‘Where should the financing for investments in the digital and sustainable transformation of the German economy come from?’ This question was the subject of a political lunch in Berlin, organised by KfW and the Capital Markets Union Foundation Project in cooperation with TSI. The 25 or so participants from the fields of politics, business and associations heard speeches from, among others, Prof. Marc Steffen Rapp from the Philipps University of Marburg, co-author of the report ‘Capital Markets, Economic Growth and Transformation Financing, and Dr Martin Wansleben, Director General of the DIHK (Association of German Chambers of Industry and Commerce).
Growth and innovation as the key to transformation
Bernd Loewen, member of the board of managing directors of KfW, opened the event with a clear statement: Europe’s future depends crucially on whether it is possible to make massive investments in transformation. Bernd Loewen pointed out that Germany and Europe are lagging far behind in key capital markets such as venture capital and securitisation. The current situation is characterised by an inefficient allocation of savings, which often flow abroad instead of financing the European economy. Therefore, a reform of the regulatory framework for all financing instruments in Europe is urgently needed.
Marathon, not silver bullet
Marc Steffen Rapp also emphasised the importance of equity and debt instruments, such as venture capital and securitisations, which complement each other well in terms of their impact and scalability. However, there is no single solution (silver bullet) for strengthening capital markets. Rather, a long-term strategy is needed that includes, among other things, reforming the pension system, improving financial education and reducing bureaucratic hurdles in financial market regulation. In his remarks, Martin Wansleben particularly emphasised the cautious investment intentions of companies. He believes that it is the responsibility of politics to create ‘good’ laws again, which, with a view to transformation, reflect a clear commitment to strengthening technological innovation capability at the global level.
How can change be promoted in an aging society?
In the subsequent discussion, it was emphasised that although the necessary reforms have been identified, they are difficult to implement in Germany’s aging society. The strong anchoring of the status quo in society makes changes politically difficult to implement. Business representatives pointed out that, in addition, interest in entrepreneurship is declining due to the current cost-income ratio.
Using a crisis as an opportunity
The discussion made it clear that Germany’s structural economic weaknesses and the necessary reforms must be clearly identified. The willingness to change is ultimately a question of attitude. The conclusion of the political lunch was that the outcome of the US elections and a reorganisation of the German federal government could provide the impetus for urgently needed reforms.