2024 will be the year of transformation (-financing)

Feb 19 2024

NRW „Germany is in bad shape,“ states Arndt Kirchhoff, NRW employer president. The latest survey of companies from the Düsseldorf and Middle Lower Rhine Chamber of Industry and Commerce shows that around a third fear a deterioration in business expectations. The economic forecasts also give little hope of an imminent recovery. The uncertainty among entrepreneurs means that demand for loans is lower than it has been for a long time.

However, the situation is not (yet) as bad as the mood. Companies‘ liquidity is generally good, banks are ready to provide financing and politicians have started to take action. Despite all the challenges facing the economy, progress is being made – albeit slowly, but noticeably. A lot depends on what we decide now: Take action and seize our opportunities, or continue to just talk (badly) and lose touch with the global competition as a result.
Take action and seize opportunities, or (mis)speak and lose touch

It is clear that, following the ruling of the Federal Constitutional Court, we cannot continue to hope for unlimited government handouts in the form of subsidies and rescue packages. The times when the public sector was always ready with money are likely to become more difficult. And we have to be realistic: Reducing bureaucracy and solving infrastructure problems will not be possible overnight. But companies cannot and must not wait that long. They had better get started now.

One solution is private capital, including from foreign investors, for which incentives must be created. We are therefore calling for the European Capital Markets Union, which can offer an alternative to the global marketplaces due to its size, with fewer restrictions for more securitizations and corporate bonds. More investment will encourage more innovation. A good financing mix consisting of loans, funding programs, venture capital and capital market products – supplemented by targeted incentives and tax breaks – could ignite the turbo for this.
Politicians must roll back excessive regulation for sustainable transformation

There is something else that politicians urgently need to tackle: Roll back the excessive regulation in the sustainable transformation. When the President of the German banking supervisory authority Bafin states that „there is a lot of well-intentioned regulation that has missed the mark and in some cases led us down a dead end“, this should be a clear warning from a competent source. The often unmanageable number of regulations, which seek to regulate everything down to the smallest detail, overburdens and overloads small and medium-sized companies in particular. Trying to regulate all the ramifications of sustainability will not succeed. „The taxonomy must focus on feasibility,“ Eckhard Forst, Head of NRW.Bank, also demands.

According to Sabine Mauderer, member of the Bundesbank Executive Board, two things are necessary for the structural change and restructuring of our economy: „Firstly, we need better networking of investment requirements, expertise and investors. And secondly, we need to bring the financing ecosystem forward“. North Rhine-Westphalia is in a good starting position: the state is one of the strongest industrial regions in Europe, with a diverse mix of industries, the largest number of corporations, global market leaders and SMEs, many years of experience and expertise in structural change and, most recently, a networking and transformation platform, Fin.Connect.NRW. The initiative, which is supported by Zenit, IHK NRW and IW Köln, aims to accelerate transformation financing, connect investors and capital seekers and promote the sustainable and digital transition.

There is still time for us to overcome this historic challenge. Waiting for better times is not an alternative. Companies – just like politicians – must deal with the requirements of the taxonomy now. Not only because there are clear targets for ESG ratings, but also because we can only make progress if we are innovative. This is and remains the particular strength of the German economy – and our best chance for more growth again.

Guest article:

Thomas Buschmann, Vorsitzender Bankenverband Nordrhein-Westfalen

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