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Finance ministers from five German-speaking countries stressed the need to mobilise private capital while reducing public debt levels, as the European Union prepares for a difficult debate on how to stimulate growth and investment.
Ministers from Germany, Austria, Luxembourg, Switzerland and Liechtenstein – all from the centre-right or pro-market Freedom Party – held their annual meeting at Lake Constance on Tuesday (August 13) to stress that they have more in common than language.
“There is not only a common language between our two countries, but also common values and beliefs,” Austrian Finance Minister Magnus Brunner (ÖVP/EPP) told reporters at a joint press conference after the meeting.
Brunner Nomination Candidates for Austria’s new EU commission seat have reiterated the need to put “competitiveness” at the heart of the next European Commission’s agenda – a theme that has already been protrude In EU policy discussions in recent months.
Brenner said this would include measures to reduce the bureaucratic burden on businesses, strengthen innovation, mobilise private capital through the Capital Markets Union (CMU) and coordinate climate and fiscal policies.
Meanwhile, the Austrian minister added that public spending needs to be cut after huge crisis-related spending in the past few years.
“This exceptional budget situation (…) must not become the norm – on the contrary, we must once again increase discipline and, I think, we must also reduce our sense of entitlement in general,” he said.
After Brenner’s speech, German Foreign Minister Christian Lindner (FDP/Renew) said EU policymakers “are about to face an important debate” on “how future investments will be financed: through the private sector, national budgets or through new common European instruments”.
“We, the EU member states, are also preparing for this debate,” he said.
Lindner added: “The German government’s position is clear: We want to mobilize private capital, which is our competitive disadvantage compared to the United States.”
Lindner’s emphasis on promoting private investment also stems from his Long-standing opposition Expanding EU public financing instruments or programmes.
“At the European level, we have all the public funds we need: we do not need new funds and structures, and ultimately it is up to the individual countries to maintain their responsibility for their public finances and economic development,” he said.
This contrasts with recent comments by outgoing Economic Affairs Commissioner Paolo Gentiloni, who Mentioning investment needs in Europe We believe that we need to tackle the “mountain ahead” and that new measures need to be taken at EU level.
Potential divergence in favor of domestic assets
While both Brenner and Lindner agree that there is a need to prioritise private investment over EU public funds – a view shared by other policymakers, including a former ECB president. Mario Draghi and former Italian Prime Minister Enrico Lettawithout full agreement – and Tuesday’s meeting also showed there may be tensions over how to achieve that goal.
Quoting Leta’s top brass Report In a report on the future of the EU single market published in April, Brenner pointed out that a large amount of Europeans’ private savings flow out of Europe every year.
Letta stressed that total private savings across the European continent amount to 33 trillion euros, of which about 300 billion euros are invested in foreign markets each year, mainly in US assets.
“It also means that European savings actually promote innovation abroad and also promote employment abroad,” Brenner said. “That cannot be the EU’s goal.”
Brenner said European capital should also benefit the continent’s domestic economies.
Lindner seemed more cautious about the need to incentivize private citizens to invest in specific domestic assets, and stressed that citizens need to choose for themselves how to allocate their funds.
Letta’s report – which also rebranded the CMU as the “Savings and Investment Union” – along with statements from a number of EU finance ministers and leaders, lays out plans to create cross-border savings, pension and investment products aimed at expanding the EU’s retail investor base (as opposed to professional investors including asset managers, insurance companies, pension funds and investment banks).
Through a joint EU retail investment product, policymakers hope to tap into Europe’s private savings wealth to stimulate economic growth and competitiveness – for example, by adding provisions to the rules for EU retail investment funds, also known as Ucits, stipulating minimum allocations to EU assets.
Lindner confirmed that new EU-level products “could stipulate that they can only invest within the EU.”
“However, investing in such products is a free choice of citizens,” he stressed, adding that “if the EU (…) does not become more competitive, then the returns on such products will naturally be lower than investing in international capital markets.”
“That’s why I want to say on behalf of Germany and our national policy that I don’t want to focus only on our market under any circumstances, especially when it comes to the pensions or wealth accumulation of millions of people,” Lindner said.
“Their opportunity is to invest in other parts of the world where growth is more dynamic, against the backdrop of an aging society and weaker growth momentum,” he said.
Additional reporting by Anna Brunetti.
(Anna Brunetti/Editing by Chris Powers)
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