Finance crisis?!

Gottwald Kranbitter, Public auditor |Chairman of the Supervisory Board of Wiener Privatbanken SE |Former Chairman of the Board of Hypo Alpe Adria AG, Klagenfurt

On March 14, 2014 Dr. Gottwald Kranebitter, an experienced public auditor and banking expert, was the visiting speaker in the MCI Alumni & Friends lecture series at the Entrepreneurial School®.

He offered a wide-ranging overview of the finance crisis, presented the diverse opinions held by financial experts throughout the world on the question whether the financial crisis is now over or not and finally drew attention to the some of the common ground on which the experts base their arguments.

He began his talk with a summary of his own career and showed the audience that, in spite of the recession and the finance crisis, it is still true to say that in Europe we are indulging in the “woes of the wealthy”. From his experience of southern Europe, however, Gottwald Kranebitter feels that there are no prospects of an improvement, especially in the light of a youth employment rate there of 60 percent.

In his opinion, a crisis is over when the countries involved again have normal access to the finance markets and hence normal interest rates and positive prospects with regard to developments in productivity. A sustainable level of investment must be achieved by both government and the private sector, and the banks must willing to lend fresh money again.

As far as the present situation is concerned, we do have normal interest rates for the most part, although they are at an all-time low. On the other hand, the enormous volume of public debt in the Euro Zone and a high level ofunemployment of 12 percent (maximum in Europe) are indicative of the fact that the necessary increases in productivity and hence improvements in competitivity have failed to materialize. Nor are governments and private companies investing on a continuous basis, and the banks are still reluctant to provide fresh loans to businesses.

There is a general consensus amongst the experts that no further crisis is to be expected, although the problems of the Monetary Union are still far from a solution. The high levels of national debt can only be reduced gradually, and for Greece – in spite of the haircut and extended payback period – there will be no real recovery in the decades ahead.

Dr. Kranebitter sees a European Banking Union as an essential step in order to maintain the Economic Union in the long term, but he is convinced that it is more likely to come “via the backdoor”.

The speaker closed his fascinating review of an extremely complex subject with an amusing and yet very real statement on the subject of bank balance sheets: “On the left there is nothing right, and on the right there is nothing left.”

The talk was chaired by Professor Klaus Schredelsecker.