Wolfgang Fink, CEO of Germany and Austria for Goldman Sachs, talks about why Germany’s economy has weathered the pandemic better than that of many of its European neighbors and what’s ahead on the road to recovery.
This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
This year's exchanges of Goldman Sachs, what we discussed velvet strictly she'd, be markets. Industries in the global economy objects would go ahead of corporate communications year. The firm today were diving into Germany's economic recovery from the pandemic in business in banking outlook. More broadly, there were joined by Wolfgang thing, woman I see over Germany and Austria Wolfgang welcome to the broken. Thank you Jake thank firing me So can you give us a high level summary of how the german economy has been hit and recover from the start of the covered nineteen prices through today? May I thank you. Germany has many other economies were hit by We are not always the deepest postwar recession in the country. experience amid the pandemic? The GB fell by eleven point: five percent. According to our numbers, in the first half of twenty twenty, a large
if the economy, where lockdown that sets the contraction over here has been softer than in other industrial countries, why the uncertainty around the outlook remains high. In essence, we have seen three phases of the crisis for many accompanied over your number one, the first phase, obviously a standstill of economic processes in highly volatile markets and securing liquidity and bad achieve stability were top of priority. May companies were taking our planet spread financing similar, and today we face off balance sheet repairs. How can these toys and abandon she'd be blocked and clearly what you do to adapt to the changing environment going forward and basic, instilling resilience in those organizations amid the uncertainty prevailing? So what the crisis, a little different in Germany relative to its neighbours in practice, direction in Germany was softer than compared with other countries, and I say first of all, Germany has come,
and the pandemic outbreak relatively well, this is both because there is a more favourable starting position compared to some of its peers that the effective health policy respond, we had here from the authorities, including the handling renewed local outbreaks. Second, dick me itself, is characterized by high sheriff manufacturing and conversed. By a relatively low, a share of sectors that are most affected by the endemic, and that would be tourism and other service industries. And thirdly, the german fiscal policy has responded forcefully to the crisis. With a mix that guarantees bridging measures short term work schemes freeze on solvency rose and hold stimulus of about three point: five percent of GDP this year and added with a safety net for corporate borings and recapitalization funds in excess of forty percent of GDP, for this massive fiscal response, not only unprecedented by historical standards but
some very large new european context, despite the fact that Germany, with its smaller than of his neighbors here, some of them the EU, pass the historic corona, stimulus package over the summer was really the first time they take collective action. This day, some german policymakers in the past have resisted european wide stimulus, but This was a big moment for Europe. Acting together in the fiscal side. Has this thing goes You ve been received by Germany and german policymakers and what's a consensus, has been effective or was it not enough, as you say, the EU is come through it with a landmark covered. Ninety in recovery package, the EU recovery and the measures to achieve the recovery were and are top of mind for the german government. for many of its agencies, especially also as Germany holds the presidency of the EU who currently- and I think that overall the need to act together in these tough times of the crisis
been widely recognised over here. The size of the package was obviously a big surprise for some observers. Surprise to the outside. I'd call it in terms of the disbursement of funds. This is work in progress now how to allocate these dreams that attached to it, President all over Europe, and I think it's a debate how that is being made. That is very actively watched over here in Germany, so we have to say that in general, this is a very positive thing that Europe to get anything data sent about that overall that we stood together in crisis and its amount, to push forward the european project in this challenging time,
you mentioned Germany's holding the presidency of the Council of the EU, and the motto is together for Europe's recovery. The government in Germany put the focus of its presence in overcoming covert nineteen pandemic. Obviously, in particular, we focused on how to make the recovery more sustainable. So what is Germany looking to achieve? How do they think Europe can best recover together from this crisis, is having a powerful pulling together during the pandemic and basically I am sure we would. Reach has talked about a landmark recovery package. A urban also continue to work on an ambitious road map for the future, which is world leading green deal, and I get a comprehensive digital strategy, both of them. mark about project and in total, green deal. This would put the continent at the forefront of the global work. I am advised that European Green Deal has transformed from a long dated climate plan to infer
the largest economic stimulus and re orientation programme. Europe has seen since the Marshall Plan, and I think the plan could achieve simultaneously. among which number one clearly would be posting short term. Well. Both ended european employment lever thanks to him, major investment wave and power infrastructure, building renovation, automotive, an industrial second to also protect the long term work of the continent by fighting climate change and reaching net zero emissions by twenty fifty- and strategically important number three improve Europe's Energy self sufficiency by shifting away from hydrocarbons towards domestic resource electricity and its plan, which we conservatively at the mad at seven trillion euros could imply a major gdp and employment both and we think it could lead to a hundred percent plus accelerate men, clean infrastructure. Investment by european utilities. For example. Second point: the European Commission,
the digital violence strategy is an important initiative as well, which can deliver innovation, security and resilience and put Europe on a strong competitive footing. In this respect, and clearly all these things- economic recovery bill, Digital isolation, initiatives, Deckard Organization, all of them need financing and financing needs of Europe have never been so significant as a result, until a part of that and you will have to come from the capital market and banking sector will have to scale up in this and that means Banking Union, which has to create conditions for us on a more efficient sector able to support what I just mentioned, and clearly also capital markets unit to make these capital markets fit for purpose, this respect. Then. You mention that basically did the german economy is proven pretty resilient through the crisis. I've seen that kid, but not as hard as must address here within the economy. Would taxes, doctors recurring fastest and,
ones are having a hard time getting back to reap endemic levels. Activity here, We have here a substantial amount of industrial and chemical companies in Germany, which obviously have a strong exposure to global growth. and to the manufacturing cited the ducks, the german and Mark Index generates more than eighty percent of its revenues outside Germany. of which more than half its outside Europe doing Though we are noting a slowdown in the pace of the global recovery. Reality have been very constructive on the european economy and a beat on the floor economic growth. All of these companies have. And are going through soft patches. But there clearly have better Ray of internationalization busy the covering Asia as they see it Europe and the? U s its modest. But it's happening we have already seen that in the recent months, the more take focus part of the landscape here, also if it had from the acceleration the pandemic, brought to the digital business models
I already mentioned two dead, it's a process where gauging comets your digital channels, particular consumer side, but also on the business side was major driver for many, The revenues of those companies and clearly companies in the services sector, companies and tourists, retailers and, in particular those that are still operating with more traditional business model and companies in the house prepared it. Industry are facing very tough times as they do elsewhere. So it's like a by four cases brought onto these businesses by the corona crisis. We, apart from the crime, This led changes also see structural changes such as the german author industry. The authorised was already experiencing a structural shift due to the electrification, the whole question of digital isolation and the question of new business models. The sector and due to the pandemic and your road slowdown in general demand. All these trends have been accelerated highlighted. The structural changes that these sectors- and this outer sector in particular, is facing so listen
talk, liberal bad. I was you serve in the business all sectors of the economy, chocolate, but about the banking landscape, logically financing, and how to evolve over the course of a pandemic dollar Gilbert age. We have witnessed here an unprecedented economic shock movement by the Central Bank report, but also by the red feebly, healthy balance sheet of the banks and, remarkably resilient capital markets and the first part of the year. We saw at volumes on the debt and equity markets here in Europe and regular India investment, great markets? We saw the supply in the Euro area of thirty five percent relative to the year before. We also thought record equity volume and twenty. and he is already the third strongest here too far in capital increases and similar placements with criteria and activity over here. Therefore, company Canada, and could availed himself of a lot of new opportunities, the banks themselves.
Also strong and were called upon in crisis. At so far they have weather the storm, pretty well it Is he more activity, especially when we are talking about what I called the faith of balance sheet repair? Where is he a lot of companies trying to tap the market to attend to businesses and growth models, as well as thought, leverage, and that we'll make accomplishing these goals easier than a good amount of it poverty, and so we are still a very, very busy over here who finance. sounds like it stay busy about emanate that started to pick up a little bed or are companies that are stronger. Looking at some of the opportunities out there on the landscape, In any event, it was picking up also in a global context. Companies are increasingly looking to pursue large and strategic transactions and, as I mentioned before, covered nineteen had again accelerated various general made within many industries and is clearly a gap between those well position
strong companies that are able to pursue opportunities in this environment and weaker companies that have to fight and focus on dealing with the consequences of the covered nineteen crisis. we are seeing a more restructuring and more mature businesses, as they will have to create scope, not just in their balance sheets, but also strategically at their hit, with a slowdown in their more established businesses and more important topic for them. forward leaning companies to make the existing This is not only more digital and quite choir, competencies like software and digital content, and therefore they could then transform their business models, but also to become more sustainable and some of their current inputs in output, for purpose in light of a more sustainable economy and a drive to more sustainability. This is not only expressed India's cheek criteria and similar metrics that make it clear companies then, but also better record speed in which many
them have shifted to a more digital economy, the company's pm. and balance sheet and make these shifts baby, the day by day a week by week can said, there's a certain urgency to make these changes and to be overcome. darting over here from traditional german sectors like industry, chemicals and automotive. But there is still a huge p2p digital challenge it is core to our economy, and this is being addressed as we speak. Both organically, through investment, but also through emanate and take overs dead at today, Activity over here till after several decades of global growth and globalization, we ve seen a bit of a pull back. Global trade has been stag in recent years and have been a number of trends. Therefore, have people talking about geek globalization and gold supply chains absorbing thrown out of work. I hope it works out leave Europe Golly Germany, which is a big export economy and has extensive economic connections all around the world. I think we're
seen three or four trends that impact value chains that it better get this economy here so dependent on that have impact it. Those value chain, globally. First of all, the breaking a pint of trade relationships, most prominent, evidence by the Uk Eu breaks it and its consequences as, secondly, the geopolitical frictions, such as the USA on trade conflict and the increased protectionism and large frocks And in general, and increased frequency and increased magnitude of shocks to the system and, lastly, the issue forward that we have been talking about, which is meeting, manufactures ability to find places where a corner make an environmental costs, in particular, are low. Job covered, team, as in many other cases, has put the spotlight on these developments, but them fundamental issues are running
and had been persistent and have been persisting for a long time, so I would consider these shifts triggering a reorganization of globalization, something the W appeal has referred to as red globalization, and its reorganization will entail shifts World trade volumes, a diversification of supplies. And into whole markets and into new markets higher levels. automation, Tibetans, operational resilience on the one hand, with the cost, efficiency or the other, and clearly also more digital cross border trade. In order to maintain their competitive position The EU in Germany need the respective industrial policy It focuses on the innovation on the intelligent regulation, on sort of partnerships, infrastructure and, more importantly, on free trade as a background to whether those challenges so who gets nice did
step back from yours politics, because that's all anyone talks about here these days as we're taping. So when I gotta get into politics, but talk a little- at about german business leaders. Think about U S german trade relationship there. obviously been a lot of friction over the past several years in how they think about that and thinking about in the future, tat. Eighty This over here have gotten used to a more volatile relationship between the EU or Germany and the? U S and in a way that Katie be one of the key concerns of businesses it's over here, as they navigate their businesses through those afflictions month by month and what about quota, but one should not forget that, apart from the pure export related relationships, These companies have massive investment in the. U S, and I also met employers there and they have the relationships. not only on a federal but also on a state level where those in bed,
then tat usually happening so the long established relationship and hence the guidance that they receive through them, have worked well for them years and also including the more about attire periods that they have experienced recently. Looking forward, what the german industry hopes too, It is clearly a more stable, less volatile business relationship that allows them to continue to forward with the investment and to furthering those relationships and their respective businesses, because the USA is the most important trading partner and keenly invent, meant that are being made there and the investments that are envisaged to be made. There are massive a stable relationship with the? U S is key to the well being the german industry and the german economy at all. Well, woman we can all use a little stability, hopefully will get some soon. Thanks for joining us today from acquiring my backing This episode exchanges Goldman Sachs. Thank you for listening refuge by the show. We hope you subscribe an apple podcast and liberating our economy
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Transcript generated on 2021-07-01.