“What good is export success if it does not lead to more wealth at home?”

Dieses Interview erschien bei European Business:

Live without thinking about tomorrow is perhaps the best description of attitude of the German economy, which so far has had a rather laid-back reaction to Donald Trump’s politics and Great Britain’s official application to exit the EU. “This impression is deceiving,” Economist Dr. Daniel Stelter emphasizes in an interview with Wirtschaftsforum and is at no loss for words about the populist developments in Europe just before the presidential elections in France.

European Business: Dr. Stelter, do you find the lack of concern from the ranks of German companies regarding geopolitical upheaval in the world disconcerting?

Daniel Stelter: I think this impression is deceiving. The companies are well aware of the dangers and are bracing themselves for it as much as possible. They can’t lead a company in constant crisis mode. Think back to the year 2009. Everything looked like we were on our way to a new global economic crisis. If you had bet on that scenario back then, you would be the big loser today. Companies always have to be on the lookout for opportunities while at the same time preparing for the worst so that they won’t find themselves in trouble in case of another crisis. This is precisely what German SMEs are doing, who have cut back debt and been cautious with their investments since 2009.

European Business: Does good economic growth hide the fact that we now have to rethink our own corporate strategies? Or have business leaders long since reacted and just haven’t talked about it?

Daniel Stelter: Of course, there are still risks. The German economy is booming and is speeding from one export success to the next. What is being overlooked there is that we are directly and indirectly dependent on the Chinese economy, which for its part is increasingly dependent on debts. A crisis, potentially even bigger than 2009, is brewing there. Added to that is the euro, which without question is too weak from the German perspective and thus also contributes to export success. Neither one is a stable factor in the long term. We find ourselves in an illusion of wealth that could end more quickly and more drastically than we can imagine. At the same time, more and more companies have contingency plans in reserve and try to prepare for the biggest risk. Take the euro, for example. My dialogue partners see through the fact that the causes of the euro crisis are not yet overcome and that it’s only the cheap money of the ECB that’s still keeping the monetary union together. Accordingly, they are trying to take precautions, which, in light of the dramatic disruptions to be expected if the Eurozone breaks down, is not easy. The same is true for the problem of growing protectionism. Companies are experiencing trade obstacles in daily business but don’t speak about it openly because they fear further repercussions. The euphoria about China is long gone. Companies recognize that they are allowed to play in China only as long as the local competitors are well established and strong enough. That is why they’re aligning themselves towards new markets.

European Business: What could or should a strategic realignment look like?

Daniel Stelter: At its core, economic growth depends on two factors: the growth of the workforce and increases in productivity. The latter has decreased significantly in recent years while the workforce in Europe and particularly in Germany faces a dramatic decline that cannot be stopped by immigration. In other regions of the world, particularly in Asia, however, we’re on the verge of another phase of high growth. Europe and thus Germany is therefore becoming less attractive as a production location for several reasons: more inference by the state, more redistribution for an aging society, shortage of staff, progressively worse educational performance, and stagnating or shrinking markets.  Strategically, this means that companies should be prepared for a fundamental change. Besides radical – I deliberately say “radical” – automation, it is in particular the building up of production and research capacities in the markets of the future.

European Business: Is there are recipe for curbing growing populism in Europe – and what can be learned from the Netherlands and Austria in that respect?

Daniel Stelter: The acceptance of the EU is also based in particular on the promise of prosperity. In recent years it has become increasingly clear that the EU cannot fulfill this promise. There would be starting points for this despite the aforementioned demographic challenges. Politicians would have had to establish the reforms to make Europe a truly innovative and competitive region. Because reforms are difficult to implement and are unpopular in the short term, they preferred to focus on welfare state redistribution, which weakens growth even further. Added to that is the aggravation of the euro as source of discord. It is becoming ever clearer that it was not a good idea to squeeze countries with such different economic structures and cultures into a common currency.  Instead of the desired convergence, we have experienced a progressively divergent development. Even if all the problems of the south (including France) cannot be put down to the euro, it is a welcome scapegoat for populist politicians everywhere. The British, who so prudently did not take part in the common currency, put on the brakes with their Brexit vote. Studies show that the British economy has many similarities to the economies of Scandinavia, the Netherlands and Germany, but none at all with the rest of Europe. The exit is also due to this insight and the conclusion derived from it of not wanting to provide fiscal transfers in the long term. That in elections the populists did not achieve the results feared by some may not be seen as an all-clear signal. On the contrary, the next wave of populism should hit us at full force by the next recession at the latest – which is always only a matter of time.

European Business: When you consider the candidates and their campaign statements on economic and European policy: Do you believe that that the ardent European Emmanual Macron, with his election platform, will prevail over the right-wing populist Marine Le Pen?

Daniel Stelter: Probably yes. Although the rise of the communist candidate Melenchon in the polls increases Marine Le Pen’s chances. The financial markets are likely to celebrate Marcon’s win, and the euro will improve. But that wrongfully, in my opinion. How should President Macron, without his party in the majority in parliament, put through the reforms that others before him could not put through with a greater power base? According to surveys, nearly 50 % of the French population supports candidates who are critical of the EU and the euro. That would make it nearly impossible to implement pro-European policies. Proponents of the euro are therefore placing their hopes on the Bundestag elections in September. The pro-European Martin Schulz is expected to bring about political change in Germany towards more socialization of debts and redistribution in the Eurozone. I also think that the current politics of the German government are wrong because they drag out the crisis and thus increase the damage. However, more financial redistribution can only buy time and cover the problems with even more debts. It doesn’t change a thing about how the story ends because the excessive indebtedness is so massive and the economies are too different. Just look at Italy: After more than 100 years of monetary union between north and south and huge fiscal transfers, the difference has intensified and become firmly established. In any case, I don’t understand why German households, which are among the poorest in Europe, should bear the brunt of the consequences of the failed politics of recent years. The Italians, the French, even the Spanish and the Portuguese have greater wealth. What good is export success if it doesn’t lead to more wealth at home? We might as well give our cars away.

→ European Business: „What good is export success if it does not lead to more wealth at home?“, 25. Mai 2017