Germany's former president yesterday launched a harsh attack on eurozone politicians and the Western financial market model, saying emerging market leaders would ask "very difficult questions" of both as their power grows in the emerging world order.
Germany’s former president yesterday launched a harsh attack on eurozone politicians and the Western financial market model, saying emerging market leaders would ask “very difficult questions” of both as their power grows in the emerging world order.
Horst Koehler told the Fonds Kongress event in Mannheim that the developing world might well have testing questions “about business models” in advanced economies that so often lectured them on issues such as quality of leadership in the past.
He said one question might be, “How could you allow your financial market to have a leading role over the real economy?”
And another: “What are you doing against the fact that for several years the prices of resources have gone up, only for your profit?
“For 200 years the Western world helped itself to the world’s resources. Now we must make good on the colonialism. This must be carried forward in the G20. A globalised world must find a global ethos.”
He said investment in the developing world should be guided by sober analysis of returns, not greed.
He said it was a good thing for the developed world that EMs were driving global growth – 42% of global economic growth, 29% of M&A and over 10% of new patents – “even if the growth will change the political structure of the world”.
As a result, developed world investors allocating to the emerging economies are in fact helping support their own countries, Koehler said.
Germans are ideally placed with their manufacturing base to help, he said.
“Emerging economies need goods and services. Germany is a country experienced with exporting, our land is predestined to be a partner of emerging economies.”
Koehler said eurozone politicians must act responsibly, and together, as an example for the emerging markets whose power will grow in the new world order.
“What should we think emerging economies should expect of Europe when some of its own members speak badly of it? Europe is the best example of how countries can work together and solve global problems. Everyone has to keep their house in order, but it is not enough just to keep one’s own house in order any more. One must look to a common way forward.”
Emerging economies needed reform, he added, in areas such as business practices and cleaning up bribery.
But the eurozone needs reform as badly – Koehler echoed Chancellor Angela Merkel’s recent comments: “A break-up of the euro would be the biggest risk to a good future for Germany. I am convinced the way we are going with reform will lead to success. The development of the union to political union should not be stopped, and Germans should with conviction push for a union, without worrying about their role in this.”
Koehler also urged German investors to engage heavily in tackling climate change, “the biggest danger of all”.