Schleweis: “Time has now come for more public investment”

Helmut Schleweis, President of the German Savings Banks Association (DSGV), called on the German government to increase public investment in response to the slowdown in economic growth. “Government frugality is not an end in itself; its purpose is always to provide for the future, so that investments can be made at the right point in time. The time has now come”, said Schleweis at a press conference held during the annual meetings of the International Monetary Fund (IMF) and the World Bank in Washington.

He said that it would be a wise political objective to put more domestic savings to productive use in Germany once again and to channel these savings into investments in the long term. According to Schleweis, the most important areas for investment include the ecological renewal of industrial society, digitalisation, and clearly positioning Germany as a knowledge-based society.

The fiscal policy pursued in the past had been good and appropriate. However, increasing investments in Germany's sustainability was now also a question of fairness towards future generations. Schleweis underlined that this did not suggest a departure from the “debt brake”. “The debt brake needs to be upheld. Even so, it will be possible to raise a certain amount of new debt for investment purposes under certain cyclical conditions.”

With reference to the European banking sector, Schleweis stated that the situation “continues to be challenging”. The persistent expansionary monetary policy as well as the more stringent requirements imposed by new regulation would continue to put pressure on the banking sector. However, if traditional retail banks turned to increasingly high-risk types of investment for the savings deposited by the population at large, this would not be a solution. Policymakers also needed to ensure that stable and sustainably acting credit institutions would continue to be able to play their part in the future.

“The translation of the new Basel requirements into European law will provide a good opportunity for differentiating regulatory requirements – more so than in the past – in accordance with risk content and business models”, said Schleweis. The United States had adopted an approach that was totally different to that of  the European Union with its “single rulebook”; in this respect, the United States could serve as a source of inspiration. Mere balance-sheet-total thresholds, such as the EUR 5 billion limit, did not take sufficient account of low-risk business models with higher balance sheet totals. Moreover, he encouraged the EU Commission to maintain the SME Supporting Factor in the EU because it rightly took into account the broader risk diversification of SME loans in terms of capital requirements.