Munich Conference

In Munich, Business Leaders Wary

  • Why it matters

    Why it matters

    Political uncertainty stemming from the Trump administration’s mixed messages on Europe could affect the continent’s economic climate.

  • Facts

    Facts

    • U.S. President Donald Trump has threatened to impose tariffs on German car imports from Mexico, has called NATO obsolete and his trade adviser, Peter Navarro, accused Germany of manipulating the euro.
    • Speaking at the Munich Security Conference, U.S. Vice President Mike Pence sought to reassure U.S. allies in Europe that the Washington remains committed to the trans-Atlantic Alliance.
    • German business executives are skeptical that Mr. Pence’s comments represent the views of Mr. Trump.
  • Audio

    Audio

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Lavrov MSC Reuters
The Russian foreign minister attacked NATO in Munich. German businesses are not so sure Trump will defend it either. Source: Reuters

Foreign and security policy aren’t normally thought of as part of a corporate executive’s job portfolio, but the Munich Security Conference was packed with German business leaders seeking answers about the uncertain future of trans-Atlantic relations.

Siemens Chief Executive Joe Kaeser impatiently waited for a meeting with German Foreign Minister Sigmar Gabriel in the lobby of the famed Hotel Bayerischer Hof.

Next door in a large conference room, Nikolaus von Bomhard of the reinsurer Munich Re, Aldo Belloni of the industrial gas producer Linde, Franz Fehrenbach of Bosch and Paul Achleitner of Deutsche Bank listened intently to the analysis of security experts.

From trade to the NATO alliance, U.S. President Donald Trump’s iconoclastic rhetoric has unsettled executive boardrooms across Europe. And with anti-establishment populist movements polling strongly in upcoming elections in Holland, France and to a lesser degree in Germany, more upheaval could be on the way.

“The big risk at the moment is the political uncertainty that keeps increasing, the economy also feels it,” Charles-Edouard Bouee, chief executive of the global consulting firm Roland Berger, told Handelsblatt.

“I hear the message, I just don’t believe it.”

Business executive

The Trump administration has taken a hard-line toward Europe since taking office, particularly against Germany. Mr. Trump has threatened to impose tariffs on German car imports from Mexico and his trade adviser, Peter Navarro, has accused Berlin of undervaluing the euro to inflate its trade surplus to the detriment of the United States.

The Munich Security Conference was supposed to be the moment when the Trump administration would soften its rhetoric and clear up uncertainty about the U.S. commitment to Europe, but the White House has sent mixed signals.

While U.S. Vice President Mike Pence, speaking at the conference, pledged the White House would be “unwavering in our commitment to the trans-Atlantic alliance, his comments come after President Trump earlier this year bluntly dismissed NATO as “obsolete.”

“To have the leader say one thing or give the impression of one thing and let the cabinet give a whole other impression is not helpful,” John Kasich, governor of Ohio and former Republican contender for U.S. president, told Handelsblatt. “They have to get on the same page.”

Given Mr. Trump’s past statements, corporate executives in Europe are having trouble taking Mr. Pence’s reassurances seriously.

“I hear the message, I just don’t believe it,” one top executive told Handelsblatt on condition of anonymity.

Though Mr. Pence sought to reassure Europe on NATO, Trump administration officials have not given similar reassurances about the European Union. Mr. Trump has championed Britain’s decision to leave bloc, a move that has created uncertainty in Europe’s single market.

Wolfgang Ischinger, the head of the Munich Security conference, has gone so far as to say that if Mr. Trump doesn’t back off his anti-E.U. rhetoric, it would amount to a “non-military declaration of war.”

The White House push for more defense spending could prove to be a boon for the defense industry.

Some German business leaders may be wary of the uncertainty created by the Trump administration’s chaotic first weeks in office, but there’s some agreement with the White House when it comes to the need for European countries, particularly Germany, to play a greater role in the world.

“In face of the increasingly complex security challenges, German policymakers need to find new answers,” said Dieter Kempf, president of the lobby group BDI, which represents German industry.

Germany needs to take more responsibility in the growing number of crises, Mr. Kempf said, particularly those in Europe’s backyard.

Long before Mr. Trump became president, Chancellor Angela Merkel sought to put Germany on a path to meet its NATO obligations by gradually increasing defense spending to 2 percent of the country’s gross domestic product. This year, the defense budget is set to increase by 8 percent to €37 billion.

With defense spending increasing, there is talk of greater cooperation between European nations on developing weapon systems, such as a new tank that’s planned for 2030.

“When it comes to new systems, joint procurement would be sensible,” said Georg Wilhelm Adamowitsch with the German Association of the Security and Defense Industry.

The defense industry should aim to design a new tank for as many European militaries as possible, Mr. Adamowitsch said. Joint development and larger unit numbers would reduce costs, result in more efficiency in upkeep and create the opportunity for the centralized training of soldiers, he said.

While many German executives are nervous about how Mr. Trump’s policies could affect the economy, the White House push for more defense spending could prove to be a boon for the defense industry.

At least two companies are already preparing for new orders. On the sidelines of the Munich Security Conference, Germany’s Rheinmetall and the U.S. company Raytheon signed a letter of intent to enter into a new partnership.

 

Torsten Riecke is Handelsblatt’s international correspondent. Donata Riedel is a senior political correspondent for Handelsblatt in Berlin. To contact the authors: riecke@handelsblatt.com and riedel@handelsblatt.com

 

 

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