Norbert Walter
Delegates at the Association of Corporate Travel Executives conference last week in Munich received an update on global economics from Deutsche Bank chief economist Dr. Norbert Walter. He touched on several areas, including Chinese tourism, which he said would become "more important than today's Japanese tourism." Yet, he suggested that the Chinese "by 2020 will already understand that their one-child policy was not ideal. I fear that by 2020, we'll probably all complain that China only grows at 4.5 percent per year. I am convinced that we will be impressed over the next six or seven years by the Chinese. Thereafter, we will discuss their problems much more often." Walter also predicted that $100 per barrel oil probably would be a reality in the medium-term; that the U.S. dollar "over next three to five years will be undervalued by 20 to 30 percent, compared to its fair value, which is something like $1.15 to €1;" and that the Japanese yen would remain weak "for a while." Walter noted that in Tokyo there are "these wonderful hotels that are so cheap and offer such good service." He also suggested that the global economy is generally holding up well, despite the downturn in the United States; that economic momentum would continue in Russia and Central and Eastern Europe; and that travel to the Middle East and other emerging markets soon would be "thriving." After his speech, Walter fielded questions from delegates. An excerpt follows.
I have heard [former U.S. Secretary of Labor] Robert Reich speak previously, saying he encourages his children to learn Mandarin Chinese. But instead of Mandarin, should we all be learning Arabic?
It is more important to learn Mandarin than to learn Arabic. It is very obvious that the huge number of people educated in the Chinese world is more important than a few Arabs. The Arabs of course multiply, that is true, but they are starting from very low numbers. We should not extrapolate the last 30 years and the next 20 years any longer. The peak of oil is something we can already see with our eyes. We already know the period when the more important source of energy will not be oil. Then of course the Arab world won't be the pinnacle of the world, as it is today.
Are you concerned by the removal of the words "free and undistorted competition" from the latest version of the European Constitution reform treaty [finalized by E.U. leaders on 19 October and scheduled to be signed on 13 December, ahead of ratification votes by member states]?
The answer is yes. We have done a publication and expressed our concern about it. We were surprised that so little reaction was seen in academia. I would have expected academia to be excessively loud about it. They were not. I am astonished that some in [the business community] who are dependent on open business and open borders did not speak up. I was surprised that the lady in Berlin [German Chancellor Angela Merkel], who is such a strong person in terms of European leadership, gave in to this request to a person who is lately protectionist, from Paris, [French President] Nicolas Sarkozy. It is something that has not gotten the proper public and official attention. It is indeed a risk if the world moves more toward protectionism. What I don't understand is how those who would otherwise benefit--international banks, or those in international travel--could remain silent under such circumstances. We should be very vocal. We should join forces. We should develop much more strength in the international arena in order to make it very clear that this might be a cul-de-sac and we should get away from this direction as soon as we can. I am worried.
Do you think the British will have to give up the pound in the future in favor of the euro?
It is very obvious that for the euro to be a resounding success, it must be fully subscribed to by the citizens of the Euro-area. And the British must drop their own currency. The two factors combined cannot be realistically expected between now and 2020. Therefore, I guess we have to live with the oddity of this little place, Europe, having more than one currency.
What is the potential for a global currency, eventually?
It was very difficult to get the vision of a European currency up and running. There are debates about currency unions in the Middle East. There are plans for a Gulf currency area by 2010, but there were events last year and the beginning of this year, where for example, Kuwait de-pegged its currency from the dollar, which makes this plan much more difficult to achieve. I think it is unrealistic to see even a small area like the Gulf area have a common currency by 2010. There are debates about a regional monetary union between Malaysia and Japan. I would not read into those debates, as I observe them, as having any chance to show results in less than 20 years. I would see the earliest possible time for a common currency in Asia as 2025, and only if by then the rest of Asia agrees to have Chinese currency as their currency. And this can only happen if the Chinese currency is fully convertible and if they have an extremely mature financial sector that by then is truly internationally oriented. That is not the case today. Even that may not be enough, because you need mutual trust for a common currency, and I do not observe mutual trust in Asian societies. Despite the fact that there may be reasons at least for regions to adopt a common currency--and there was good reason for Europe to have common currency--I don't think that it will happen in the Middle East or Asia because of the lack of trust between nations. It is unrealistic [to expect] a common world currency during the next two or three generations.
In Europe, there are still differences between the countries, even though there is a common currency. What changes might occur over the next few years?
Europe will continue to consolidate. We will move more toward a single market. This includes not only the countries that are members of the European Union but also countries that are adjacent. It will be different from sector to sector. There are some sectors where governments must intervene. Unfortunately, the financial markets are such a sector. Unfortunately, airlines are such a sector. ... If the international community would note what has happened in Europe over the past 15 or 20 years, they would be deeply impressed. For example, Central and Eastern Europe has the most modern financial sector almost overnight, in less than half a generation. How did it work? Western European banks have taken over banks of the Czech Republic, the Slovak Republic, Hungary and the Baltic states. Now, 75 percent of the banks in Central and Eastern Europe are foreign-owned. That is an indication of how intense the integration was in Europe in a number of fields. We are not yet complete. Some factors that I would welcome include more openness of Old Europe for Southeastern Europe, which has not yet been consolidated. We still exclude Serbia. We still have not embraced Croatia. We still believe that we cannot and should not support Turkey. I am pretty sure that part of our future--part of our dynamism--will only be possible in our aging societies of Northern and Western Europe if we invite the Middle East and Northern Africa to be much closer partners, and to help revitalize Europe. If we don't do that, we will be a graying continent ... Not all entrepreneurs can be home-grown.