and euro area could curb worldwide demand to the extent that global economic growth does not continue to accelerate. Political uncertainty in Europe and the USA, as well as potential trade restrictions, pose the primary risks to the world economy.

The world economy is gaining momentum after sluggish growth in the first half 2016 - which was primarily due to a weak expansion in the emerging markets - gave way to a slight acceleration. This trend is likely to continue, and will increasingly benefit the developed economies as well. The brightening labor market situation in advanced countries is leading to a higher level of consumer demand, which will remain a primary growth driver. As a result of the improved sales opportunities, the currently weak corporate investment activity should pick up again. The growth of global economic output is expected to amount to 3.3 percent this year, and is expected to be slightly higher in the coming two years. This development will be supported by fiscal policy, while monetary policy is likely to become more contractionary globally in the course of further U. S. interest rate hikes. There remain significant risks, however - especially in Europe, where political uncertainty is high due to the Brexit decision and the upcoming elections in key EU member states, among other factors.

The German economy has been growing significantly recently, also due to strong foreign trade, and will experience a powerful increase of 1.9 percent in 2016. In the coming quarters, the drag of the Brexit decision should become noticeable. This will dampen the year-on-year growth rate in 2017 to 1.0 percent, alongside somewhat weaker private consumption dynamics. From the second half of 2017 onward, industry will start benefitting once again from a more dynamic development in key foreign markets, and in 2018, the German economy is expected to grow by 1.6 percent. Throughout the forecast period, the increase in employment should continue, and private consumption will contribute to growth-albeit at a somewhat slower pace. The unemployment rate should continue to drop: from 6.1 and 5.9 percent in 2016 and 2017 respectively to 5.8 percent by 2018. At 0.5 percent, inflation is low again this year, but at one-and-a-half percent, it will be higher in both 2017 and 2018. Corporate investment remains weak and won't start picking up momentum until the end of next year, in view of accelerating global growth dynamics. The government surplus is expected to increase to 27 billion euros this year; however, the surplus will be smaller in the coming years, at 14 billion euros in 2017 and 16 billion euros in 2018.

The German economy is on track, and will likely grow by 1.8 percent this year; in the coming year, with a slight increase in dynamics, it will grow by 1.9 percent. With these figures DIW Berlin confirms its forecast from this summer. Employment growth continues; the unemployment rate will decrease this year to 6.4 percent, where it will remain in 2016. Due to the sharp drop in oil prices this year, inflation is low and stands at 0.4 percent; next year it will climb to 1.4 percent. Global economic growth is likely to experience a slight increase during the forecast period. In the industrialized countries in particular, the renewed drop in energy prices keeps inflation rates low. In addition, many countries have experienced steady improvements in labor markets. Together, these two factors support consumption and the purchasing power of households. Recovery in the euro area is moving forward. The euro's external value is low, the monetary policy is very expansionary, and major trading partners are growing vigorously; consumption is likely to develop well, and in the course of time, corporate investment is also expected to recover. In the emerging markets, growth will remain subdued this year. Higher financial market volatility is leading to deterioration in financing conditions. They are expected to contribute more to global growth next year, when for example Russia and Brazil have emerged from recession. German exports continue their upward trend: A strong upturn in major industrial countries, as well as the continued recovery within the euro area, are compensating for the somewhat weaker demand from the emerging countries. In net terms, however, foreign trade barely contributes to growth, because imports will increase significantly as part of the dynamic domestic economy. Consumption is supporting the growth of the German economy. The low inflation substantially supports consumers' purchasing power. But nominal incomes are also experiencing strong increases: The employment growth continues - the number of employed individuals is expected to rise at roughly the rate of previous quarters - and wages have noticeably increased, also due to the introduction of the minimum wage. Other important factors are the significant increases in social benefits; these are primarily due to a sharp increase in pensions, but also to the benefits being received by the refugees, which should give private consumption an additional boost. In contrast, investment will be rather subdued overall. Concerns about the future of the euro area are likely to dampen investment plans. Furthermore, considerable uncertainties about the development of important markets have recently intensified, particularly in China. There are also unresolved geopolitical conflicts, especially the tensions with Russia. Nevertheless, a moderate expansion of investment in equipment is emerging. With robust foreign demand and fully utilized capacities in the industry, these investments are expected to rise over time, especially since the dynamic domestic demand should provide an impetus. However, the risks to the economy remain high and in fact have recently increased. The impending interest rate turnaround in the U.S. could lead to unexpectedly strong capital outflows from the emerging countries; given the high private debt - especially since it is often in foreign currency - this could dampen economic momentum in these countries as well. Although a significant slump in the Chinese economy is expected to be handled with expansionary measures by the government, there is the risk that they may not take sufficient countermeasures in time. It has also been shown in the past that uncertainty about the further development of European integration can flare up quickly. In addition, the recently high volatility of oil prices shows that a new stable equilibrium still has not been established on the market. The planning uncertainty bound up with this could dampen the disposition of many corporations more strongly than assumed here.

The German economy continues to recover, and will grow by 2.2 percent in 2015 and by 1.9 percent in 2016. The unemployment rate will further decline, to 6.4 percent this year and 6.1percent in 2016. Inflation, which averages 0.5 percent this year, will be substantially dampened by the slump in oil prices; in 2016 as well, inflation will remain low, at 1.2 percent. The global economy continues in its recovery. In industrialized countries, a gradually improving situation in labor markets, as well as the slump in oil prices, is propelling the purchasing power of private consumers. Corporate investment activity should also pick up, benefitting from easy monetary policy. In many economies in the euro area, unemployment remains high and the public and private debt is dampening demand. For the time being, growth in the emerging markets is expected to lag behind. Overall, the average annual growth rate of the global economy is expected to be 3.8 percent in 2015, and 4.0 percent in the following year. The German economy is currently recovering, driven by strong domestic demand, and should be back on its potential path later on. Inflation is bound to remain weak. There is no sign of the German economy overheating; important markets have lost momentum when compared to the pre-crisis years - foreign trade is therefore likely to provide only minor stimulus, and in this environment, investments in equipment and machinery will only experiencea moderate expansion. Government revenues are surging: despite a rather loose spending behavior, the public budget surpluses will reach approximately 0.5 percent in both years of the forecast period.