Those days are over. The Chancellor gave the welcoming speech at the bank’s virtual New Year’s reception – an important reputational success for Deutsche Bank boss Christian Sewing.
In its 151-year history, the largest domestic financial institution has “seen and survived” all the upheavals in German history, said the Chancellor. “That is a reason to congratulate.” In the fight against the economic consequences of the corona crisis, the support from the banks is essential, stressed Merkel. That is why a crisis-proof and competitive financial sector is essential for the German economy.
CEO Sewing thanked the Chancellor for pointing out the importance of the financial industry. “Personally, I am particularly pleased because we see ourselves as an important part of our country and want to be at the center of our society,” he said in his speech.
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With Federal Economics Minister Peter Altmaier (CDU), Sewing was able to welcome a second prominent political guest. Altmaier thanked Sewing for the far-reaching restructuring program that the CEO has initiated and which is expected to cost 16,000 jobs. The minister emphasized that the restructuring had strengthened confidence in Deutsche Bank.
Sewing was surprisingly optimistic about the economic situation. In his opinion, many prerequisites have been met for the global economy to pick up noticeably this year – provided that the fight against the coronavirus is successful. China has already reached pre-crisis economic levels. In the USA it should be ready in the first quarter. “For Germany and other countries in the euro zone, we expect the economy to recover strongly from the spring,” said Sewing.
In view of the high numbers of infections and the threat of corona mutations, the pandemic is not over yet, and the vaccinations also took longer than hoped. “But that’s no reason to be pessimistic. On the contrary: we still believe that 2021 can be a far better year than the last, ”emphasized Sewing in his New Year’s address.
No more new billions in aid
Sewing therefore believes that new government aid programs worth billions are unnecessary and even harmful. “If we now give full throttle to get going again, it will not be easy to keep the economy on track.” Europe has launched good economic stimulus programs. “That’s why we shouldn’t saddle up again now, that is, we shouldn’t get another huge spending package off the ground like in the US.” When the crisis is over, the debt should fall and interest rates rise again as quickly as possible.
Some prominent economists disagree with Sewing. The President of the German Institute for Economic Research (DIW), Marcel Fratzscher, called for further help in an interview with ZDF: The money that the state is now spending is well invested. He must not let himself be deterred by a “nonsensical debt brake”.
Sewing justifies his economic optimism with five arguments: On the one hand, the advances in vaccines – “not even a year after the start of the pandemic” – are a “scientific breakthrough”.
At the same time, there is a “considerable pent-up demand” among consumers and companies that have so far held back with capital investments because of the crisis. “A lot of people are just waiting to travel, eat out, go to a concert again,” said Sewing. “After the end of the Spanish flu in 1919, there was a similar explosion in consumption and investment that culminated in the ‘golden twenties’.”
In addition, from the point of view of the Deutsche Bank boss, the third and fourth points are the previous “government economic stimulus programs as the world has never seen them” and the support from the central banks.
The manager recognized the shift in US foreign policy as a fifth argument. “As the American President put it so aptly: ‘America is back.’ From our point of view, this is a major stabilizing factor that had failed for years, ”emphasized Sewing.
Fear of inflation and rising interest rates
However, Sewing also warns of the risks of the measures to contain the economic corona aid. The extremely loose monetary policy leads in the medium term to the risk of monetary devaluation. “For decades, inflation seemed like a phenomenon from a long time ago – now it could return,” says Sewing.
In sub-segments such as the real estate market and luxury goods, it is already in full swing. “It would be foolish to assume that historically low interest rates and historically large economic stimulus programs will not lead to significantly rising consumer prices as soon as the economy picks up again.”
The price for the “hopefully quick economic recovery” is high. “We are experiencing tectonic changes in national debt.” The debt ratio in all major industrialized countries except Germany is now more than 100 percent of economic output, and in the USA it is even over 120 percent.
For many countries, this level will only be sustainable if interest rates remain at the current, historically low level. “But that also means: Any sustained rise in interest rates could lead to considerable turbulence – in the financial markets and in the economy as a whole,” warned Sewing.
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