No sustained growth without genuine structural reforms – Deutsche Bank’s co-Chief Executive Anshu Jain is convinced of that. Gabor Steingart, the publisher of Handelsblatt, spoke with Mr. Jain about euro bonds, the European Central Bank’s monetary policy and the Frankfurt bank’s investor from Qatar.
Gabor Steingart: Mr. Jain, you’ve been co-CEO of Deutsche Bank for two years now. What’s the main difference between Frankfurt and London?
Anshu Jain: Germany is doing well. I’ve been with the bank for around 20 years now, and I’ve been watching the nation closely. The past five years have certainly been the best for Germany in relative terms. The nation is doing well economically, and the Chancellor’s status as a respected leader is almost unrivalled in the world.
Steingart: Do you speak German or English with her?
Jain: Mostly English, unfortunately.
Steingart: Why unfortunately? We Germans can be proud of having a chancellor like Angela Merkel, who speaks Russian and English.
Jain: She speaks very good English.
Steingart: Many experts are anticipating an economic slowdown. What is your forecast for 2015?
Jain: I’m afraid I’m not very optimistic about Europe. We’re predicting around 1 percent growth for 2014, and about 1.2 to 1.3 percent for 2015.
Steingart: How does the forecast look for the DAX? Will it pass the 10,000 point mark again?
Jain: If the ECB maintains its relaxed monetary policy, prices can continue to rise, even if economic growth drops back.
Steingart: Is it a healthy development for the share market and the real economy to diverge to that extent?
Jain: It’s not yet an alarming development, at present. But in relation to share prices it’s a trend that needs watching.
Steingart: Has the time come for the ECB under Mario Draghi to provide further stimulus for business?
Jain: I think we are coming to the end of stimulus to business activity through monetary policy. The ECB did excellent work in overcoming the crisis. However, growth cannot be created in Europe by reducing the interest rate burden for state debt. In order to be able to accelerate growth, we need both structural reform and a clear improvement in financing volumes.
Steingart: Is the executive board of the ECB getting the message? Is it being heeded?
Jain: Yes, I do think it is.
Steingart: But unlike the Fed, the ECB is still considering stimulating business activity through monetary policy.
Jain: Monetary policy in the United States and Europe will drift apart significantly over the coming 12 months. That will be one of the most significant developments we will see in the markets. Growth in the U.S. is clearly pointing to expansion, and at some stage in 2015 the Federal Reserve will end its easing of monetary policy.
Steingart: What can we learn from the U.S. Government and from regulation there? The American economy recovered faster from the financial crisis than Europe.
Jain: There are many factors involved. Some of them can be applied to Europe, and others can’t. The property market in the U.S. recovered due to bond-buying programs and the easing of monetary policy – that is something we can learn from. Fracking – that is, producing energy from shale gas – is a route the Americans are taking for which we have neither the resources nor the political will.
Steingart: Is the German turnaround in energy policy the right answer to fracking?
Jain: It presents an enormous challenge to business here, and hence to the whole national economy. It is, and always will be, essential for business here to be able to retain its competitiveness in terms of price in relation to energy costs. Another factor that is certainly accelerating U.S. growth is the revival of consumer demand over the past 24 months. And the Americans dominate the Internet, which is certainly one of the fastest growing business sectors. All these factors combined put the U.S. economy in a very, very strong position.