Wolfgang Schäuble

Faithful to His Beliefs

104644413 Schaeuble HB Dinner Nils Broer
Whether or not he remains finance minister after the election, Wolfgang Schäuble stays true to his principles. Source: Nils Bröer for Handelsblatt

Call it a swan song with an asterisk.

Germany’s crusty finance minister, Wolfgang Schäuble, commented crisply on a range of issues during an interview Tuesday at an annual Handelsblatt Banking Conference in Germany’s financial capital Frankfurt. But the Christian Democrat, who turns 75 this month, has not confirmed whether he will continue to serve in his cabinet post even if Chancellor Angela Merkel, as expected, is victorious in national elections September 24.

Whether Mr. Schäuble is still finance minister or not, it’s hard to see a government under Ms. Merkel veering too far from the positions he has staked out over nearly a decade in charge of Germany’s budget. That includes on issues like Europe-wide deposit insurance, where he rejects proposals by the European Commission to mutualize it.

“Unfortunately, the European Commission is much more creative on ways to mutualize risks than with suggestions how to reduce risks.”

Wolfgang Schäuble, German finance minister

“First the risks in bank balance sheets must be reduced,” Mr. Schäuble said at the conference. “Unfortunately, the Commission is much more creative on ways to mutualize risks than with suggestions how to reduce risks.”

His remarks were at odds with comments by the chief bank supervisor at the European Central Bank, Danièle Nouy, at the same conference. “The supervision and winding down of banks takes place at the European level,” said Ms. Nouy, who is heading implementation of the Single Supervisory Mechanism at the ECB. “So it makes sense to have deposit insurance at the same level.”

But Mr. Schäuble has never shied away from disagreeing with others, and he isn’t about to stop as he nears what may be the end of a long political career. Mr. Schäuble was first elected to the German parliament in 1972, and will stand again in his district in this election. He has occupied a number of top government posts and was widely considered a candidate for chancellor until an attack by a would-be assassin in 1990 confined him to a wheelchair. He has been Ms. Merkel’s finance minister since 2009.

Mr. Schäuble also offered a contrary opinion to some of the views expressed at the conference by John Cryan, chief executive of Deutsche Bank, Germany’s largest bank. Mr. Cryan complained that, in view of the consolidation he expects in the European banking industry as a whole, Germany’s fragmented market will rapidly lose competitiveness. “A fragmented market with still more than 1,700 institutions is a poor precondition for producing more internationally-competitive banks,” he said.

The German finance minister took a different view. “I see the current state of the banking market – with private banks, savings banks, and mutual banks – as a strength,” Mr. Schäuble said. “The banking system is a mirror image of the German business structure. We not only have successful big companies, but a multitude of small and medium-sized businesses.”

115943242 Schaeuble Marc Steffen Unger for HB
Wolfgang Schäuble spoke to Handelsblatt's banking conference via video uplink. Source: Marc-Steffen Unger for Handelsblatt

Nor was Mr. Schäuble unduly worried about the impact of automation on the banking business, which Mr. Cryan described as disruptive. “The sad truth for the banking industry is we won’t need as many people as today,” the Deutsche Bank chief said at the conference. “In our bank we have people doing work like robots. Tomorrow we will have robots behaving like people.” Mr. Cryan refused to be drawn on how many people would be thrown out of work, but said “it will be a big number, definitely.”

The Deutsche Bank CEO undoubtedly knows more about the impact of digitization, the overall revamping of a business through automation, Mr. Schäuble acknowledged. It is a factor in virtually all businesses. “Whether it is a horror or a hope?” Mr. Schäuble asked rhetorically, noting that throughout history society has had to cope with disruptive technologies. Then he added mischievously, “Germany is not necessarily the leader in the pace of digitization.”

In other remarks, Mr. Schäuble was more hands off – at least for today. Asked whether the ECB’s interest rates were too low, he said it wasn’t up to him to make monetary policy, but rather to defend the independence of the central bank. Current policies are unusual, clearly, and “everyone worldwide” would like to see normalization, he nonetheless added. That reticence to criticize the ECB stood in contrast to his many battles with the central bank over the past years.

With regard to cross-border mergers in the European banking industry, Mr. Schäuble said many experts feel global market developments and pressure from automation create a need for restructuring in the sector. “But I wouldn’t know what reasonable suggestions the German finance minister could publicly express about that,” he said wryly.

For banks in general, Mr. Schäuble was more like an indulgent grandfather than a strict taskmaster, now that the main failings that led to the financial crisis have been overcome. “They have learned from their mistakes,” he said. “Just that is the advantage of a liberal system – that you can learn from your mistakes.”

A man of firm opinions, Mr. Schäuble was firm on another point. The European Union’s chief bank regulator, the European Banking Authority, will have to move from its current location in London when Britain exits the EU, and there is no better place for it than in the heart of Europe where the ECB is based. “Frankfurt,” he said, “is exactly the right place for it.”

Handelsblatt’s editor in chief Sven Afhüppe conducted the interview. Darrell Delamaide adapted the story for Handelsblatt Global. To contact the author: afhueppe@handelsblatt.com

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