Economy: Volker Wieland leaves the Council of Experts

The news is a turning point for the Council of Economic Experts. After the federal government could not agree on a successor for the then chairman Lars Feld at the beginning of 2021, the council was only four.

Now there are only three farming methods left. And Wolf Reuter, Secretary General of the German Council of Economic Experts, only moved to the Federal Ministry of Finance a few days ago. His successor is also still open.

In the coming weeks it will not only be about the replacements, but also about the advice itself. Ideas for reform have been circulating for years, for example he could be placed closer to politics or publish reports more often. With two new members, there would be an opportunity to put this into practice.

Inflation and number crunching

But first, technically adequate successors have to be found. Wieland is considered one of the most renowned monetary politicians and inflation researchers in the country. For example, the 56-year-old worked with other researchers to develop the Orphanides rule, which is considered an important measure for central bank decisions.

For years, Wieland has been warning of rising inflation and an overly lax course by the European Central Bank (ECB) – and sees this as confirmed by the developments of the past few months. He is also an advocate of strict fiscal policies.

However, critics accuse him of not recognizing new realities of the economic environment that would limit the applicability of models such as the Orphanides rule or debt rules.

Wieland is a “number cruncher”, i.e. someone who prefers to rely on numbers rather than perceived truths. During conversations in his office on the Frankfurt university campus, a piece of paper often ends up on the table on which he jots down the formulas for the economic theories he is talking about.

“I very much regret Volker Wieland’s decision,” Truger told Handelsblatt. “Even if we come from different directions, the cooperation has always been very productive.”

In the Council of Experts, the trade unions and the employers each have an informal right to nominate a member. Truger is sitting on the union ticket, Wieland on that of the employer. “I learned a lot from working with Volker Wieland, especially in the area of ​​monetary policy,” said Council colleague Veronika Grimm.

Wieland’s departure comes as no surprise. When asked about a third term, he had repeatedly made it clear that he would probably not be available for that. It is also said from those around him that in the past few months he has repeatedly hinted that he will not finish his second term in office.

No stalemate on the energy embargo issue

What’s next for the Advisory Council? Formally, the wise men are still able to act, for resolutions only three votes are required by law. But this constellation will probably not work in the long run.

Already the absence of the fifth member was repeatedly criticized. “Of course, it was not an optimal prerequisite for further work, because clear majorities for substantive positions were missing several times,” said Wieland in an interview with the Frankfurter Allgemeine Zeitung. This weakens the Council’s influence.

The 2021 annual report was a first in the Council’s 60-year history. The wise men could not agree on questions of finance and debt policy, and for the first time there was a stalemate.

Observers had also expected this constellation in the economic forecast presented at the end of March. When it came to the question of whether Germany should impose an embargo on Russian energy supplies, the Wise Men had taken different positions beforehand.

In the forecast, they calculated a drop in economic output of only two percent due to an embargo, but pointed out the limited validity of the calculation. As a result, the wise men did not formulate a final recommendation for action for politicians in their prognosis.

Wieland, who was the only one who had not positioned himself in advance, nevertheless told the Handelsblatt that the German economy would “cope with a delivery stop from the Russian side, for which one urgently needs to prepare, as well as its own embargo”.

Potential for conflict at traffic lights

From May there will only be three of the Wise Men – which could mean a lighter majority in the Council again. But being an economist is a part-time job. All council members hold professorships at the same time.

It is almost impossible to cope with the workload of such a decimated Council, especially not in view of the legally binding annual report, which is hundreds of pages long and will be published again in autumn. “The federal government shouldn’t take too much time with the replacements,” says Grimm.

The traffic light did not even agree on the first vacancy, i.e. the successor to Lars Feld. Names are circulating, but at the moment you have other things to do, according to government circles. With Wieland’s departure, the Council is likely to move up the list of priorities.

But reaching an agreement will be complex. While the right to propose other positions, such as the presidency of the Bundesbank, had already been established in the coalition negotiations, it is still open to the Council of Economic Experts who will bring a name into play.

But one thing is already clear: there are different ideas. Finance Minister Christian Lindner (FDP) recently made Feld the economist his chief advisor, of all things, with his predecessor and now Chancellor Olaf Scholz (SPD) making sure that he left the Advisory Council.

According to economists, Wieland’s position could now become a bargaining chip to make it easier to reach an agreement. The employers have unofficially the right to propose this position.

But this rule is not written down anywhere. And it wouldn’t be the government’s first intervention. In 2018, the Family Ministry had already wanted to prevent the extension of the term of office of a council member with an employer ticket: it was about a certain Volker Wieland.

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