The president of the banking association demands that Germany should also use fracking and nuclear power.
(Photo: dpa)
Washington Christian Sewing has experience with large restructuring projects. After all, the head of Deutsche Bank has reorganized his institute in recent years. Now he is calling for “a transformation program for Germany.” Sewing said in his capacity as President of the Association of German Banks in Washington. The program must be drawn up in the next six months and show “how the energy supply can be secured at competitive prices from 2024.”
The so-called defense shield of the federal government is correct, but it is not enough on its own. In talks with international investors on the fringes of the International Monetary Fund (IMF) conference, it was clear that Germany had to provide an answer. “That is the task of the economy and the federal government,” emphasized Sewing on Friday. German banks want to play a constructive role in this.
If it succeeds, “then international investors, some of whom have left Germany, will come back.” It is also clear that all energy sources must be used for this, “this also applies to modern fracking and nuclear power plants.”
The President of the German Savings Banks and Giro Association, Helmut Schleweis, made a similar statement. “With the subsidization of energy costs from public budgets, only a limited amount of time can be bought. This very short period of time must be used for an effective energy transition that will make us more independent of excessively high energy prices in the long term and thus maintain the international competitiveness of the German economy,” said Schleweis in Washington.
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In addition to the energy crisis, the fight against inflation is another important topic at the IMF meeting. Fed Governor Lisa Cook warned that the rise in prices was more persistent and harder to combat than initially assumed. Therefore, central bankers would have to raise rates further and then leave them higher “until we are confident that inflation is moving back towards the 2 percent target.” September inflation data, released on Thursday, was higher than expected.
A pause in interest rate hikes is considered unlikely
A few weeks ago, some economists were still hoping that the Fed would take a break at the end of the year – also to avoid major turbulence on the markets. But this is now considered unlikely in view of persistently high inflation. Mary Daly, the head of the regional central bank in San Francisco, expects interest rates to rise to 4.5 to 5 percent. The key interest rate in the USA is currently in a range of 3 to 3.25 percent.
Sewing also believes that the fight against rising prices, both in the USA and in Europe, is key: “Inflation is one of the key issues that must be addressed immediately.” He believes that an inflation rate of two percent will return in the foreseeable future however, for unrealistic. “We assume that in 2023 we will remain at seven to eight percent despite the aid programs.” In 2024 an inflation rate of five percent is conceivable.
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In view of the recession fears in Germany, new tensions between regulators and financial institutions are also emerging. “The gloomy macroeconomic environment is also affecting vulnerabilities in the German financial system,” the Financial Stability Committee (AFS) warned on Thursday. The panel of experts includes representatives from the Federal Ministry of Finance, the Bundesbank and the financial supervisory authority Bafin.
At the beginning of the year, the AFS decided that banks in Germany should build up a so-called anti-cyclical capital buffer by February 2023. This means that money houses have to set aside equity capital for their businesses in addition to the normal requirements.
However, Sewing considers this step to be wrong. 80 percent of the transformation of the German economy would be financed through the total assets of the banks, not through the capital markets. With higher capital buffers, “hundreds of billions in credit would be taken out of the economy.” That would send the wrong signal. “We have to mobilize a lot of capital to adapt economic structures,” says Sewing. “This can only succeed if the domestic financial sector is able to adequately finance the economy and assert itself in global competition.”
More: Deutsche Bank boss Sewing – “We have to make ourselves more independent”