Habeck's growth gloom ++ Commerzbank's new CEO Orlopp gives first interview
Monday 7th October
Good morning. Two of Germany’s front pages this morning cover Economics Minister Robert Habeck’s attempts at ‘expectation management’ on the country’s growth. Meanwhile, the new CEO of Commerzbank Bettina Orlopp has given her first long-form interview to Handelsblatt.
Habeck expects recession over 2024, ‘optimistic’ for ‘25-’26
The Süddeutsche Zeitung’s Claus Hulverscheidt reports that Economics Minister Habeck will announce on Wednesday that he expects the German economy to shrink by 0.2 per cent this year, continuing the slight recession of the previous year. Paraphrasing the ‘growth forecast’ this announcement is based on (and which the SZ’s reporter has seen), Hulverscheidt sketches the government’s prognosis:
“Instead of picking up speed, the economy continues to be characterised by a general reluctance to spend. Although many people have more money in their pockets again in real terms thanks to significantly higher wage settlements, the money often ends up in their bank accounts instead of in the shops or in online retail out of sheer caution.
A similar problem can be seen in companies, which are hardly investing in the face of high energy costs, uncertain profit prospects and structural upheaval. The coalition government will also feel the consequences of the slump: Its already chaotic budget planning for 2025 is now likely to become even more difficult.”
However, Habeck is apparently bullish about the country’s growth in the immediate future. The government “expects the economy to gradually overcome the economic weakness and develop more dynamically again”, with growth of 1.1% forecast for 2025, and 1.6% in 2026. This, however, Hulverscheidt adds, is based on the assumption that “the federal and state governments implement the traffic light's latest growth initiative quickly and without cutting corners.” Quite the assumption these days.
Orlopp’s frosty first sit-down with Handelsblatt: ‘We will lose customers’ in event of UniCredit merger
Bettina Orlopp became Commerzbank’s CEO on 1st October amid the bank’s subjection to an attempted takeover by the Italian bank UniCredit. Today’s Handelsblatt contains her first major interview since taking the helm.
Orlopp’s comments suggest a siege mentality. She appears deeply unhappy with the way that UniCredit has attempted to strong-arm their way to a complete takeover, and sceptical about its potential success. She plays on the ‘strategic’ concerns shared by the German government about a foreign institution taking over a key lender to the Mittelstand, and makes some interesting off-hand comments about the UC’s exposure to both Italian government debt, and also to Russia.
“I can say from my own experience that it makes a big difference where the decision-makers are based, especially in difficult phases. I am certain that our customers know what they stand to gain from an independent Commerzbank that is firmly anchored in the domestic market.”
HB: Unicredit has numerous Italian government bonds on its balance sheet. In the event of a takeover, is there a risk that Commerzbank could also come under pressure if a new debt crisis breaks out and Italian bonds come under pressure? “The portfolio of Italian government bonds is an issue that needs to be looked at closely. This also applies to all other potential risks, such as Unicredit's exposure to Russia. But we are not at that point right now.”
Orlopp then speculates that a merger would cause CoBa’s ‘AAA’ credit rating to be devalued (UniCredit is only rated ‘BBB’ by S&P, three grades lower).
There’s also some choice words about the Italian government’s attempts to wrap the deal in the EU flag, and the narrative which has consequently grown around the deal suggesting that this is a ‘test for Europe’ and its aspirations towards a banking union.
“We support the Capital Markets Union and the Banking Union, but a merger of Commerzbank and Unicredit would not advance either. In essence, it would be a consolidation within Germany. This will not make Europe more European. Instead, we would first need standardised regulations in many areas, such as insolvency and consumer law. And a European deposit guarantee scheme is essential for the completion of the banking union. […] When I read comments from the Italian government that the bank's headquarters and all important functions would have to remain in Milan in the event of a merger, that doesn't sound very pro-European to me. We all still have a long way to go.”
See also
Heike Buchter, Die Zeit: ‘Do we need to rescue industry?’
A real sign of the times, this one. Buchter compares Germany’s concern for the future competitiveness of its industrial base with the US, where, she observes, employment and growth figures are up despite a long-term decline in industry. “There, it becomes clear that prosperity can also be achieved without smoking chimneys,” she writes.
Joshua Beer, SZ: ‘"Germany has nothing to contribute, quite simply nothing"’
Beer reviews Foreign Minister Annalena Baerbock’s performance on ARD’s talk show with Caren Miosga last night. He says that her lack of insight in answers to questions about the conflict in the Middle East suggest that “Baerbock does not appear to be a member of the circle of insiders”.