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An expert panel discussed at EXPO REAL 2018 how future-proof the EU is. An expert panel discussed at EXPO REAL 2018 how future-proof the EU is.

Europe – whither will you? How sustainable is the EU?

Stephanie von Keudell
Stephanie von Keudell
independent journalist

One highly anticipated discussion at EXPO REAL 2018 revolved around the future of Europe, precisely the economic and political sustainability of the EU. The panel consisted of:


  • keynote speaker Prof. Dr. Marcel Fratzscher (German Institute for Economic Research),
  • Dr. Thomas Beyerle (Head of Group Research Catella),
  • Prof. Dr. Tobias Just (IREBS),
  • Christoph Schumacher (Global Head Real Estate Credit Suisse) and
  • Dr. Hans Volkert Volckens (until recently CFO CA Immo)
  • The discussion was moderated by Klaus Schweinsberg (Center for Strategy and Higher Leadership GLH GmbH)


Worries as to political situation in Europe


In his keynote Fratzscher points out that Europe as a whole is doing well with its economic growth averaging 2% and unused resources. Germany with its high employment is even doing particularly well. If anything, he sees a certain amount of overheating in property prices in Germany, but not in consumer prices. He does think, however, that there are risks, and that they are mainly political ones: populism, paralysis (we are too well off) and protectionism. In this context he is not too worried about Brexit, but rather about Italy’s economic weakness in combination with a Euro-sceptic government. Thomas Beyerle agrees with him regarding the economy: although the current cycle has been lasting unusually long already, he sees hardly any indications of a turning point in economic development, so that he can well imagine another two to three good years ahead.

Tobias Just coins the buzzword of “rational exaggeration”, where investors looking for alternatives to zero returns of fixed-rate bonds are forced to take risks, which was the aim of the ECB. Thus, he sees no speculative extremes in Germany, but equity-funded overinvestment in property, and warns that in this situation political mistakes, such as Brexit, may result in a crisis very quickly. There are no modeling data for such scenarios, which means that their risks are not predictable. Hans Volckens also puts Germany’s function as a “safe haven” into proportion and refers to returns for US government bonds going up again – rising interest rates could well have a negative impact on the property industry.


Possible solutions for housing shortage


Beyerle also thinks that this overinvestment in property contributes little to nothing to mitigating the housing shortage in big German cities. “We are building luxury living, and not what is actually needed, i.e. Porsches instead of Golfs or Fiats,” he criticizes, while German policymakers have meanwhile come under considerably pressure to slow down the rent rises, except that they have not taken any appropriate measures as yet. Fratzscher criticizes that the government grant scheme to support families building homes is driving families into risk-taking and the rent control mechanism is reducing the housing supply. What is needed is the designation of more building land, including congestion and the addition of more stories, and a reduction of regulations for easier and, therefore, more expedient planning and building permission procedures.


Undecisiveness on future development in the USA


The panelists do not agree on the future development in the USA. While Fratzscher expects the risk of a recession in the US to increase over the next two years, Beyerle refers to Trump’s infrastructure program (according to Schumacher, Swiss institutional investors are showing a growing interest in infrastructure investments as well) and his focus on the competitiveness of his country. He sees this as a wake-up call for Germany and Europe. Instead of weakening their own competitiveness and denigrating their own key industries (in Germany the automotive industry), European countries should face international competition and promote sustainable fields of research.

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