When there were almost no flats in Halle yet ...

Brigitte Loose about IWH's foundation and development

Ms Loose, how did you experience the early days of IWH?

Looking back, it was the most exciting time of my career. IWH had an “East Germany” profile at the time, and so its objectives included assisting the development of companies in the region. This meant we were constantly analysing how well the economy in East Germany was adapting. Lots of new ideas and concepts were developed that were mainly discussed in a broad context. Everyone got involved at the time and contributed; so it was extremely creative teamwork.

Were you already on board in Berlin?

Yes, I was one of those who joined the IWH from the Akademie der Wissenschaften (Academy of Sciences). From 1992, I worked in the IWH's Department of Macroeconomics, together with Mr Ludwig.

We've already heard from Mr Ludwig why Halle was chosen as the location. What's your theory?

Firstly, it was important that two similar institutes shouldn't be located in close proximity to one another in Berlin and secondly, we needed to focus on East Germany. So it was decided to move the headquarters to a place from where we could closely follow East Germany's problems: in the chemicals and lignite mining region. The move to Halle was primarily driven by the then Foreign Minister, Hans-Dietrich Genscher. Initially, only two departments were relocated to Halle: the Environment and Energy as well as the Central and Eastern European Departments. The Departments of Macroeconomics and Structural Change remained in Berlin. The entire Institute then relocated to Halle when Mr Pohl replaced Mr Wegner as President of the Institute at the beginning of 1994.

And your relocation?

I was in fact one of the first to relocate, along with my family. But it was very difficult to find accommodation in Halle, because there were very few vacant apartments. There hadn’t been much progress in the construction of new builds or renovated properties in Halle. In addition, environmental damage and air pollution were still extremely high in the chemical triangle of Merseburg-Halle-Bitterfeld at that time. Despite these problems and some initial difficulties, I've never regretted the decision to accept this enormous change and move to Halle. Every day, every week, positive changes and progress were visible in Halle, and the IWH was able to contribute successfully with many interesting projects.

That alone sounds like a major challenge.

Yes of course, especially in terms of my work-life-balance, particularly as the IWH didn't support this aspect as much then as it does now.

Swiftly changing the subject: what happened at the IWH when the investment bank, Lehman Brothers, collapsed in autumn 2008?

At the time, we were already working with other economic institutes to produce the joint economic forecast. Initially, institutes had to dismiss their previous forecasts and produce a completely new baseline scenario for Germany's economic development. In the context of such an extreme situation, however, even this seemed extremely risky, so various other scenarios were also simulated. But even then we underestimated the actual dramatic extent of the financial crisis, unfortunately.

Did the financial crisis damage the image of economists? 

Partly, yes, because all the global forecasts and early indicators failed at the time. But the consequences of a global financial shock are very difficult to predict. The only way we could arrive at a better prognosis was to compare a variety of crises, which always occur under different framework conditions, however. Ultimately, forecasts are merely projections. They can never accurately predict reality, but will always be a simple approximation of real economic growth in the future.

Is there a moment from your last 25 years at IWH that you particularly like to recall?

There are lots of moments actually. There was always a great deal of excitement within the Institute while tendering for the joint economic forecast. It was always a fantastic, relieved feeling when we learned that the IWH would be involved again.

Where do you see the IWH in the next 5, 10, 15, 25 years?

I think and hope that the Institute will continue to exist for many more years. I'd be delighted if there's an increased focus on financial markets and if the IWH can specialise in this future-oriented field. But this definitely won't happen without a strong Macroeconomics Department. I wold also advise against removing East German analysis from the IWH's agenda completely. In future, the Institute will continue to walk the tightrope between preserving its own focus areas and creating and implementing new ones. This is by no means easy.
In my opinion, the IWH has now become too much of a qualification facility, which is resulting in high staff turnover. However, I believe that its long-term existence and particularly its economic policy advice require a permanent core staff of academics.

Dr Brigitte Loose

Brigitte Loose joined the institute in 1992. In the department of Macroeconomics she was significantly involved in the business cycle analyses and forecasts for Germany, East Germany and Saxony-Anhalt.

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