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| A fully attended event 5th Capital markets day of bank Hauck & Aufhäuser in Frankfurt/Main (Source: Thomas Seidel) |
The semi-annual event of the
traditional bank owned by the Chinese Fosun Bank is addressed to
independent asset managers. Due to the continuing strong demand for
the event, there will be space for more than 270 participants. The
central lecture will be given by the President of the Munich ifo
Institute, Prof. Dr. Clemens Fuest. He is regarded as one of the most
renowned economists in Germany and is also a member of the Council of
Economic Experts. His statements on the development and progress of
economic activity in Europe are eagerly awaited.
The event will be introduced by Michael
Bentlage (CEO Hauck & Aufhäuser). Michael Bentlage can report a
positive business development for his company. Following Hauck &
Aufhäuser's acquisition of the Luxembourg activities of the former
bank Sal. Oppenheim, Bentlage has managed a smooth integration
without any fundamental impact on the processes in Luxembourg and
Germany. Hauck & Aufhäuser employs around 350 staff in
Luxembourg and manages around 80bn euros of assets at various levels
of the value chain. All business units operate profitably in their
own areas of focus. Hauck & Aufhäuser also sees itself well
positioned for the coming year.
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| Michael Bentlage CEO Hauck & Aufhäuser (Source: Thomas Seidel) |
Global economic activity
Clemens Fuest
serves his role as a favourite for the core lecture. In a precisely
structured presentation, Fuest deals with currently important
economic topics. From the point of view of Fuest and the ifo
Institute, the traffic light is clearly yellow. The economic peak at
the beginning of 2017 is long over. The economy is experiencing a
considerable slowdown. In particular, the "uncertainty
indicator", determined by surveys of companies, has risen from
52 to 57.
The Trump administration is trying to
keep the US economy at this level until the next presidential
election. But the clear turnaround in interest rates and the
government deficit, which has risen sharply as a result of massive
tax cuts, raise doubts about this plan.
Fuest sees the trade dispute with the
US as ambivalent. It is true, that Europe has a trade surplus over
the US in goods. But the situation is quite different for services.
There the US is in the plus. Last but not least, large US companies
are making strong profits in Europe. The trade relationship between
the US and China is quite different. The Chinese sell services to the
US for 506 billion dollars, while the latter only supply China for
131 billion dollars. This would put the Chinese in a worse position
in the trade dispute. They simply run out of goods coming from the
US, which they could still impose customs duties on. So it is hoped
in Europe that the trade dispute will concentrate on China and the
US.
Fuest rightly omits the subject of
Brexit. New and sometimes contradictory information, virtually every
hour, is not a suitable basis for development forecasts.
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| Prof. Dr. Clemens Fuerst ifo-Institute Munich (Source: Thomas Seidel) |
Fuest, on the other hand, is right in
its choice of Italy. It begins with positive facts. There would be an
economic recovery of just under two percent. The labour market is
running relatively well. There would be a surplus in the trade and
current account balance, as well as a primary surplus of just under
two percent. But youth unemployment would be 35 percent, compared to
6 percent in Germany. The national debt has reached a level of 130
percent of the gross national product. The dynamics of export
strength are now negative. Worst of all, however, is the decline in
labour productivity since 1990, which is still declining compared
with other European countries. One of the reasons for this is the
high number of family-run companies with a strong traditional
approach.
All these shortcomings would be
exacerbated by radical political change. What the current government
is doing is robbing itself of a better primary surplus. Without
enormous growth, however, Italy could no longer hold its own in the
long run. The targeted additional debt will not be spent on
investments, but on pensions. Investor confidence will be lost.
Ultimately, however, the EU cannot change this. The Union is a
community of sovereign states that do not really have to adhere to
Brussels guidelines. Only the reactions of the markets could perhaps
bring the Italian government to a change of course.
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| The uncertainty is rising (Source: Thomas Seidel) |
Fuest gives concrete advice. Europe
must not reward populist blackmail. Other countries would have to
protect themselves against a crisis in Italy. Without saying how in
detail, this will probably only be possible with equity capital for
write-downs on Italian bonds and loans. The EU should enter into a
dialogue with Italy and promote initiatives that bring European added
value. For example, in migration and security policy, in the
expansion of European networks and in research funding.
Fuest assumes, that the EU will remain
a community of sovereign states. Under this premise, an overall
political concept is needed. Fuest criticises the idea of a Euro zone
budget as wrong. There would already be 260 billion euros available
in the EU, but not yet called up. In principle, any risk sharing must
be accompanied by more market discipline.
Controversial discussion
After this detailed analysis, a panel
discussion will take place in which Fuest and Michael Bentlage from
Hauck & Aufhäuser, Claus Döring, editor-in-chief of the
Börsenzeitung, Prof. Dr. Christoph Schalast from the Frankfurt
School of Finance an Management (FSFM), and Christoph Subbe, CEO of
Frankfurter Lebensversicherung will take part. The participants
engage in a heated discussion. Döring sees the stock market
shrinking by 25 percent in one year. Subbe warns of severe volatility
in the markets. Schalast regards Germany as the "lame duck"
in Europe and foresees a new chancellorship for the coming year. He
is also confident that Italy will get its act together again.
Bentlage countered Döring, that the markets would not collapse so
sharply. He believes that the European banks are now well positioned.
The regulators had developed refined and expanded mechanisms for
monitoring them. The poor performance of some German banks can be
traced back to the regulatory system, which affects their equity
capital and business models. Verbal fights are being fought over the
problem of Italy. Döring warns, that the exposure of banks in Italy
is not properly taken into account in the bank stress tests.
Schalast, who is a self-confessed Italian fan, at least for groovy
clothes and shoes, believes in an elegant solution to the Italian
problem. While Döring considers the ECB's possibilities regarding
Italy to be exhausted, Fuest believes the big question is how the
financial markets would react and what liquidity problems this would
lead to. Subbe doesn't believe in the big Italian crash that nobody
really wants to see.
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| Panel discussion (f.l.t.r.: Michael Bentlage, Clemens Fuest, Claus Döring, Christoph Schalast, Christoph Subbe |
In another issue Bentlage complains
about the handling of German cutting-edge technology. That would be
tantamount to selling out knowledge and human resources. Schalast
warns, that Germany is sealing itself off. Bentlage insists, that
competitiveness suffers. However, Döring does not regard
technologies as a national good. Fuest points out, that now, after
the globalisation of capital, the globalisation of goods is coming,
which is much more pervasive. He warns, that the key to the future is
the ability to set standards. This is the only way to ensure, that
the company's own products will be able to penetrate the markets in
the future.
In the event, which lasted barely three
hours, more substantial statements were made than in some major
events of the financial sector, which last several days. Hauck &
Aufhäuser has managed to bring important and interesting facts for
future economic events to the point for a closed audience. We will
continue to report on this exclusively.
