 Ladies and gentlemen, thank you very much indeed for coming you're most welcome back after what I hope was a Relaxing and enjoyable summer. My name is Catherine Meenon and I chair the Germany group here and I Happy to say that we're starting with a bang And I think that you'll find today's event extremely interesting and very valuable If I could just say in advance of everybody, please wouldn't mind turning off their mobile phones I would also make the point that This part of dr. Lang's address the public part would be on the record and the question and answer session afterwards Will be off the record on Chatham house rules So we're very privileged to have with us today dr. Joachim Lang who is the director general of the confederation of German industry he has Considerable qualifications in law from the University of Tübingen and Bonn and has also Graduated in European studies He's a background in the federal Ministry of Defense in the chancellery and worked in The parliament in the office of the whip for the CDU CSU parliamentary group He worked in the chancellery and then he also worked for a number of years as the director general of eon which is as you know the energy company the publicly listed energy company and He's been director general of the BDI since 2017 and a member of the presidential board since 2017 So we look forward with great interest what you have to say. Thank you Thank You Catherine for the invitation and For having me here and as I understand it. It's the right after summer so The issue why I'm here is is pretty easy It's thank you for the invitation and the great opportunity of sharing views with you On this troubled state of politics and economics in our times I will put forward some ideas and then look forward to your perspectives on those issues Let me start with a view on the political and economic state of the world then move on to Brexit The trade environment and the policies and politics of the EU going forward For those of you who might have seen in the movie the dead don't die by Jim Jarmusch Let me paraphrase the key dialogue. This isn't going to end well Says the policeman trying to stop the rod. How do you know as Bill Murphy? Jim gave me the script. It's the answer and as I know my script I fear that this applies to my speech as well. This isn't going to end well Let us enter the world economy is a current horror show after a long period of economic expansion in the world economy and in Europe to Slow, but gradually taking up speed in 2017 and 18. We are in troubled waters once again This holds true for slowing global growth and in particular for the pronounced slowdown in European economic activity Germany is the leading star of the slowdown Industrial production is in the single digit minus territory already This is the situation in advance of brexit and Trump's terrace on Europe As you know, Germany is nowadays a forward-looking indicator itself as it is so tightly integrated in global trade Money finance data and migration that any wind of change On the globe is immediately felt in Cologne Munich or at the headquarters of Adidas and Puma and Herzogen aurach And wind of change. We have a lot Unfortunately Those winds are not the ones of the revealing sort that we have experienced in a hot summer But the cold winds of protection Populism and techno nationalism and Germany is a rather small player in the current global set of conflicts in other words the US Chinese conflict already hurts Europe strongly and the nation escalation of conflicts between the US and the European Union Will make matters even worse Considered the facts global growth will slow down this year to some 3% the lowest figure since 2002 except for 2009 after the crisis the conventional assumption of a return to higher dynamism Next year assumes away Trump assumes away Johnson Xi Jinping and other risks In fact Europe will find itself in recession next year if a hot brexit takes place and in a slow moderate growth situation if it can be avoided Global trade growth is back to stagnation Enhanced policy uncertainty emanating out of Washington Beijing and London will dampen global investment spending substantially in This and next year even arriving at close to 2% growth in global investment Which the OECD expects will require dramatic improvement in policies of the US We do not expect this to happen Quite the reverse Germany is a producer of investment goods much more so than of highly priced cars. This is bad news, too Consumer spending much sustained the global recovery for so long is suffering from signs of weakness globally This holds true for the purchase of new cars in particular Manufacturing is in very sorry cyclical state of affairs Growth in global production this year may well not exceed 1% in Europe in Germany We will see a decline in other words Manufacturing is already in recession Fortunately construction services and the public sector still grow but at medium term But a medium term decoupling is less likely than many may think We are heading for trouble Global financial markets turned sour from benign neglect until June till historic fear of recession Now it took only a few bad news Global bond markets price in recession global stock markets lose their regained strength for an exchange markets feel the punch The Yuan crosses the seven the pound loses weight The Argentine peso sinks to rock bottom looks great not at all Put together we have all the ingredients at play that make for a perfect recession This will be the first serious one in post-war history that is manufactured in Washington, DC and London 1973 and 1979 it was oil inflation and interest rates 1990 it was security issues Kuwait 2001 and two it was global stocks and the new economy 2008 it was finance again this time housing and banking and nowadays it's bad economic policy And this is clearly bad news The game in town of this autumn is central banking The Fed and the ECB must stem the tide and the Bank of England is taking a grand stance in every difficult waters How awful does it have to become that we must rest our hopes on monetary policy alone? Fiscal policy Will squarely come into play this autumn of course. There are many highly indebted countries in the OECD area Which have little leeway to act? fortunately Germany is not amongst them but has the space and capacity to stabilize the situation if and when it turns sour This will require a more complex redoing of German fiscal policy on which we made our points clear Strengthening private and public investment is now key and Strengthening consumption if unemployment related to protection and brexit emerged is a no-brainer tool We have to use the space that fiscal rules allow us and there is space and we must apply those rules The German debt break and the stability and growth pact Flexibly if the situation requires it Chancellor Merkel said so Olaf Scholz says so we say so too It will happen, but we have to do a lot of homework to make it work well The most immediate cause of action in Berlin will be another round of bad news starting with brexit soon Clearly Ireland will be hit by brexit in a unique way None of the other EO 27 countries shares a common border and such intense historical and economic bonds With the UK and yet the impact of brexit will have a magnitude that will be felt on the continent as well Germany's bilateral economic relationship with the UK is ample and multi-fold BDI therefore has set up the task force with 10 export groups and nine 200 members coming from all parts of the German industry community and Business community already last year we have presented our policy proposals for the German government and the European Commission and There were certain guidelines on which we have been clear about from the very beginning Of course, we deeply regret the referendum result. However German business has always been committed to the European project and the single market It is true that Germany and brexit will suffer from from this and the brexit will worsen the access to Irish and German businesses exports markets, but these negotiations are not about our bilateral relations alone Not surprisingly our trade and investment With the other EU member states outnumbers those for the UK by far But even that numerical perspective would be too short-sighted German business depends heavily on the EU's unparalleled network of preferential trade agreements with third countries brexit will weaken our market access to our FTA partners for instance through existing So-called local content requirements, which will be harder to meet for European firms with production in the United Kingdom We must make sure That we avoid further damages to the EU's trade relationships with other nations This means we neither want to see renegotiation with other EU member states Nor do we want to jeopardize our relationships to other allies, especially in the European economic area in Switzerland or Turkey if we do not live up to our commitments vis-a-vis our closest partners How should the world have confidence in the EU? We would damage the EU's reputation Running trade negotiations in the future would be much harder not just considering today's challenges We cannot afford that to happen Secondly the four freedoms in the single market remain indivisible in the long run The single market will only work if the framework allows for a level playing field The idea of keeping market access for goods and services But not for capital and labor is only possible in a full-fledged customs union or preferential agreement of the Canadian or E a type In modern business models, for example, one doesn't buy simply a machine It oftentimes comes with a setup maintenance guarantees and financing all these components require among others The free movement of people capital and data Separating one component from another would hold these business models How can you repair a machine without being allowed to send a worker on short notice? How can you use a 3d printer without data flows these questions remain unanswered by the Brexiteers The inconvenient truth is that brexit rips apart already existing business models and production structures It will lead to large numbers of lost jobs Therefore any references to supposedly problem-free trade Relations with other WTO members fall short Also sectoral accesses to the single market do not resolve the issue at hand We have reiterated this position to the German government and the European Commission over the past month In fact, we would clearly prefer continued membership membership of the United Kingdom in the EU However, as this appears politically unfeasible. We aim for a preferential trade and investment agreement based on a customs union Given the red lines in London. We regard a traditional FDA as possible, which would be still far from optimal It would fall behind the current state of play of integrated production systems and supply chains In manufacturing that depends on a working regulatory environment standards and also testing procedures I'm making these points as we are aware that Germany and its business community are under immense scrutiny in the international media and public debate Therefore, let me be clear We BDI fully support the political declaration and the negotiated withdrawal agreement including the backstop Despite all noise all-time pressure and all the immense challenges for businesses Our stance has been undisputed in our membership and it is widely acknowledged in the German-Brexit debate Here in Dublin, I feel the need to emphasize a few points with respect to the specific situation in your country We the BDI stand firmly behind the backstop We have a fundamental interest in keeping the EU's external borders permanently safe This includes the enforcement of customs and single market rules Again a policy that lets goods and services flow into our market without any checks will be the level playing field at risk Such policy is unsustainable until we have found a solution for a permanent border regime. We need an insurance policy In other words, we need a backstop and we reject any sort of expiry date It would drive the idea of an insurance completely. That's absurdum All other published proposals Protecting the single market and most importantly protecting the Good Friday agreement Fall short We count on the European Commission to evaluate any proposal that will be brought forward Whether it meets these criteria It is first and foremost the Commission's responsibility to protect the integrity of the single market Further, it is indispensable to keep Ireland as a full member of the European market and the single market Any type of border checks between Ireland and the continent are clearly undesirable Hence an outcome that falls behind the backstop would not only constrain German-Irish business relations. What else? It must also be of utmost importance to the European Union as a whole that made in EU is globally recognized. If we establish separate Rulebooks in one single market, we create a double standard. I Cannot see how such policy can possibly Contribute to European integration and the stability of our common market again only the backstop will allow for this Lastly, I want to make another point which is by and large unrecognized. We need macroeconomic stability It must be clear that every form of Brexit Will cause disruptions in Ireland Germany and the other EU member states It is our duty to exploit the existing European framework and to do whatever we can to mitigate a looming recession This includes workable solutions for a land bridge Brexit will require us to conduct structural changes in the medium term For those we must equally be prepared. I Have no doubt that Germany with our firm support will demonstrate our strong commitment to our fellow European friends and allies and be reassured how our country and your country will be the first to which we are So our solidarity International value chains are not only challenged at the European level, but also on a global scale President Trump's trade policy and the escalating trade conflict between the United States and China Are serious threats to global economic growth and stability Although the bulk of tariffs and other trade related measures implemented by the Trump administration are so far directed towards China They also directly hit European companies Our companies are impacted when they produce in and export from China to the United States and the other way around The list of conflicts in the EU's EU trade relationship is long too the Trump administration is obsessed by With bilateral trade deficits, although according to official US data The United States has had a positive current account with the EU since 2009 According to EU data the EU has a small surplus, but the current account is almost balanced the obsession with Bilateral balances and trade in goods such as with Germany is wrong It completely understates how strong the United States is in trade in services. It also neglects The importance of primary income for example earnings of US affiliates in the EU And it neglects the importance of the European common market Germany for example sources a lot of US services from Ireland I'm also a worried that the dispute over aviation subsidies might lead to a further escalation of the transatlantic trade conflict We expect a WTO verdict regarding the damage to the United States caused by EU subsidies later this year If the United States decided to immediately implement retaliatory measures, and I hope it does not this need to be WTO compatible and should not surpass the value which the WTO identified The transatlantic relationship is a pillar of global prosperity and stability Instead of repeated threats the United States should constructively pursue negotiations with the EU Removing barriers in transatlantic trade will benefit both the EU and the United States In general, German business is strongly in favor of ambitious trade agreements In the case of the United States a step-by-step approach might be preferable Better successful negotiations on separate areas than an ambitious agenda ending up in political gridlock A step-by-step approach would also help to rebuild trust in the transatlantic relationship In light of these two big storms, it's imperative that the European Institutions will take on their work as soon as possible German industry welcomes that the European Council and The European Parliament have agreed on a new president of the European Commission Any delay would have paralyzed the EU institutions and would have caused political uncertainty and instability It is now crucial that the EU institutions develop a joint political program for the next five years and comment swiftly with its implementation The new president of the Commission Fundaline outlined her political priorities for the next legislative term in her speech before the European Parliament in July From this and her political guidelines It becomes clear that the new Commission will place a strong emphasis on climate environmental and social policy The BDI stresses that in times of increasing tensions in the global economy and Sobering economic outlooks a comprehensive European economic program for boosting rough Job creation and competitiveness in the EU is of utmost urgency Only with a strong economic base Europe can find solutions to the big challenges such as fighting climate change and safeguarding the European welfare state The BDI welcomes that EU member states have called on the Commission to develop a European industrial strategy In March 2019, which the Commission has already started to work on The BDI has recently presented its vision for a future agenda for Europe 2019 until 2024 comprising industrial policy Priorities it is important to bear in mind that though they constitute important elements of industrial policy The comprehensive industrial strategy needs to go beyond environmental and climate policy Also taking the following aspects into account a modern Industrial strategy needs to be founded on strong governance. It should be implemented by Commission vice president and supported adequately by the council The EU institutions should develop and implement an ambitious action plan for the completion of the single market in all areas Most notably the digital single market and the single market for industry related services To strengthen the competitiveness of Europe investments in trans European transport networks the digital Infrastructure and European energy grids need to be more consistent The European competition regime should be strengthened by promoting cooperation between businesses Improving merger control proceedings taking greater account of the global competition in merger decisions and Focusing state-owned rules on stimulating investment and innovation The digital transformation to the economy must be supported by establishing a common European data space Focusing on industrial digital business models and implementing horizon Europe in an industry friendly fashion Last but not least we will only manage to build a sustainable Europe if we succeed in aligning the goals of industry industrial policy with ecological goals in the further development for example of the gas sector the circular economy and Mobility and climate and environmental policy need to be thought together One of the major issues of our time is climate policy Friday's for future is a popular demonstration in Berlin and in Dublin and Greater Thunberg had just sailed alongside the coast of Ireland to America German industry supports the Paris Treaty and the European climate targets. We want climate protection But we want to shape it in such a way that the European economy and industry is strengthened and not weakened If we want to be the architects and builders of a new climate neutral world We need innovation and investment in the first place and not just new taxes in Germany We presently discuss how to design a future CO2 pricing for better climate protection The German government will take a decision in this autumn We propose a concept which stimulates the necessary new investments in each single sector energy, industry, buildings and transportation We are convinced that this cannot be achieved by introducing a simple CO2 tax or by enclosing Transportation or buildings right away in the existing European emissions trading scheme As price sensitivity in the various sectors is very different To give you an example Card drivers will easily pay 30 cents more for their gasoline in contrast for tenants or Corresponding increase of their heating costs might already be problematic and Finally for energy intensive industries on a global market such a rise of energy costs could right away lead to insolvency of the company Therefore we need a CO2 pricing system which takes the differences of the sectors into account and is combined with other instruments as tax incentives, funding or subsidies and Any new pricing system must not touch the sectors in the existing EU ETS But cover only other sectors such as transportation and buildings in the long run We might achieve a common CO2 pricing system for all the sectors in entire Europe But in the meantime, we will need a differentiated system which allows to be Socially fair and economic wise By the way, these are also fundamental preconditions not to lose public support for the long-term inter-generational Project to reach climate neutrality These are the points that I wanted to mention besides the Brexit and thank you for your attention. I'm looking forward to the customer with you now