A Symposium on the Global Economy, Financial Markets, and the Auto Industry: A German / American PerspectivePrint Oct 23
On October 23, 2012, the American Institute for Contemporary German Studies (AICGS) hosted “A Symposium on the Global Economy, Financial Markets, and the Auto Industry: A German / American Perspective.” Occurring before the Institute’s annual Global Leadership Award Dinner, the AICGS conference focused on two main topics: the challenges in stabilizing the financial system and the euro zone and the impact of the current crisis on the real economy, particularly the car industry.
All participants agreed that both Europe and the U.S. face significant challenges. However, most speakers expressed palpable relief at the fact that the common currency area in Europe has finally found its lender of last resort. According to former Ambassador Wolfgang Ischinger, Chairman of the Munich Security Conference, the decision by the European Central Bank (ECB) to buy unlimited quantities of government bonds from distressed euro zone countries amounts to a game changer. Panelists applauded German Chancellor Angela Merkel for providing political cover to the head of the ECB Mario Draghi, calling the decision a brilliant “tactical move.” Some openly criticized the German Bundesbank for attacking Draghi’s decision and pointed out that the German central bank has to realize and accept that it cannot block the rest of the euro zone from containing the crisis more decisively.
However, other participants were less sanguine about the situation in Europe. Thomas Mayer, an adviser to Deutsche Bank and its former Chief Economist, voiced concerns about the direction the euro zone has taken. According to him the euro zone is moving away from the rulebook of the Bundesbank centered around price stability and a strictly independent central bank to a southern model, closer to the Italian and French central banks. The euro “patient has been taken off the scene of the accident and is in intensive care,” Mayer said, but now doctors are arguing over the best way to get it back on its feet. Perhaps the whole architecture of the euro needs an overhaul, he suggested.
Former Secretary of State Henry Kissinger had deeper misgivings. According to him the power of the nation state will continue to undermine the process of deeper integration in Europe. In fact, nation states are playing a bigger rather than smaller role. Germany’s power on the continent is growing and that is causing more friction within Europe. He then turned his attention to China. It would be a big mistake for the U.S. or Europe to confront the country as an adversary, he said.
Both former senators George Mitchell and Bill Bradley voiced concerns about the political will in Congress to address the fundamental challenges in the U.S. What is needed on both sides of the Atlantic is more political leadership, they said.
The final panel focused on the car industry, in light of the Global Leadership Award being presented that evening to Martin Winterkorn, CEO of Volkswagen AG. All participants on the car panel, who included executives from carmakers and suppliers, pointed out that the crisis in Europe is having a deep impact on the industry. Overall, they said that the sector will continue to grow, but not in its traditional markets. Investment decisions will concentrate on adding factories where clients are. While further cuts in Europe are to be expected and the slump there could last long, there will be more investments in emerging markets. None of the panelists openly promised to add capacities in the U.S. On the contrary, if the industry expands in North America, new lines of production would be added in Mexico rather than in the U.S.
While nobody expected gloom and doom in the coming year, a robust recovery is not yet in sight. If 2012 was a difficult year, 2013 will certainly not be much easier.
- AICGS Business & Economics Program
- The German Marshall Fund of the United States