What’s next for Germany, Europe, and Deutsche Bank? With Christian Sewing

To be honest, Michael, I can hardly remember a time which has been that complex, that challenging and also that volatile that it is right now. Whatever this government is now doing, it always needs to put the economy first, because if you put the economy first, it's actually good for democracy. And that is the most important. Deutsche Bank is a global bank. We have the global expertise and in particular the local expertise in the global markets, which is fantastic.

Thank you for having me.

Well, first of all, there is still a lot at stake actually. We are, I think, in a very critical environment geopolitically, economically, from a societal point of view, from a geographic point of view. So to be honest, Michael, I can hardly remember a time which has been that complex, that challenging and also that volatile that it is right now. And in this regard, I have to say, I'm glad that we have the opportunity with the results of the election to have a coalition which consists of the two big and, you know, historically the leading parties in Germany who in my view can make a huge difference also to the fate of Germany. We need a government which is stable, which is clear about its reforms and which is, so to say, very much driven by, on the one hand, the geopolitical challenges we have in this world. And we need clear answers to that. And that can not only be a German answer, it needs to be a European answer. But at the same time, this government needs to again focus on economic topics, because clearly we have seen difficulties and we have seen also misses in Germany, which we need to repair. And I do think whatever this government is now doing, it always needs to put the economy first. Because if you put the economy first, it's actually good for democracy. And that is the most important.

It would not be sufficient if this is the only step and therefore, let me put it different. We always ask for structural reforms in Germany and that remains the most important. We need structural reforms when it comes to bureaucracy, when it comes to regulation. We need to think about what can we do about energy prices in Germany going forward. You need to think about the mid-cap companies, the family-owned companies, the manufacturing part of the industry. We need to have competitive energy prices. We need to think about the lack of skilled workers, that is all translated into a structured migration and immigration environment. We need to think about defence, but not only defence in terms of what is happening in this world. Defence can be a huge impulse, positive impulse for the economy actually because defence and technology is very much linked. So I gave, I think, at the end of November to one of the German media houses, a nine point programme, which Germany needs from structural reforms and these structural reforms remain most important in order to avoid that Germany becomes the sick man in Europe. So that is number one. Number two, I still do believe that also from a budget point of view, we really need to review in Germany our income and expenses like you have to do it with each and every corporate which is in, you know, some challenges or in some difficulties. And therefore I do believe the new government needs to take a very close look for what are we doing our expenses, is there room for certain cuts and can we reinvest that into yielding investments in terms of growing the economy? We need to grow the economy on average above 2% in order to pay for our pensions long term. So it's all about also getting the budget right. Thirdly, we need to actually invest into Europe. I think in particular in this geopolitical environment where we are Germany on its own, even if we would do super well, we are not strong enough actually to compete with the other nations and the other countries which are bigger than us. Not only talking about the US, but I'm talking about China, India, other blocs in this world. And therefore I think Europe is the answer. And in this regard, obviously coming from a financial institution, the capital markets union is the key answer in order to actually invest and allow investments into Germany. Now if all this is done actually what we heard yesterday is in my view a positive and a right step. And I do believe if these investments are really used to make us safer to actually invest into defence - and again, don't forget the positive impact on technology, defence and technology is really linked - if we invest into infrastructure I do think also from a debt capacity point of view, it is the right direction, but it would go nowhere if we are not working on structural reforms. And therefore I hope that while I support directionally-wise what happened yesterday, I hope that we are not forgetting about the economic reforms - that is most important.

Look, first of all, I think we really all have to realise that there is not only a new tone coming from the US, but it's a different policy. And you know, I'm not now judging on it, whether right or wrong, but I think we all have to wake up that this is not a phenomenon which is only there in January, February and March and all gets hunkydory again in April, May or June. I really do believe that we will see a longer-term different economic and also geopolitical policy out of the US. And I'm sure to be honest, my reading of all of that is that the US is first of all focusing on itself. America first is, for them, America first. And secondly, I do believe that the focus of the US long term is actually more Asia Pacific oriented than Europe. And the reason is that if you think about demographies, if you think about growth rates, if you think about resources, if you think about topics like technology, the fastest growing sector in the economy, there are opportunities in Asia, in the Asia Pacific region, which are hard to discuss. And therefore the focus of the Trump administration is going into this. And that means that we obviously again need to focus and need to find the right answers. What are the right answers? Work on your own economy, make yourself stronger and not in a confrontational way. Not at all. I think most important is that we keep in dialogue with the US, with other partners we have. But even if you keep the dialogue and there are, by the way, items where I understand the criticism of the US versus Europe and Germany, if you think about defence expenses, there is no reason that we didn't spend as much as we should have. And therefore, I think it's an argument which is valid. But in order to and therefore we need to keep the dialogue. We need to think about where we can also agree on certain deals, so to say, if I use the US language in these days, and I'm sure there are ways to find that, but you always have better cards in politics privately but also professionally, if you are yourself strong. And therefore we need to work first on ourselves. And therefore my plea for structural reforms and not only for the increase in debt capacity, but also the big plea is that we think about a common Europe. What can we do together in Europe? Europe is a continent with 450 million consumers. In the EU we can be super strong, 450 million compared that to the US consumers and if we find common grounds and I do think there is a window of opportunity also with the new EU Commission. I think we are a very competitive partner and that will also get a positive feedback in this world.

Definitely, definitely and therefore again, I mean, if you are in a difficult position, you need to define yourself a way out of this position. To be honest, the feedback on Europe, the feedback on Germany is not at all only bad. If I'm travelling the world and whether I'm in Asia, the Middle East or in the US, there is a lot of good feedback on Europe, on Germany in particular micro. And when I talk micro, it's the companies we have, the excellence we have, the talent we have, the technology we have, the manufacturing we have. People are always talking about artificial intelligence. Yes, very important. There is artificial intelligence actually which we can use for our industries, i.e. industrial AI. We are one of the leaders. We have fantastic companies in Germany on DAX level, on family-owned level, where this is already applied. So I think people actually see the benefits of Europe if we are now working on the structural reforms and never forget what counts for our clients, what we tell our clients, private clients, commercial, corporate clients about diversification, each investor is thinking about that. No investor of this world likes to have all eggs in one pocket and therefore they would like to have a strong Europe and hence there is a window of opportunity, yes.

Well, I think we can play multiple roles in this and it would take too long for this podcast. But number one, to our clients, in my view, a most critical role that in these times where we are with these volatilities, which we see in the market, but also from a geopolitical point of view, the advisory needs for our clients is as big and as high as I haven't seen it before. And actually, the clients are looking for a bank with its home market in Europe and in Germany, but with an international and global reach. And there are not so many European banks left with the network we have. And to be honest, we can see that in our mandates. We can see that in our client feedback that is wanted. When I'm in the US, when I'm in Asia, a lot of clients are actually telling me to be honest, we are looking for the one European alternative to the US banks because also we would like to diversify. We have fantastic US banks, there is no doubt, but they would like to have European alternatives. We can be that European alternative. That's the reason why, with all the transformation we have done, one thing was never at question that we are not remaining global. Deutsche Bank is a global bank. We have the global expertise and in particular the local expertise in the global markets, which is fantastic. We have the risk management tools. So I think we can be the advisor to our clients. I also do believe that in these times where we are, if we think about the geopolitical shifts, I think it is very important that we have a capital markets bank in Europe because everything what we are discussing, you just talked about the capital markets union. In order to make a capital markets union happen, you need to have European capital markets banks. There are not a lot of banks with an investment banking network like we have. So we can be a facilitator actually of the European capital markets union. And to be honest, I also do believe with the transformation which we have seen, with the return to a real credible bank like we are, we also have a chance to be actually also an advisor to other stakeholders and really be not only an advisor, but we can give, in my view, good input from a research point of view, but also from a markets point of view, to stakeholders in Brussels, in Berlin. And I can see that this is picking up and therefore I can see that we are playing a major role actually and can play a major role. And this is exactly what, at the end of the day, is so interesting.