What was not explicitly stated - report on the recent decisions of the Governing Council of the European Central Bank - by Thomas Seidel

Deutsche Version

Mario Draghi (center) accompanied by the Vice-President and
the communication director
(Source: Thomas Seidel)

The first ECB press conference in the new year 2019 does not initially promise to be very interesting. In terms of what was said, it was. What is exciting, however, is what has obviously or intentionally been told nothing about.

The ECB is certain that the current conditions, with a key interest rate of zero percent and a freeze on new acquisitions in the purchase program, will remain so until summer 2019 in order to achieve the target of core inflation of just below two percent.

What has not been said is, that it will remain so until the end of Mario Draghi's term as President of the ECB.

If there is talk of no more new purchases of government bonds, the portfolio of 25 percent of all government bonds in the euro zone will nevertheless remain at this level. What is not being said is, that maturing government bonds can be replaced by new issues at the ECB. At the end of the day, governments are not paying back anything and are not really reducing their debt.

Sometimes better say nothing
(Source: Thomas Seidel)

However, the politically driven changes in the economic framework conditions, such as the negative trade dispute between the USA and China, the Brexit, the weakening demand or positive developments in the labour market and rising wages, have not yet led to the achievement of the desired inflation target. On the whole, one comes to the conclusion that the tried and tested money market policy is being pursued because the economy needs this stimulus to achieve the declared inflation target after all. Which was not said: Does the economy have to focus exclusively on a single objective?

This is followed by a general and repeated appeal to political leaders. Structural reforms had to be undertaken, structural unemployment combated, fiscal buffers put in place, making the economy made more resilient and the capital market union completed. What has not been said: An out-of-control populist government in Italy is increasingly leading the country into the abyss. The reforms in France under President Macron, which have so far been timid anyway, are threatening to disappear completely in the angry protest of French citizens unwilling to reform. The nature and consequences of Brexit are becoming increasingly unpredictable.

That counts for the vice-president too
(Source: Thomas Seidel)

Asked where the Governing Council drew its seemingly certain economic conclusions from, Draghi explained, that it was the long-term continuity of some key data that was trusted. One continue to monitor developments. The decisive factor would be the situation that would emerge next March, which is not said: No one knows how things will develop around the UK's exit date at the end of March. But only then is it worth taking a closer look.

Will the ECB's zero-interest policy, which has now been pursued for a long time, not burden the banks' profitability too much? The high operating costs, inherited liabilities in the lending business and overbanking are more responsible for this. Not a word about the simmering rumours of a state-orchestrated association of Deutsche Bank and Commerzbank in Germany.

A prankster amoung the journalists seriously asked whether the ECB was dealing with the issue of a digital currency. Draghi refers to the results of studies, that all point to more disadvantages than advantages of a digital currency. What he doesn't say is, that if it doesn't even work in the city of Frankfurt with a digital ticket for public transportation, how will it work at the central banks?

Somethimes it's to talk about everything
(Source: Thomas Seidel)

What Mario Draghi definitely has nothing to say about, however, are questions about his successor as President of the European Central Bank. Nor are there any speculations about Sabine Lautenschläger, Vice-President of the European Banking Supervision. That is the task of other people.

The fading of British identity -The causes of Brexit and its consequences- by Thomas Seidel-

Unless some kind of revolutionary movement is quickly given to political
establishment, the lights on the island will soon turn off.

(Source: Berliner Zeitung originator: dpa)

The Brexite has plunged many Britons into a national identity crisis. Especially the supporters of the leave hope for a real catharsis from the "pollution" by the European Union. They are prepared to take on heavy burdens and renunciations for years to come. But the national conflict is also based on very old feathers. Between the north and the south of England; between Anglicans and those who never want to be, and between generations.

Only a few are really aware, it is only the royal house which carries the crowns of England and Wales and Scotland in personal union as kings. Only this holds the so-called "Great Britain" as a state structure together at all. There are good reasons, why this Great Britain still has no modern constitution. This personal union would then probably have to be abandoned and with it the symbolic union of the crowns in one person. Ultimately, what we have perceived as the United Kingdom for about four hundred years is about to disintegrate. The English aversion to Welsh and Scots is already legendary and often enough the stuff of jokes. Hardly anyone realise, however, the centuries-long rift between the north and the south within England. But that's what finally led to Brexit.

Historical North-South conflict

The relationship between the north of England with places like York, Liverpool, Manchester and the south with its centre London has always been problematic in England. Without going too far back in history, the rebellion of the North in the "Pilgrimage of Grace" during the reign of King Henry VIII in the 1530s may be recalled. Perhaps because of Henry's separation from Catholicism, the rebellion against the king ends after some back and forth with a terrible revenge by Henry on the rebellious ones in the north. He finally had all the leaders of the rebellion executed in public.

König Heinrich VIII (1491-1547)
(Source: wikipedia, licence free,
Workshop Hans Holbein the Younger

Never again should the North of England, in the reputation of English society as a whole, come even close to the level of the South English. To this day, northern Englishmen, especially in the eyes of the Londoners, are regarded as backward, uncouth, awkward, narrow-minded and stubborn. They are defamed as uncouth people, capable neither of the fine language nor the fine customs of the noble Southern Englishmen. Later, in the beginning industrial age, which finally had its origin in England thanks to the steam engine, the North was mainly used as a supplier of coal and as a steel factory, without really being loved by the South. In the eyes of the South English, the North remains a region where one can only get dirty.

With the growing colonial empire in the 18th and 19th centuries, the British made the same fundamental mistakes as other European colonial powers. They exploited the colonies mercilessly and thus created a questionable wealth at home. However, it lacked completely the domestic economic substance. That, above all, is the difference to major continental powers such as the USA, Russia and, more recently, China. They have, at least theoretically, so many resources of people and material in their own country that they can try to live up to their ambitions on their own. The two world wars also contributed to the economic decline of the "Empire". They also sucked the last reserves out of Great Britain. Soon the motherland could no longer hold its colonies. Since the 1960s, Great Britain has been reduced to the economic power of a population of around 60 million people. Thus one finally arrived where one had never wanted to go in England since the 17th century, in Europe!

Modern Confrontation

After Britain had actually lost its global significance and had long since ceased to be called "Great", the country spun into two almost civil war-like conflicts: the war in Northern Ireland and the merciless struggle of the powerful trade unions with their base of workers, especially from the North. In this phase, Margaret Thatcher, a strictly patriotic conservative politician, came to power in London as prime minister. She is determined to resist the country's obvious decline. Meanwhile, the Americans, under the presidency of Ronald Reagan, are also preparing to withdraw London its important rank, as the financial and trading centre of the world. The country threatened to become even more of a peripheral phenomenon in Europe.

Margaret Thatcher (1925-2013)

(Source: wikipedia, originator: Chris Collins /

Margaret Thatcher Foundation / CC BY-SA 3.0)

Margarete Thatcher, whose hatred of ordinary workers and trade unions was indelible, actually managed to break the social neck of this class and its organizations once and for all. Once again, the proud class of workers from the north of the country was to be deprived of everything. Even today, the devastating condition of the Liverpool and Manchester areas testifies to this defeat. But Thatcher not only wanted a single victory, she wanted to prevent a renewed resistance from industrial workers forever. Her instrument was to be the targeted development of a strong service economy at the expense of a traditional industrial production economy. The starting signal for this would be the Big Bang. The complete liberalisation of the British financial sector in October 1986. Since then, an increasingly rapid economic divide has developed for a long time between the north and south of England. From year to year, the City of London made more and more fantastic profits in the trading of funds and securities. The tough boys and girls from the City of London became enormously inventive in their lax handling of laws, especially tax law. At the same time, many of them earned millions in bonuses year after year. As a result, property prices skyrocketed not only in London, but also in large parts of southern England. On the other hand, property values fell in the north. While salaries in the south skyrocketed to unprecedented levels, unemployment rose in the north. As if to mock the poor, the English Financial Times regularly published a glossy magazine with the meaningful name "How to spend it". This was addressed to a few nouveau riches. It served to answer the very difficult question of how they could most senselessly bring their million-dollar bonuses back to the people.

Problems of Class Society

But that alone is not the only rejection of English society on the islands. It has always been a class society. Old nobility and nouveau riches clearly distinguish themselves from the rest of the population but also from each other. Non-hereditary nobility titles only for lifetime are nothing more than elaborate orders of merit. Of course, the old nobility distinguishes itself from such upstarts. It is almost impossible to ascend socially to the highest circles via the way to school and even through personal talent. Overpriced private school institutions offer young Britons hardly any development opportunities, even if well-heeled parents are behind them and can buy their children a place in such schools. England, which prefers to train the offspring of rich foreigners, with whom these schools can earn a lot of good money, rather than systematically promote its own talents for cheap fares, has been suffering for decades from a secret brain drain that no government has so far been able to counter with anything. No bourgeois businessman, no matter how successful, can ever ascend to the innermost social circles of the long-established aristocracy. Rich businessmen from abroad certainly don't. The long-standing racism of a white, Anglican Protestant upper class and the rest of English society has not improved throughout the centuries. Foreigners, regardless of their origin, have always been tolerated only for time and only for economic reasons, but in the end have never really been accepted, or even integrated. Immigrants from the former colonies, today somewhat dressed up as the "Commonwealth of Nations", are easily preferred to other foreigners from "third" countries. But in the end they form a parallel society. At times this picture has changed in the country due to membership of the European Union. Union Europeans enjoyed a degree of freedom of movement that even Commonwealth members were unlikely to enjoy. They can enter and leave the country as they wish, work without special official controls and even buy what they want, without any customs. As long as the EU was dominated by Western countries, that did not matter much to the English. At the latest, however, since the eastward enlargement of the EU, many people view these new EU citizens with great distrust. Again, especially in the north of England, where Eastern Europeans compete with their native counterparts on the labour market because of their relative modesty.

Theresa May also allows herself to be influenced in her politics
by misjudge

(Source: wikipedia. open government licence,

Originator: https://www.gov.uk/governmenploads/system/

uploads/attachment_data/file/588948/

Controller of Her Majesty’s Stationery Office)

Misjudgements

In the meantime, economic ties with the European Union have become so tightly knit in such a way that a detachment will be painful for both parties, but could even be fatal for Britain. At best, the country still plays a role internationally in areas such as the chemical industry and pharmaceuticals. Recently, it has even been used to electronically sniff out alleged opponents of all kinds and origins. Separated from the EU, the British could not even feed themselves from domestic production in the foreseeable future. The mandatory import of food and daily necessities is likely to drive the prices of these goods to unexpected heights in the event of an unregulated Brexit. Such an increase in prices will not be matched by a corresponding increase in income for a long time to come. The enforced end of the heavy industry and the sell-out of entire industries by Margarete Thatcher, such as the automobile industry to various foreign owners, have made the country so dependent on important production opportunities in other countries that an interruption of this chain of goods will immediately lead to production stoppages.

The importance of England as a military power, which some like to praise, is simply an illusion. It may well be that the country has some nuclear toys. However, when you look at it in the light of things, all the effort that has been put into it has been of no use in effectively resisting any aggressive action by various countries, pirates or terrorist organisations. However, the maintenance of the strategic weapons causes immense costs for the already weakening economy. The country is already no longer in a position to build new nuclear submarines for itself, for example. It lacks the necessary shipyard capacities and the necessary know-how. For example, they are forced to order replacements for the outdated nuclear submarines in France and have them built there. The costs for this will then rise in future, probably by 25 percent customs surcharge. The company proudly refers to its own construction of two modern helicopter carriers near Aberdeen in Scotland. One is supposedly finished, the other is still under construction. Admittedly, for the time being the two are useless because they do not have the helicopters that are supposed to be the core deployment systems of the two costly carriers. These two prestige objects were not laid on keel for the own national defence anyway. Someone in London years ago came up with the clever idea of lending these weapon systems to other users for money. The main focus is on Singapore.

David Cameron

(Source: wikipedia, copyright notice,

Originator: Meet the PM (direct image link)

from the 10 Downing Street Website)

Gamblers

How did the victory of the Brexit supporters come about two years ago? Because a politically disinterested, slightly arrogant and blasé relatively young British population, based in the south of England, was too sad to be strongly committed to its own future at the decisive moment. On the other hand, the older people, who had always been disparaged and treated badly by London, were busy going to the ballot boxes, especially in the north, and forced a triumph in their eyes. Nothing that populist politicians like Nigel Farage or a Boris Johnson promised to the people two years ago will come close to what they promised. This may well dawn on the last citizen in the meantime. But it is to be feared that a majority of the English electorate is still more willing to shoulder heavy burdens and renunciations for years to come than to give up the dream of regaining full national sovereignty.

Some politicians in the European Union fear that Britain's resignation may become an example of ambition for other Member States. That is not to be feared! On the contrary, the inevitable, blatant decline of Great Britain will make it clear to many a national political muddlers that their small nations, which cannot survive on their own, will only be able to leave a little more of their national proud if they are embedded with a strengthened EU. Other than that, all what's left for those countries, is being just the destination of hundreds of thousands of Asian tourists in the future .

Deutsche Version

The markets are moving -Report from the 5th Capital Markets Day of Bank Hauck & Aufhäuser in Frankfurt by Thomas Seidel

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.

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.

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.

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.

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.

Back to normality -A report from the Frankfurt European Banking Congress- by Thomas Seidel

The Alte Oper as venue of the European Banking Congress
There were more policemen than protesters at the location
(Source: Thomas Seidel)

For a whole week, bankers from all over Europe have been meeting and exchanging views on various topics in the financial sector. The motto was: "Back to normality". Last Friday, the closing event took place at the Alte Oper in Frankfurt. A very small group of protesters in front of the meeting place made the lack of excitement about finance business clear. Inside, there was also a lack of ideas.

Europe, according to Christian Sewing of Deutsche Bank in his opening speech, is playing with its future. The European Union, unlike the United States with its large domestic market, is still too fragmented. There are about 27 markets with e.g. different consumer protection rules. Sewing claimed to have an European agenda again. Alternatives to American and Chinese technology platforms must be developed. At the same time, one must remain attractive for young people, both in terms of wages and opportunities for entrepreneurship. All this, however, presupposes a larger single European market.

Christian Sewing CEO Deutsche Bank
(Source: Thomas Seidel)

Risk Management and Digitalization

In a panel discussion, Sewing focuses on the banks' actual core competence, their ability to manage risk. The banks should also make this ability available to their customers. The banking industry in Europe continues to be the catalyst for economic growth by financing it. Sewing is thus alluding to the dominance of banks in industrial finance in Europe. Sewing demands a new mentality in the financial business, but does not say in which direction the current mentality should change.

Commerzbank CEO Martin Zielke's permanent statement is digitalization. He considers that the banking sector is over-regulated on the one hand, but under-digitalised on the other hand. Today, bankers would have to become technologists. For example, cloud technology in Europe is lagging far behind availability in the USA. In a hazy remark Zielke mentioned people at Commerzbank having a number of good ideas internally. That sounds exciting at first. However, as long as one don't get ideas out there and try to do business with them, such ideas won't remain profitable. Lack of profitability is known to be one of the main problems of the self-proclaimed Mittelstandsbank. According to Zielke, it is not to be expected that the ECB (European Central Bank) will return to a monetary policy like before the financial crisis. This can only mean, that there should again be interest margins with which banks can earn money comfortably without having to be truly innovative.

Mario Draghi's last appearance as President of the European Central Bank at this annual event was insubstantial. He could have saved himself that. The European Central Bank's-metronome had nothing new to say. The economic statements on the overall situation of the economy are well known. The ECB's position and conditions are unlikely to change.

Core competence of the banks

On the other hand, the remarks of Jean Lemierre, the chairman of the supervisory board of the French Banque Nationale de Paris (BNP), who looks only outwardly old-fashioned, seem surprisingly refreshing. He advises for example, to stop dreaming about Anglo-Saxon pension funds in Europe. Europe has a life insurance system. Nevertheless, the banking and capital market union must move closer together. Contrary to Zielke's views, banks are not technology companies. He, like Sewing, sees risk management as the core competence of banks and for that is no need for any special technology. Rather banks should listen to their customers' wishes and meet their needs.

Much has already been achieved since the financial crisis, but Lemierre believes that only half the way has been covered so far. It is clear that new structures have to be created.

Of course, it is still unclear how the markets will realign themselves because of Brexit. An important problem that has not yet been solved, is the ongoing fragmentation of liquidity. The monetary policy of the central bank is made for the productive industry and not for the banks. It is already clear that banks will lose a sense of risk because of the large amount of liquidity.

Mario Draghi President  of the European Central Bank
(Source: Thomas Seidel)

Technology for the future

A second panel discussion focused on technology in the financial sector. The audience was asked for example, what concrete benefits crypto-currencies would have to them. As it turns out, none benefit is expected to be available for the time being. This is precisely the reason why crypto-currencies are not developing on a broad scale. There is no added value for consumers and companies when using them. It becomes clear what the financial sector really needs are standardized processes, that make business processing effective and affordable. What just few people know, is that standards for bank procesing have existed since the 1970s, but in almost 50 years the financial industry has not managed to take advantage of these opportunities. To dream today that in the future processes, such as the very cost-intensive processing of securities- transactions, could be simplified very soon with blockchain technology is not helpful for the industry.

The five-day Euro Finance Week is a mammoth event for the financial sector, which of course has to consider a new content concept. Its declining importance can be seen in the decreasing number of sponsors. At least the most prominent representatives of the industry, who traditionally speak on the last day, have not really had anything new to say in recent years. This reflects the general political paralysis in Europe. Germany has had a torturous year of government, the end of which is not yet in sight. The Brexit is imminent and one has no idea how it will end. 2019 will be a year for many changes in leadership in Europe. In the meantime one cannot see anymore one or the other faces of the official decision-makers. Either there will be a storm blowing a fresh wind through Europe, or the old continent will choke on its muff from rotting compromises.

Too much money is desperately looking for investments -Report from Handelsblatt-Summit on Private Equity- by Thomas Seidel

A panel discussion at the summit
(Source: Thomas Seidel)

Professionally organised by the Handelsblatt, a good 130 participants from the industry gathered at Frankfurt's Jumeirah Hotel, directly behind the Palais Thurn & Taxis for their annual conference. People like to see themselves as a driving force to help companies on their feet and drive innovations forward. But private equity is also always a tough selection process. What is no good is discarded. But it is precisely this demand for quality that the industry sees as endangered by too much money on the market.

Holger Schmieding, Chief Economist at Berenberg Bank, gave all participants an economic overview. He sees no recession for the coming year. In some sectors there would be a need for correction, but this would not turn into a general crisis. The global trade disputes instigated by the USA would be directed primarily against China. Important circles in the USA do not wish to have a dispute with Europe. Nevertheless, side effects of the US-China dispute would of course also affect Europe.

Holger Schmieding, chief economist Berenberg Bank
(Source: Thomas Seidel)

The United Kingdom should have four times more interest in a regulated outcome of the Brexit dispute than the European Union. Otherwise, a hard Brexit would harm Britain in particular. Italy simply has the wrong government at the moment. If at all, only the markets could discipline this government. Schmieding sees a problem rather in the oil prices. For the dollar, new interest rate hikes are expected from the FED in 2019. Overall, however, economic growth should improve again in the second half of 2019.

Dr. Levin Holle, German Ministry of Finance
(Source: Thomas Seidel)

Dr. Levin Holle from the German Ministry of Finance found words of softness. Yes, the financing of the real economy is important. Yes, better framework conditions for an EU capital market must be created. Yes, digitaisation is right at the top of the agenda because China is already seen as the world leader in this area. Yes, the Eurozone must be strengthened. Yes, structural reforms are important in some EU countries. Yes, the location Germany and especially Frankfurt must be supported more strongly. Yes, Germany needs to develop an equity culture.

Only Mr Levin, it was all like that a year ago. All this is well known. But nothing happened in Berlin!

A first panel discussion about the industry drew the following picture: Private equity would be regarded as a reliable long-term investor. This consideration is increasing more and more in Germany. During the last financial crisis, companies financed by private equity would have performed better and created more jobs than those classically financed.

But there are still many stumbling blocks for venture capital in Germany. The main reasons are the German mentality, supervisory rules would make it difficult, for example, for the pension fund to invest in venture capital and there is a lack of infrastructure such as in 5G. In Germany, one could even take the reforming France as an example. The government sees the lack of data security ("from a German perspective" editor's note) as a major obstacle to digitaisation.

Surprisingly, the Chinese savings rate would be 40 percent, so economists are not very concerned about the Chinese debt. It is expected that the French economy will overtake the Germans in the next decade. 

There are enormous savings rates and capital, but there is no demand for investment. The recovery of public budgets depends first and foremost on a healthy labour market that produces enough taxpayers to meet public debt. (Editor's note: Such formulations show the coldness of economic thinking). 

Johannes P. Huth, KKR
(Source: Thomas Seidel)

The overall picture is rounded off by individual voices. Johannes R. Huth of KKR (Kohlberg Kravis Roberts & Co, a large New York investment company) sees London-based private equity firms looking for opportunities to work legally in the EU. This does not have to go hand in hand with a move to Europe. As far as investments in the UK were concerned, the profit expectations had already had to be revised downwards. London has become less attractive as a location for future talent in the financial sector. Huth does not see a talent and brain drain, but the universities in England have to adapt more to the needs of students than they have done so far.

Hermann Dambach of Oaktree Capital has something positive to say about the new technologies. Their application leads to a decrease in manual tasks and a simultaneous increase in reporting, which in turn creates more time for the actual activities.

The industry sees itself in a positive development. However, there is concern about the large amount of money in circulation. The industry considers this to be dangerous and harmful. Ultimately, therefore, investments would be made in companies and areas that could hardly be profitable. This would destroy capital that could have been used more successfully elsewhere.

Mario Draghi clearly tells Target 2 critics his opinion -Report from the EZB-press-conference before summerbreak 2018- by Thomas Seidel

EZB-president Mario Draghi (center) announces decisions of the EZB-council
(Source: Thomas Seidel)

Before the summer break, there are no sensations in terms of Euro. The excitement of the hour take place especially on the other side of the Atlantic. However, a careless question about to the critics of the Target 2 balances, leads to cut someone short.

In its last session before this year's summer break, the ECB actually decided not to decide. In any case, the central bank interest rates and the terms of the extraordinary purchase program have remained unchanged. One did not expect anything else. The economic basis for this non-decision has not changed either. The key figures for overall economic development in the euro area have largely remained the same. Sustained economic growth, declining unemployment and at least non-increasing government costs in the social sector, as well as a moderate but not exactly definable inflation represent by and large the current situation. Ireland, Portugal, Spain and Greece are on a positive path, only the unclear development in Italy gives reason for thought.

The shimmering heat fills the air at Frankfurt am Main
View at the new Henninger Tower from the EZB building
(Source: Thomas Seidel)

With so much summery sunshine in Europe, the discussion is therefore more focused on secondary locations. One of them is the current trade dispute that the US has not only instigated with Europe. After all, according to Mario Draghi, the negotiations are a good sign for multilateral talks. The Governing Council do see a certain weakening in the extraordinary export growth of recent years. However, other indicators such as investment and private consumption would continue to show positive development.

Given a certain tiredness at 37 degrees Celsius summer heat outside the ECB press center, a request due to the German permanent critics of Target 2 balances acts, first seems to be a gap filler for a lame press conference. But Mario Draghi takes up this topic about constantly nagging critics on the German Target 2 balances to put someone in his place. First, Draghi explains the situation. Target is a payment system and every central bank system needs a system to handle transactions. Such a system, however, poses no risk in itself. The remaining high balances in some of the central banks of the euro system are mainly caused by the purchase program of the ECB itself. Then Draghi concludes with the remark, that those criticising the target balances, are people who do not like the Euro itself.

Conclusion

Certainly in Germany the criticism of the euro will not be silenced. The longing for the "good old German Mark" is just as unreal as the desire many British Brexit advocates for the "good old imperial times". Both will not come again. Other Europeans, of course, should refrain from any criticism of the Euro. Remember, no one at the end of the 1990s was ready at last to make faster swaps of their old useless national currencies, than the Belgians, French and above all the Italians.

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)