The ongoing emergency in political decision-making puts Europe at risk -Report from 1st Forum Europe- by Thomas Seidel

Conference in a new format: Some venues are switched via video. An enormes
increase in outreach.
(Source: Corporate Group Maleki)

In this times when political Europe is becoming more and more divisive, the financial industry is trying to save from common European projects what can be saved. To support this process, a new format is being created, the conference Future Europe. The Maleki Corporate Group has organized a simultaneous conference. Participants at several European places were also able to make their contributions in Frankfurt, Amsterdam, Paris and London. The forum, with top class participants at all locations, successfully completed its entry. The event is supposed to be continued every six months.

The welcome speach was held by Dr. Andreas Dombret, until recently board member of the Deutsche Bundesbank, to all participants. This format would come at the right time. What started on European initiatives for a common financial market must be brought to an end. Thus, after the launch of the banking union, now capital market union must be addressed. It should be decided whether this should happen with or without Great Britain. Dombret cautiously points out the need to share liabilities in Europe as well.

Dr. Andreas Dombret adresses to the audiance
(Source: Thomas Seidel)

Via a recorded speech Peter Praet, chief economist of the European Central Bank (ECB), warned that the banks' traditionally national ties were another risk factor. This would hamper the creation of a true common financial market in Europe. It is urgent to find a European solution for a guarantee of customer deposits. In the event of a bank collapse, it would be unavoidable in the future to involve the taxpayer as an indirect guarantor.

Financing Europe's economy

After these speeches, the first panel will start, titled "Financing the EU Economy". Philippe Oddo, head of the French ODDO Bank, which not long ago bought up the traditional German BHF Bank from Deutsche Bank's portfolio, justified his commitment to gaining expertise in the German market. Oddo believes that the joint potential of France and Germany can be increased if the employees from both countries can be motivated to work together.

Oddo considers the German banking system as very strong and effective. This is mainly because of the savings banks and cooperative banks. The reason for the traditional capital market abstinence of the Germans sees Oddo in the timidity against debt financing and poses at the same time the question, whether the middle sized companies are really in need of a capital market. In France, this topic is being considered much more open. Oddo points out that between 2007 and today, the volume of the capital market in Europe has shrunk by 40 percent, while in the same period in the US an increase of 130 percent has taken place.

The Frankfurt panel, left to right: Gerhard Schröck, Philippe Oddo,
Stefan Collignon, Michael Rüdiger, Joachim Würmeling
(Quelle: Thomas Seidel)

Like Peter Praet, Oddo sees the lack of a deposit insurance solution as the main obstacle to European bank mergers. One can not use German deposits for financing losts in other countries.

The acting Bundesbank executive committee member Prof. Dr. Joachim Würmeling explains that Europe's outward view has always been made by the capital market in London, which is now being swept away by the Brexit for Europe. Würmeling hopes that new technologies will help to create a platform that will enable the dismantling of very fragmented financial markets in Europe. Würmeling still sees the euro as the common European currency in twenty years' time. At the moment there is more than ample liquidity. But the supply of capital to some countries in Europe could become more expensive as a result of Brexit. In this case, Europe must take precautions.

Dr. Gerhard Schröck of Deloitte stresses the importance of a recovery of the European banking industry. After all, corporate finance depended for more than half of bank loans. The establishment of the European Banking Supervision SSM (Single Supervisory Mechanism) as a recognized institution within just four years is a remarkable achievement. Of course, the supervisor must now move more to a qualitative approach based on the US model and not just pursue the quantitative approach as before. This means that financial supervisors need to better understand business models and the complexity of doing business.

The second panel on the same topic also included contributions from the video-linked venues Paris London and Amsterdam.

Lorenzo Bini Smaghi, the prevented ECB president and now chairman of the board of the major French bank Société Generale, emphasizes the need for a European capital market. At the same time he describes the obstacles. There will be no capital market unless there were pan-European banks. But that will not be possible without a European deposit insurance. While in the US banks get bigger and bigger, there are too many small-scale banks in Europe. For all this, Germany and France should look ahead together and be oriented towards the USA. Then it needs a schedule that one work through step by step.

Crossing borders: Roland Boeckhout Amsterdam above left.,
Lorenzo Bini Smaghi Paris below leftl., Minouche Shafik London above right,
Andreas Dombret below right
(Source: Thomas Seidel)

The Dutchman Roland Boeckhout, board member of the Dutch ING Bank, is very skeptical about the capital market. Europe simply lacks the knowledge and skills. The skills are still in London. He laments the lack of solidarity in Europe. There is a lack of objectification. At the moment there are a lot of emotions in Europe but no European solutions.

The president of the German banking supervisory authority, Felix Hufeld, is surprised that only a short time ago one had warned about too big banks "to big to fail", but now speaking again of the necessity for globally competitive banks. The problem in Europe is that there is a lot of capital that is looking for profitable investments, but such investments are hardly to find in Europe. Hufeld distinguishes between supervision, which makes a daily work about supervision in detail and the regulation, which he considers more as a political task.

Simultaneously in Frankfurt, from left to right: Felxis Hufeld, Andreas Dombret,
Harald Kayser
(Source: Thomas Seidel)

Again and again, the participants discuss the missing European capital market. Harald Keyser, who will shortly head PwC Europe SE in Berlin, also recommends reducing dependence on the London capital market. For this, Europe needs more standardization and harmonization and less competition between locations such as Paris, Amsterdam, Luxembourg and Frankfurt. As a major obstacle, however, Keyser sees the political decision-making emergency.

Strengthening the EURO-Zone

The next panel focuses on strengthening the Eurozone. An introduction will be given by the former Dutch Minister of Finance and Chairman of EURO Group Jeroen Dijsselborn. For him, the most important homework is the completion of banking and capital market union, but also to begin with an improvement in labor markets and pension systems.

From the work in the European Parliament Jakob von Weizsäcker reports. New European projects should prove that they can make a difference step by step. He gives an example of Frontex. Before any financing, it must be clear what effect getting 10,000 more officials at the external borders. But von Weizsäcker fears an end to the European project. In more and more countries, the political orientation is to be only pros or cons of the European Union. The awareness of the commonality is fading.

In the typical Prussian-Wilhelminian style ("the world should adopt the German character") presented by the only governmental member of the German Federal Government Thomas Steffen, State Secretary in the Federal Ministry of Finance. For him, the mayor constraint is currently the unsolved problem of a European deposit insurance. Many other approaches, such as asylum policy, corporate taxation, etc. may also be important, but the unsolved deposit insurance is currently preventing everything in Europs financial markets. But of course, he expects the only solution can be a German model and the repeatedly demanded catharsis of bad loans.

from left to right: Jörg Zeuner, Lüder Gerken, Stefan Collignon, 
Thomas Steffen, Jakob von Weizsäcker
(Source: Thomas Seidel)

The former governor and current professor at the London School of Economics, Lord Mervyn King, first lectures on the lost competitiveness of Southern countries in Europe. They could not compensate by devaluing within the euro. Therefore, there must be an internal devaluation, but this would trigger high unemployment. Alternatively, one could also promote inflation in Germany and the Netherlands, for example. The third possibility would be to carry out transfers in Europe (the German irritant theme par excellence). Anyway, it would inevitably come to that. If one goes along this path without adequately informing the electorate, it would only strengthen the right-wing radical forces. Another problem is the lack of democratic legitimacy. Under no circumstances should politics keep silent about the truth. (Note: Is this a British insight from the Brexit vote?) Lord Mervyn King then alleged with the statement: It is not Great Britain who is leaving the European Union, but the EU is leaving Britain. Finally, King explains the failure of the Brexit advocates. What they did not do, was give a positive justification for remaining in the EU. They only argued with the cost of leaving. But with such a statement you could win no vote. Similarly, the EU should be able to communicate a positive reasoning for Europe.

from left to right: Christian Sewing, Stefan Collignon, Norbert Röttgen
(Source: Thomas Seidel)

Then the concentrated pessimism about Europe spreads in the upcoming debate. It comes to statements such as by the former Italian Prime Minister Enrico Latta, in Europe there is currently either only "no" or „nightmares“. Christina Sewing, the youngest head of Deutsche Bank, sees a lack of negotiable visions for Europe. The German parliamentarian Norbert Röttgen philosophizes that at the end of the post-war period a new epoch has not yet begun. It is not clear which order is now resulting. For a deep disagreement prevail. It would be discussed different value, but one do not know which values will prevail. That's why the role of the EU in the world needs to be redefined, including the issue of migration. The President of the Banque de France Francoise Villeroy de Galhau finally gives a sense of a achieved banking and capital market union. It is about transforming the 400 billion euros of private savings into investment.

Conclusion

Once again, this event has made it clear that the current inability of the European Union to work together in a constructive and collaborative manner is putting the project Europe at an ever faster and more fundamental risk. More than ever, everything seems to be teeters on the brink. Even though the banks seem to be pleading for the completion of the Banking and Capital Markets Union, they are all unable to separate internally from their national action cultures. This is even more true for politics. Already the pro-European fire, which briefly caused the French President Macron to blaze, again only a faint glow. The hope for leadership and assumption of responsibility for Europe by Germany shatters like a striking crystal glass because of an absurd power dispute of a small regional people's party. The forces of perseverance on national priorities are on the rise everywhere, if not already on the march. This is how Europe crumbles itself or is wiped out by global reality.

Nader Maleki established a new conference format
(Source: Thomas Seidel)