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Finance Ministers from five German-speaking countries doubled down on the need to mobilise private capital while reducing public debt levels, anticipating a potentially difficult EU debate over how to spur growth and investment.
Ministers from Germany, Austria, Luxembourg, Switzerland and Liechtenstein – all from centre-right or pro-market liberal parties – held their annual meeting at Lake Constance on Tuesday (13 August), highlighting that they have more in common than just language.
“It is not only […] the common language that connects our countries, but also our common values, our convictions,” Austrian Finance Minister Magnus Brunner (ÖVP/EPP) told journalists at a joint press conference after the meeting.
Brunner, who has been nominated for Austria’s Commissioner seat in the upcoming EU mandate, reiterated the need to put “competitiveness” at the heart of the next EU executive’s agenda – a topic that has featured prominently in the EU policy discourse over recent months.
This would include initiatives to reduce the bureaucratic burden for companies, strengthen innovation, mobilise private capital through the Capital Markets Union (CMU), as well as to align climate and fiscal policy, Brunner said.
Meanwhile, public spending would need to be reduced after large crisis-related expenses in the last few years, the Austrian minister added.
“This exceptional budgetary situation […] must not become a normal state – on the contrary, we must have more discipline again, we must also reduce our sense of entitlement overall, in my view,” he said.
Speaking after Brunner, his German counterpart Christian Lindner (FDP/Renew) said that “there are important debates coming up” for EU policymakers on “how future investments can be financed: through the private sector, from national budgets or via new common European instruments.”
“And we, those of us who are members of the EU, are also gearing up for this debate here,” he said.
“The position of the German government,” Lindner added, “is clear: We want to mobilise private capital, this is our competitive disadvantage compared to the [US].”
Lindner’s emphasis on boosting private investments also stemmed from his long-standing opposition to expanding the EU’s public funding tools or schemes.
“At European level, we have all the public money we need: we don’t need new funds and structures, in the end it is always about maintaining the responsibility of the individual state for its public finances and its economic development,” he said.
This contrasts with recent statements by outgoing Economy Commissioner Paolo Gentiloni, who referred to Europe’s investment needs as “mountains ahead of us” that would require new instruments at EU level.
Potential divide on favouring domestic assets
While Brunner and Lindner agreed on the need to prioritise private investments over public EU funding – something that other policymakers, including former ECB President Mario Draghi and former Italian Prime Minister Enrico Letta, are not fully aligned on – Tuesday’s meeting also signalled potential tensions over how this aim should be reached.
Citing Letta’s high-level report published in April on the future of the EU single market, Brunner pointed to substantial levels of Europeans’ private savings flowing out of Europe each year.
Letta had highlighted that as much as €33 trillion in private savings is held in deposits and currency across the continent – around €300 billion of which is invested annually into foreign markets, primarily into US assets.
“This also means that the savings of Europeans actually promote innovation abroad, but also jobs abroad,” Brunner said. “That cannot be the goal of the European Union”.
European capital should also benefit the continent’s domestic economy, Brunner said.
Lindner, for his part, seemed more cautious about the need to incentivise private citizens to invest in specific domestic assets and emphasised the need for citizens to make their own choices on where to allocate their money.
Letta’s report – which also rebranded the CMU as a “Savings and Investments Union” -, along with statements by several EU finance ministers and leaders, spelled out plans to set up cross-border savings, and pension and investment products aimed at boosting the EU’s retail investor base (as opposed to professional investors including asset managers, insurers, pension funds and investment banks).
Through an EU joint retail investment product, policymakers hope to tap into Europe’s private savings wealth to spur economic growth and competitiveness – something that could be achieved, for example, by adding provisions to EU rules on retail investment funds – also called Ucits – that mandate minimum levels of allocation to EU assets.
A new EU-level product “could stipulate that it may only invest within the European Union,” Lindner confirmed.
“However, it would be the free choice of citizens to invest in such a product,” he stressed, adding that “if the European Union […] does not become more competitive, then the return on such a product will naturally be lower than an investment on the international capital markets.”
“That is why I want to say for Germany and our national policy that under no circumstances do I want to favour a national focus solely on our market, especially when it comes to the retirement provision or wealth accumulation of millions of people,” Lindner said.
“In an ageing society with less dynamic growth, their opportunity is to invest in other, more dynamically growing regions of the world,” he said.
Additional reporting by Anna Brunetti.
[Edited by Anna Brunetti/Chris Powers]
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