Monthly Report No. 3/2025

Chart of the month US trade deficit and the rise of protectionism by Robert Stehrer Opinion Corner Why have the sanctions against Russia failed? by Vasily Astrov Taking stock three years on from the imposition of wide-ranging Western sanctions against Russia, one needs to acknowledge that their overall effect on the Russian economy has been relatively modest – although in several sectors of the economy their impact is being felt to this day. We argue that there are essentially three factors behind this (i) the ill-conceived design of many sanctions; (ii) the adoption of ‘military Keynesianism’ as a new economic policy paradigm by the Russian government; and (iii) the crucial role of China in absorbing the shock of sanctions. Strength and weakness of Germany’s economy by Leon Podkaminer Germany’s economic strength, reflected in its huge trade surpluses, has hinged on restrictive fiscal and wage policies, which have suppressed domestic demand. However, these policies have increasingly been backfiring, as its trading partners in the EU, induced to emulate the German policy model, have regained the ability to run trade surpluses. The present political change in Germany brings some hope, and a large fiscal stimulus package is on the agenda. But the idea of ‘kick-starting’ the economy by implementing a new version of Agenda 2010 lives on; if implemented, its consequences would be bad for Europe – and for Germany itself. Regional disparities and industrial structures in China by Simone Grabner Since the late 1990s, China has recorded notable regional economic convergence, with backward inland regions recording above-average growth rates. This has been closely linked to major structural shifts while inland provinces have been industrialising, the coastal regions have seen the rise of the services sector. However, the transition from an export-driven to a consumption-based economic model and the growing concentration of high-tech, digital and green industries and innovation in prosperous coastal cities may potentially widen regional disparities in years to come. Forecasts of main economic indicators for Central, East and Southeast Europe for 2025-2027