Joachim Faber: Welcome address at the New Year s Reception Date: 16 January 2017, start of the event: 7 p.m. Venue: Eschborn, The Cube Core messages: Global trade is to grow again and we must enable people to share in that. People s worries must be taken seriously; the social divide is an issue that cannot be ignored. The capital market offers in particular the middle classes the chance to share in the opportunities offered by globalisation. Better access to the capital market is therefore the best answer to social challenges and scepticism about globalisation. Providing for old age with a company pension offers opportunities. 1
Madam Secretary, Larry Fink, Ladies and gentlemen, I m delighted to be able to welcome all of you to Deutsche Börse. Every year it s a great pleasure and honour for us to kick off the exchange year, once again with such active participation from those representing the financial centre of Frankfurt. The Prime Minister of Hesse, Volker Bouffier, is attending a cabinet meeting and sends his regards. Ladies and gentlemen, I wish you happiness, success and prosperity for the new year. I hope that 2017 will be the year in which economic growth and prosperity reach a broad swath of the general public. It s vital for people to share in growth, since there is now the widespread impression that the individual has nothing more to gain from closer international trade ties and globalisation. Many even feel they have lost out as a result of this trend. The calls for isolationism and protection against economic competition from abroad have grown louder again and more and more people are lending them a sympathetic ear. Protectionism and nationalism forces that defined the last century and the one before it are gaining ground again. These forces are the avowed enemies of free international trade, and indeed of an open society such as the Federal Republic of Germany has been since it was founded. Growth in world trade has faltered for the first time in decades. The World Trade Organization expects growth in 2016 to be at its lowest since 2009. Visible exports, which grew at a double-digit pace each year from 2003 to 2009, have risen by no more than lower single-digit rates since 2012. Exports slumped worldwide by 13 per cent in 2015. That s a threat for us in particular, since Germany is a trading nation. If you add its exports and imports as an indicator of an economy s global trade links they account for more than 70 per cent of gross domestic product. That ratio stands at 38 per cent in the UK and just 21 per cent in the US. So we in Germany should pay special attention to issues of international trade. 2
Those are the facts. At the same time, there s growing resistance among many people to an opening of markets. Populism is spreading and emotions are fanning the flames of a new nationalism. There s now widespread talk of a post-truth era. These currents are a reaction to a feeling of uncertainty, if you like, a growing sense of a loss of belonging. It s certainly true what a perceptive journalist observed in the German newspaper Frankfurter Allgemeine Zeitung last November: It s little use to unemployed skilled workers if they can buy cheap Chinese goods at the supermarket. That s perhaps expressed somewhat pointedly, but it shows a broad and controversial debate about the issue of social division and the growing gulf between rich and poor. People aren t worse off, but many have to do a lot more to maintain their standard of living. OECD statistics show that the number of employees who earn less than two-thirds of the average wage has risen from around 16 to some 19 per cent since the turn of the millennium. And many jobs are far more demanding than they were just a few years ago; people have to work longer and harder without higher incomes. That also affects the middle classes. And it doesn t even take into account the future impact of digitisation and Industry 4.0 as well as the widening income gap in our society. I believe we have the duty to take note of these conditions in our society, to call them by their name and also to change them. Not only because their political impact has now taken on significant dimensions, but also because social disintegration must be a cause for concern for all of us who bear responsibility. The financial industry as a whole, and we too as a company that operates a stock exchange, have limited means to exert an influence. However, here are the issues that I believe are vital. It s very obvious that the benefits from international trade must be distributed better. I m firmly convinced this also applies to Germany, which is approaching full employment. Full employment and yet increasing inequality: that is perhaps the paradox of our times. 3
This imbalance has been exacerbated further by the fact that the only ones who benefited from the positive, perhaps ebullient, performance of stock markets up to the 2008 crisis are those who have the required expertise in financial affairs and the necessary willingness to take risks. And who have the necessary capital a small constraint that should not be forgotten. Sharing in growth is the watchword. There s no quick-and-easy solution that works for everyone, but there are various answers. If we look at the middle classes, I believe they can best share in growth through the capital market. Pension funds and insurers have a key task here. Even more people should be won over to modern forms of capital formation by means of simple products and new ways of interaction that make investing and saving attractive. Simple access to an equity or fund savings plan that s a model to which many fintech companies are also committed. They thus support funded pension provision. Market infrastructures, including Deutsche Börse, must also offer an efficient platform for transactions by ordinary people. Deutsche Börse has made that its objective. It s part of our strategic alignment to address the buy side since they are customers who are important to us. We want to put customers at the heart of what we do; let s start right away this evening by listening closely to what Larry Fink has to say. His company has a lot of experience when it comes to the issue of sharing in the capital market. Equities are not a nice to have. They are a key component of pension provision in an ageing society. Sooner or later, this demographic factor will stretch the system of pay-as-yougo funding to its limits and probably sooner rather than later. In a study on the viability of public finances, the Federal Ministry for Finance has spelled out that quote contributors must not be over-burdened. To put that in numbers: in 2013, 61 per cent of the population was of working age, a figure that will fall to just 51 per cent in 2060 according to the German government s scenario. 4
A number of forward-looking suggestions for maintaining the pension system s efficiency which is after all the overriding goal are being floated. The federal state of Hesse has proposed the Deutschlandrente (Germany Pension) in a concerted action by Minister of Economics Al-Wazir, Minister of Social Affairs Grüttner and Minister of Finance Schäfer. Its core concept is a simple, government-subsidised product that truly enables everyone to save and build up a supplementary pension. What s particularly important: this proposal is a funded scheme. One more key point on this issue: the DAX index has risen from below 4,000 in 2009 to over 11,000 points. According to the latest figures from the Deutsches Aktieninstitut (DAI, German Equities Institute), some 7 per cent of Germans have money directly invested in shares. Let s not kid ourselves: we in Germany are well behind the figures for the US. A direct shareholder ratio of 20 per cent would be extremely high here. A significant factor behind the ratio in the US is that the capital market there makes a major contribution to personal pension provision. And that s a widespread phenomenon: you can share stock market tips on just about every taxi trip in the US; in Germany, you d probably meet with a shake of the head and a blank look. That s why we have to further expand funded old-age pension provision here in Germany, too. It s a key means of broad-scale participation, since it gives employees a simple way to participate in capital formation. Here, too, the DAI noted a significant increase in 2015 from 820,000 to 1.1 million participants in employee share plans. Yet that s still a mere 1.7 per cent of the population. These figures show that the company old-age pension scheme has great potential. In particular, people should come around to the realisation that shares are an excellent means of sharing in growth long term. That s where we in Germany need to take action. As representatives of major companies, we have a particular duty to do our bit in this regard. That means we have to be in the vanguard of the move towards greater sharing in growth for all by listening to and taking to heart people s legitimate worries. We have to leverage our leeway and influence on the international capital market to shape regulations so that sustainable structures are created. We need a lasting and resilient European infrastructure that helps distribute the benefits of globalisation better. 5
As many people as possible should profit from global earnings through efficient, modern financial intermediaries and market infrastructure providers. I ll finish as I began: 2017 must be the year where more of our fellow citizens share in growth. Under my chairmanship of the Supervisory Board, Deutsche Börse AG is committed to that goal. We ll continue in future to do all we can here at the financial centre of Frankfurt to enable Germans to participate more strongly in the growth of markets worldwide through the capital market. Our planned merger with the London Stock Exchange Group will also help in that. As a result, we ll create one of the world s largest providers of financial infrastructure. Among financial marketplaces, London is Europe s leading trading location. Frankfurt is the leading centre for stability in Europe. Together, we ll forge a stable bridge between the two economies as a result of the merger; together, we ll be able to steer the European capital market to renewed strength and enable broad segments of investors to share in the capital market. Larry Fink is one of few global business leaders who has also been a thought leader for many years even far beyond his own industry. Over a span for 30 years, he has created the world s leading asset manager from scratch. Larry, I now look forward to hearing what you have to say. 6