High-Calibre Discussion: “Fiscal Policy, Capital Markets and Banks ‒ What will the Future Bring?”
On 5 June 2024, Binder Grösswang held a panel discussion featuring Federal Minister of Finance Magnus Brunner and CEOs of banks and industrial enterprises.
Fiscal policy, capital markets and banks – challenges and future developments: These were the fascinating and highly topical subjects discussed by Magnus Brunner (Austrian Federal Minister of Finance), Ingrid Hengster (CEO of Barclays Germany – Global Chairman Investment Banking), Gerda Holzinger-Burgstaller (CEO of Erste Bank Oesterreich), Peter Oswald (CEO of Mayr-Melnhof Karton AG) and Heinrich Schaller (CEO of Raiffeisenlandesbank Oberösterreich). The discussion was moderated by Martina Salomon, publisher of the daily newspaper KURIER.
“Continuing regulatory transformation and demanding market situations: these are the framework conditions within which business enterprises, banks and other financial services providers are operating. We consider it our responsibility to give our clients practice-oriented advice,” said Stefan Tiefenthaler, Managing Partner at Binder Grösswang.
“We are therefore all the more pleased that our firm was able to provide the forum for this extremely exciting panel discussion within the framework of our impulse series,” Managing Partner Florian Khol added.
The strengthening of Europe’s competitiveness was a leitmotiv that ran through the entire discussion, given the common tenor of the panellists’ opinions: that in recent years, Europe has severely forfeited its competitive effectiveness and that in future a stronger focus has to be placed on this issue, also by the new EU Commission.
A “New Deal” to facilitate the “Green Deal”
Austrian Federal Minister of Finance Magnus Brunner shares the aforementioned opinion. “The highly relevant subject of competitiveness, which will accompany us at European level in the coming years, has been seriously neglected of late, not only in the EU election campaign.” Brunner considers that the primary tasks of the European Commission in the coming years will be to strengthen competitiveness and reduce bureaucracy in areas where it has become excessive. He already sees a certain paradigm shift in this regard, for example in the Commission’s target of reducing burdens associated with reporting requirements at European level by 25 percent.
In Brunner’s opinion, a “New Deal” for competitiveness is required first, before the “Green Deal” can be further pursued. “Generally, in future the EU needs to think certain things through better and consider in detail what specific effects they will have on business enterprises,” he said. He believes that in some respects businesses are currently being overburdened – e.g. in the EU Supply Chain Law – by having many responsibilities simply transferred to them.
The Minister of Finance also questioned the fact that regulation is often placed at the top of the agenda in Europe. For example, with respect to artificial intelligence, the first issue being dealt with in the EU is the regulation of AI, but Brunner believes this is the wrong approach. He thinks it would be more constructive to address the subject matter in a first step and only after that to deal with regulation.
More investment in education and research in order to increase Europe’s innovative strength
Ingrid Hengster, CEO of Barclays Germany and Global Chairman Investment Banking considers that strengthening Europe’s innovative strength and thereby its role in international competition will require more intensive investment in education and research. In future, we need to “cooperate more closely, create larger units, and work more with clusters – and also invest more money,” Hengster said. Moreover, she added, people will often have to be willing to take more risks – as they do, for example, in the US.
The fact that education and research constitute an important key to competitiveness is illustrated by Austria’s positive image abroad, Hengster believes; she pointed out that Austria continues to enjoy a very good reputation as a business location, partly based on its good education landscape.
Ingrid Hengster expressed optimism regarding the economic development of Germany. She noted that Germany, like Austria, had been seriously affected by numerous crises in recent years and that now substantial efforts were required to recover its former strength. Although the economy and the political situation had recently been jump-started and a lot of things had gotten moving again, she said, nevertheless, not only Germany but the entire EU was now confronted with considerable challenges: the green transformation, digitalization, the infrastructure – all requiring a high degree of financing, and therefore the capital markets union would have an important role to play in the future. “I expect a great deal in this respect from the next steps taken by the EU,” concluded Hengster.
A lower threshold for Austrians regarding the subject of the capital market
The significance of the European Capital Markets Union was also emphasized by Gerda Holzinger-Burgstaller, CEO of Erste Bank Oesterreich: “Since 2006, Europe has lost around 27 % of its share in global economic growth and has concomitantly sustained a considerable loss in terms of competitiveness. Remedial action is urgently needed, which means that in the EU – as in the US – we need to intensify investment in the development of the capital market.” She believes that culturally, we need to change our approach to the subject of the capital market, because up to now, in her opinion, many EU citizens have shown too little or no interest in this topic. “Therefore we have come up with the idea of the so-called ‘Zukunftsdepot’, a securities deposit account for the future. Each child would receive, at birth, 1,000 euros, to be mandatorily invested in the capital market.” According to Holzinger-Burgstaller, this would be a good way of bringing each and every person in Austria into contact with this subject and breaking down existing barriers.
In terms of the capital market, Holzinger-Burgstaller hopes that the new EU Commission will take a close look at what works well in which Member States and introduce these best practices in the entire EU, in order to raise the EU to the next level.
Gerda Holzinger-Burgstaller pointed out that in retrospect, 2023 and the first quarter of 2024 looked good: In her opinion, the highly satisfactory results were due to the good operational development of business and not solely the interest rate rises.
Environmental protection and climate action: reducing European overregulation
Peter Oswald, CEO of Mayr-Melnhof Karton, also sees a need for considerable changes if higher competitiveness is to be achieved. He referred to the EU Supply Chain Law already mentioned by Federal Minister of Finance Magnus Brunner, a law which places a strong focus on the environment and global human rights: “Well-meant, but poorly implemented,” he commented. “Due to the fact that the EU hasn’t enough officials to deal with these matters, as much as possible has been relegated to the business enterprises.” Oswald illustrated the consequences for businesses like Mayr-Melnhof with a specific example: For a medication package that costs 1.3 cents to produce, he said, proof is required that no deforestation has taken place within the supply chain. “This means, in practice, that for this package we have to provide some 15,000 satellite images to substantiate the provenance of the wood used to produce it,” Oswald said. According to Oswald, if one considered the associated personnel and development costs, it was clear that the Supply Chain Law included absurdly excessive requirements that seriously limited competitiveness. In general, Oswald is of the opinion that there is too much bureaucracy and overregulation in Europe and that the concrete output in terms of environmental protect and climate action is – in comparison with the US and China – limited.
ECB: Concentrate on core functions and win back trust
Another subject discussed by the panel was interest-rate reductions and increases by the ECB. Heinrich Schaller, CEO of Raiffeisenlandesbank Oberösterreich, took a look at the past: “I think that all of us in the financial sector agree on one thing: the interest-rate rises came far too late; in fact, there was a period even before the Corona pandemic during which the interest rates could have been increased. During the pandemic there was actually no longer any possibility to intervene.” Now he considers that the ECB urgently needs to take steps to win back trust, and emphasized that its core functions were to achieve price and money market stability.
Schaller expressed cautious optimism regarding the economic situation in Austria: “There are small dark clouds on the horizon, because we can see a decline in the creditworthiness of the business enterprises. The real estate sector is still confronted with major challenges, particularly the project field, not the private one.” However, he added, one could see that the problems were becoming significantly fewer – companies that were already in trouble before were now in great difficulty, but most companies had recovered, Schaller said.
This 20th panel discussion marked a small jubilee for the event series Binder Grösswang impulse. Once again, more than 100 invited guests gathered in the conference area of the firm, where they participated in the lively discussion and afterwards enjoyed a relaxed get-together during which they could delve more deeply into the topics.