Europe's stuttering markets must do more to attract investment in technology according to Christian Sewing, chief executive officer at Deutsche Bank.
“We simply aren’t that interesting anymore for many investors in companies,” said Sewing at the Sibos conference in London this week. “We must be alert that Norway’s sovereign wealth fund, the largest in the world, is considering switching large amounts of money into US equities because the growth prospects are so much better than in Europe.
“Deutsche Bank as well as McKenzie economists expect an enormous first move advantage in technology. They actually estimated that it will be worth at least $15trn in the next five years. This gain will be attributed mainly to the US and China, and not to Europe.”
Sewing said that during his meetings and in Asia last week, the US and China were the hot topics of conversation also when it comes to long term growth.
“Europe needs to invest more in particular in technology and digitisation and related infrastrucutre. This is especially true in the current face of the business cycle when growth is slowing down, and government spending my help to stabilise the situation,” he said.
“The German Federal government has announced €3bn of investment into artificial intelligence by 2025. But the Chinese cities of Shanghai and Tianjin are planning AI investments of almost $15bn each. The US tech giants are also investing heavily in this area.
“Europe should not focus primarily on regulating new technology, Europe should drive innovation itself.”
Sewing warned that the economic slow down is worrying given China’s importance as a key driver of global growth in the recent past, and that the US/China conflict isn’t going to disappear anytime soon.
“This is more than just about trade flows and tarrifs, the two largest economies in the world are engaged in a strucutral conflict about economic amd political dominance, so the associated uncertainty is to persist as well,” said Sewing.
On September 24, Luis de Guindos, vice-president of the European Central Bank (ECB) told a conference that the central bank was “aiming to preserve favourable bank lending conditions in the euro area to further support the accommodative stance of monetary policy and ensure it is smoothly transmitted to the real economy.”
But Sewing said the central banks have used their economic crisis prevention tools to a large extent already.
“So, there are no convential measures left to effectively cushion the real economic crisis. They have already turned on the money tap to the limit. First and foremost the ECB which has now announced an even looser monetary policy,” he said.
“Very few economist believe that cheaper money at this level will have any effect, something our clients absolutely reinforce,” he said. “All SMEs tell me is that they will not invest an additional euro just because the loan will be an additional ten basis points cheaper. Hence, why we probably won’t see the positive effects, but there are lots of negative ones like the distortion of asset prices.”