Unprecedented slump in CFS Index

The CFS Index, which measures the business climate of the German financial sector on a quarterly basis, slumps by -15.4 points to 98.8 points. This is the sharpest decline on record since the index surveys began in 2007 and the first time the index has fallen below the neutral line of 100 points since 2009. Expectations of the financial sector for the current quarter have turned especially bleak. Huge slumps in revenue, earnings and investment are expected, with service providers in particular anticipating an extreme decline in revenue and earnings, now also accompanied by job cuts. By contrast, the job cuts at financial institutions, which have been ongoing for some time now, remain almost flat, and the current quarter is not expected to bring as steep a decline as the other index values.

“There has never been such a severe deterioration in financial industry expectations of all the measured performance indicators – revenues, earnings, employee numbers, investment – since the survey began in 2007 – not even during the financial crisis of 2008. It would therefore appear crucial to pay the utmost attention to impacts on financial stability when pursuing rescue and recovery measures in reaction to the coronavirus pandemic – especially now that we have created a supervisory regime that makes a wholesale bailout difficult,” Professor Jan Pieter Krahnen, Director of the Center for Financial Studies, interprets the results.

Owing to the corona crisis, the future international importance of the Financial Centre Germany is also seen to be progressively declining. The corresponding sub-index falls by -5.8 points to 111.2 points and is now at its lowest level since 2012. The decline is increasingly driven by the assessment of the service providers. The relevant value for this group stands at 113.7 points, 7.8 points lower than in the previous quarter. The assessment of the financial institutions falls by -3.6 points to 108.8 points.

Dr. Lutz Raettig, President of Frankfurt Main Finance e.V., explains, “The slump in the rating of Germany’s future international importance as a financial centre is a result of the uncertainty surrounding, and not clearly foreseeable course of the global corona pandemic. In fact, Germany is considered to be on the cutting edge in managing the current crisis. The federal and state governments were able to rely on an efficient financial sector and get the billion-euro “corona protection shield for Germany” up-and-running in the shortest possible time without triggering negative reactions on the capital markets.”

Financial industry expects huge slumps in revenue, earnings and investment in the current quarter

The surveyed financial institutions and service providers report a significant decline in their revenues/business volume in the first quarter of 2020, with the corresponding index value dropping by
-8.2 points to 112.4 points for the financial institutions and by -13.8 points to 108.6 points for the service providers, relative to the previous quarter. With these figures for the first three months of 2020, each sector is still only 2.6 points below the previous year’s level. However, the financial industry is anticipating the sharpest drop in revenues since the surveys began in 2007 and an index value of well under 100 points for the current quarter.

The earnings of both groups developed in line with revenues in the first quarter of 2020. The corresponding sub-index for the financial institutions reached a level of 103.3 points after falling by
-8.0 points, but is still 2.3 points above the previous year’s level. The service providers report an extreme decline in revenue growth. The sub-index drops by -16.4 points to 106.4 points. Although this is still close to the previous year’s level for the first quarter, this group is anticipating an extraordinary slump to well under 100 points in the current quarter.

Growth in investment volume now below last year’s level

The growth in investment volume in product and process innovations in the financial sector also declined in the first quarter of 2020, but not to the same extent as the revenue and earnings figures. The corresponding sub-index falls by -6.9 points to 101.8 points for the financial institutions and by -4.5 points to 108.1 points for the service providers. The financial institutions are now 10.2 points below last year’s level, the service providers are 6.7 points below. With respect to the current quarter, the financial sector as a whole is expecting a strong decline in investment to a level well below 100 points. Among the service providers, however, the expected downturn in investment is less pronounced than the extreme revenue and earnings declines anticipated in this segment.

Financial institutions: job cuts almost flat in the first quarter / Current quarter slump should not be as severe as other index values / Service providers: jobs expected to be shed for the first time since 2009

Job cuts at the financial institutions, which have been ongoing for some time, are less severe in the first quarter of 2020 than in the previous quarter. The employee numbers sub-index rises accordingly by 0.7 points to 95.2 points, just 1 point under the previous year’s level. Although the service providers hired fewer employees in the first quarter of 2020 than in previous quarters, their employee numbers indicator remains in positive territory, at 105.5 points, after slipping by just -0.6 points. For the current quarter, the financial institutions are expecting a larger reduction in employee numbers, albeit less drastic than the anticipated declines in other index values. By contrast, the service providers are expecting to shed jobs for the first time since 2009.



The results are based on a quarterly management survey in the German financial sector.

The Center for Financial Studies (CFS) conducts independent and internationally-oriented research in important areas of Financial and Monetary Economics, ranging from Monetary Policy and Financial Stability, Household Finance and Retail Banking to Corporate Finance and Financial Markets. CFS is also a contributor to policy debates and policy analyses, building upon relevant findings in its research areas. In providing a platform for research and policy advice, CFS relies on its international network among academics, the financial industry and central banks in Europe and beyond.

CFS survey: “Effects of the corona crisis”

German financial industry expects economic impacts to exceed those of the 2008 financial crisis – Equity capital measures broadly welcomed

A CFS survey of financial industry executives shows that around 78% of the respondents expect the economic impacts of the corona crisis to be significantly more severe than those of the 2008 financial crisis.

So far the rescue measures adopted by the German government, amounting to around €750 billion, consist largely of special loans and loan guarantees.

Over 60% of the survey participants regard the measures taken by the Federal Government as appropriate, another 24% of those surveyed would like to see even higher levels of support, while just 12% consider the current package excessive. When asked what form the assistance should take, just under 80% of respondents said they would welcome more equity measures, in addition to the loan programmes, to prevent corporate debt levels from rising further. Only 13% of those surveyed are opposed to equity measures.

“The financial industry would surely give a strong boost to the acceptance of government support in the form of equity capital – this could prove crucial to securing and regaining financial stability in Europe,” explains Professor Jan Pieter Krahnen, Director of the Center for Financial Studies.

The respondents are divided on whether financial assistance should be coordinated on a Europe-wide basis, i.e. allocated according to shared standards. This is endorsed by 54% of the financial sector respondents and opposed by 41%.

The assistance programmes in Europe vary greatly in scale – large in Germany, small in Italy. Do these differences pose a threat to the European Monetary Union/eurozone in the medium term? Respondents clearly regard the disparity in the size of assistance packages in northern and southern Europe as the main threat to the eurozone – 85% see dangers looming here.

“Since the disparity in dimensions is far more strongly identified as a problem than a lack of international coordination of support programmes, this could provide an important insight for policy-makers. It is also in the self-interest of the northern countries to counteract the asymmetry of rescue packages at European level – whether the programmes are coordinated or not,” explains Professor Krahnen.

A large majority of financial industry executives (approx. 85%) see a risk of European Monetary Union stability being jeopardized due to the extensive support programmes at EU and individual member state level. Approximately 48% of the participants oppose the introduction of joint EU debt in the form of corona bonds, while around 23% could envisage them.
A remarkably high 30% of the survey participants do not hold a firm opinion on this issue.

Hubertus Väth, Managing Director of Frankfurt Main Finance e.V., emphasises, “The current crisis demands and promotes global coordination in the fields of medicine, science and business. Although global interconnectedness eased the rapid spread of the corona pandemic, it also plays a key role in solving the crisis, which will be done much faster through cooperation. This factor still receives too little attention.“



The results are based on a quarterly management survey in the German financial sector.

The Center for Financial Studies (CFS) conducts independent and internationally-oriented research in important areas of Financial and Monetary Economics, ranging from Monetary Policy and Financial Stability, Household Finance and Retail Banking to Corporate Finance and Financial Markets. CFS is also a contributor to policy debates and policy analyses, building upon relevant findings in its research areas. In providing a platform for research and policy advice, CFS relies on its international network among academics, the financial industry and central banks in Europe and beyond.

World Alliance of International Financial Centers (WAIFC) on “The role of financial centers in driving economic growth.”

In 2018, financial services leaders from around the globe assembled to announce a new strategic initiative: The World Alliance of International Financial Centers. WAIFC is an international non-profit association, which represents leading global financial centers and facilitates cooperation and the exchange of best practices.

In the context of the present uncertainties, with the consequences of the coronavirus and the slowing down of economic growth all around the world, financial centers must play an even more essential role to accompany a necessary recovery and the orientation of the economies towards sustainable development and the satisfaction of the economic needs.

Together with WAIFC member Casablanca Finance City, WAIFC has published a report in collaboration with Oxford Business Group on “the role of financial centers in driving economic growth,” which highlights the breadth and diversity of financial centers’ activities in financing their real economies.

Eleven financial centers have contributed to the report with their showcases:

    • Abu Dhabi Global Market
    • Astana International Financial Center
    • Belgian Finance Center
    • Busan International Financial Center
    • Casablanca Finance City
    • Frankfurt Main Finance
    • Hong Kong Financial Services Development Council
    • Luxembourg for Finance
    • Paris Europlace
    • TheCityUK
    • Toronto Finance International

The financial industry undergoes a process of structural change. Nowadays, the priority actions of our members concern environmental finance, technological innovation and infrastructure, as well as social and territorial financing. International financial centers are more reliant on technology, and our members have been driving innovations in the financial industry by supporting the adoption of innovative technologies from cloud computing and blockchain to artificial intelligence and big data. Also, our members are increasingly promoting all segments of sustainable finance and strive to ensure that environmental and social considerations are adequately taken into account and integrated into the financial sector moving forward.

The new report provides an overview of those activities. It is available for free download at https://frankfurt-main-finance.com/wp-content/uploads/2020/04/WAIFC-role-of-financial-centres.pdf.

Arnaud de Bresson, Chairman of the WAIFC Board of Directors and CEO of Paris Europlace, says:

“The WAIFC was created to foster collaboration among international financial centers and to build up a global network. It aims to accelerate the dialogue and exchange of best practices among them and develop communication with the general public. Our core objective is that finance should not be self-centered but rather serve the real economy all around the world. We are committed to supporting global economic transformations, fostering the combination of public and private funding, and contributing to meet the sustainable development goals all around the world.”

Said Ibrahimi, Member of the WAIFC Board of Directors and CEO of Casablanca Finance City, says:

“As a founding member of the WAIFC as well as the first financial center in Africa to join the alliance, CFC is proud to contribute an African perspective that showcases the level of international cooperation in its undertakings on the continent. We strongly believe in Africa’s potential, and the pivotal role global financial centers play in driving growth and contributing to socio-economic development. We aspire through this report to make these benefits known beyond the world of finance.”

Dr. Jochen Biedermann, Managing Director of the WAIFC, says:

“Financial centers are vital to sustaining economic growth. They provide the infrastructure for investment that drives entrepreneurial endeavors and economic growth across industries and communities and increasingly contribute to sustainable development and financial literacy. Our members embrace innovation and actively drive developments in that space. They provide fertile ground for start-ups with new ideas and innovative business models. The diversity of WAIFC members is an important strength.”

Hubertus Väth, Member of the WAIFC Board of Directors and managing Director of Frankfurt Main Finance, says: “Frankfurt Main Finance is proud to be a co-founder of the WAIFC network. Especially in times when the financial industry is facing enormous challenges, it becomes clear that solutions in an interconnected world can often only be found through international cooperation. This applies in particular to the financial sector. The financial center Frankfurt, in the heart of Europe, is a natural partner in such a cooperation.”


The World Alliance of International Financial Centers (WAIFC) is a non-profit association registered in Belgium, representing 16 leading international financial centers of four continents. WAIFC members are city governments, associations, and similar institutions developing and promoting their financial centers.

In an era of breakthrough technologies and rapid social change, financial centers are crucial to sustaining economic growth. Thus, the objective of the WAIFC is to create a transparent network that facilitates cooperation and sharing of best practices to further the understanding of the importance of international financial centers for national and global economies as well as social development.

Dr. Lutz Raettig: Protective Shield for Germany leverages financial centre’s efficient infrastructure

Politicians rely on an efficient financial sector for their economic protection programmes. Under KfW’s leadership, the entire breadth of the development banking system and the financial centre’s infrastructure has been deployed.

“Waste not, want not.” This proverb characterised the budgetary policy of the federal and state governments. Internationally, the “black zero,” the surplus in the budgets of the federal and state governments, has long been a hot topic. Now, however, it is precisely this room for manoeuvring that allowed politicians to get the “Protective Shield against Coronavirus in Germany,” likely in excess of 500 billion euros, up-and-running in quick order without triggering negative capital market reactions.

The largest aid package since the Second World War includes short-time work benefits, the deferral of social security contributions, tax-privileged one-time payments to employees, and a large number of aid and credit programmes for the self-employed, as well as small, medium- and large companies. The interest rates vary slightly, depending mainly on the exemption from liability for the lender.

Germany as a pioneer

Governments at the federal and state level have acted quickly, correctly and courageously. In doing so, they have relied on the financial centre’s efficient infrastructure, which has been successfully proven for decades. The state, development banks and local banks are well coordinated to quickly and efficiently process and disburse loans.

Borrowers apply for a loan from their local bank, which checks eligibility and creditworthiness, while a development bank provides the funds. Depending on the programme, the local bank can be exempt from liability up to 100%, while the development bank can refinance itself on the market with favourable terms because it has a state guarantee either explicitly or implicitly through the legally established institutional liability and guarantor liability. Moreover, due to the urgency of the situation, new programmes are usually not developed, but rather expanded and easier access to existing ones has been facilitated.

With KfW Bankengruppe and Landwirtschaftliche Rentenbank, Germany has two federally owned development banks. In addition, the federal states also have their own investment and promotional banks. For many years, KfW carried its corporate objective in its name, as it was founded in 1948 as the Kreditanstalt für Wiederaufbau as part of the Marshall Plan. After the Second World War, comparable institutions existed only in France, Italy, the Netherlands and Poland. It was not until 1989, first in the countries of Central and Eastern Europe, then increasingly in other EU countries from 2008 onwards, that comparable concepts were implemented and corresponding banks were established. Today, KfW is one of the world’s leading development banks in the world, with a AAA rating from the three most important rating agencies.

Financial stability concerns

With the loan programmes, the government mandates the German banking system to provide corporate customers with financial “medicine” for “acute care” and later “rehabilitation” based on its in-depth knowledge and experience

The corona pandemic shows how valuable a healthy finance sector can be for the real economy during a crisis. However, even the financial industry is not immune to the risks of drastic measures. Therefore, prudent principles must continue to apply to banks as well.

Against this backdrop, it is understandable when politicians and supervisors urge banks to waive bonuses and dividend payments due from 2019, at least if the banks do not receive the distributions as a capital gain. Although the banks have significantly increased their equity capital, the further course of the crisis is by no means clear enough to allow a sufficiently robust risk assessment to be made today.

BaFin and the Bundesbank have already taken far-reaching preventative measures together at the European level with the European Central Bank and the financial supervisory authorities. As BaFin President Felix Hufeld summarized, “The existing regulatory framework grants us a high degree of supervisory flexibility, of which we will fully utilise. We will relieve the burden on banks where this is possible without compromising financial stability.”

When visiting BaFin’s website on Corona, one gains an impression of the range of measures being taken. These relate to banking, insurance and securities markets, and range from waiving the planned countercyclical capital buffer, the treatment of problem loans, the postponement of Basel III standards by one year to the shortfall in pension funds and reporting obligations under the Market Abuse Regulation.

Drawing lessons from the pandemic

Just like the financial crisis in 2008, the corona pandemic in 2020 should be a point for reorientation. It should be clear that Germany, as the world’s fourth-largest economy, must have an efficient financial sector to overcome crises.

In addition to the development banks and local banks, capital markets also play an important role, as this is where the programmes are financed. In this respect, the Financial Centre Frankfurt is outstandingly positioned in Europe. Gradually, institutional investors should also be included in financing the new start, because they can leverage and thus strengthen existing programmes. The role of international financial institutions should not be underestimated either. Here, Frankfurt has scored points in recent years by bringing more than 30 international financial institutions to the Main with their new EU headquarters. These institutions can now see that their choice of location was the right one because here, challenges were solved pragmatically.

Regulation is now being put to the test as well. There is no doubt that many components will demonstrably contribute to stability. Other rules will require review in the light of the crisis, especially where complexity is unfavourable in relation to the desired outcome.

It is certainly clear that digitalisation will receive an enormous boost. It will be irreversible. Simplification and de-bureaucratization of existing regulations will ease digitalisation efforts. The criteria should be adjusted by all parties involved. Our perfectionism, which is so valued worldwide, should be pragmatically adjusted in the light of the crisis. After all, we now are experiencing how, with a little flexibility, the challenges of the lock-down can be mastered in a way that was not imaginable just a few weeks ago.

What efforts the corona pandemic will still demand of politicians, the populace and the economy cannot yet be seriously predicted. At this point, whether it is a “black swan” event or, as the author of the book of the same name, Nassim Taleb, claims – simply an expected shock, is more of an academic question. We can only hope that the medical and pharmaceutical sector will quickly find a vaccine and/or an effective therapeutic treatment for the coronavirus and that those responsible can agree on economic and public health measures to better guard against future pandemics. Hopefully, we will not waste the lessons of our current emergency and be forced to relearn them in the next.

World Alliance of International Financial Centers (WAIFC) publishes Corona Report

The World Alliance of International Financial Centers (WAIFC) publishes a report on “How global financial centers can help combat the COVID-19 pandemic.”


Rarely has the world faced challenges such as today. Whatever comparison is drawn, COVID-19 and efforts to curb its spread are poised to inflict strain of historic proportions on the world’s economy and financial systems. Within just weeks, economic growth has ground to a halt and gone into reverse. The virus knows no borders, nor can economic actions be seen in splendid isolation. Wouldn’t it have been helpful had the world been prepared for such a crisis on this global scale?

The WAIFC is a global association comprised of the world’s leading financial centers from four continents. We believe it is time to overcome our borders and put competition aside for more cooperation and exchange of best practices. We are convinced that global challenges require global responses.

Together with WAIFC member Frankfurt Main Finance, WAIFC has published a report on “How global financial centers can help combat the COVID-19 pandemic,” which highlights lessons learned of the past as well as current activities of our members.

It includes an interview with Christopher Hui, Executive Director of the Hong Kong Financial Services Development Council, who explains why Hong Kong was able to recover quickly from SARS crisis 2003 and what Hong Kong learned for the current crisis: “Our SARS experience has driven us to respond sooner and with adequate caution to COVID-19.”

And Hiroshi Nakaso, Chairman of FinCity.Tokyo, talks about lessons learned from the Tohoku Earthquake in 2011: “The Bank of Japan has a long tradition of quickly responding to a crisis as it unfolds.”

The report is available for free download at https://frankfurt-main-finance.com/wp-content/uploads/2020/04/WAIFC_Publication-on-COVID-19.pdf.


Arnaud de Bresson, Chairman of the WAIFC Board of Directors and CEO of Paris Europlace, says:

“The first lesson is that all the countries are concerned all around the world and therefore we are in the same boat: to maximize the chances to win this war we must share and work together. A second lesson is that we have to reconsider our economic models and give a new priority to long term perspectives and sustainable economy, it means environmental and social issues. It is the essence of WAIFC to contribute to these new goals and long term partnerships.”

Hubertus Väth, Member of the WAIFC Board of Directors and Managing Director of Frankfurt Main Finance, says:

“We have much to learn from each other and history. Financial centers like Hong Kong or Tokyo successfully coped with similar challenges in the past. We should draw on these experiences. That is the motivation of our publication. We not only share today’s responses and best practices, but we also reflect on historical experiences. It will prove that our financial systems are essential to the solution, and the world can cope with such challenges, given the right response.”

Dr. Jochen Biedermann, Managing Director of the WAIFC, says:

“Our members, the world’s leading financial centers, stand together and do their part to mitigate the current crisis and prepare for a rapid economic recovery. That is an excellent sign and encourages us to continue our work at full strength.”


The World Alliance of International Financial Centers (WAIFC) is a non-profit association registered in Belgium, representing 16 leading international financial centers of four continents. WAIFC members are city governments, associations, and similar institutions developing and promoting their financial centers.

In an era of breakthrough technologies and rapid social change, financial centers are crucial to sustaining economic growth. Thus, the objective of the WAIFC is to create a transparent network that facilitates cooperation and sharing of best practices to further the understanding of the importance of international financial centers for national and global economies as well as social development.

Asahi Shimbun interviewed Hubertus Väth

Kazuo Teranishi, correspondent for Asahi Shimbun, one of the oldest and largest national daily newspaper in Japan, interviewed Hubertus Väth during his visit in Tokyo in March 2020, which took part in the FinCity Global Forum (hosted by FinCity.Tokyo).

Read more

Protective Shield against Coronavirus for Germany: Financial Industry as Partner for the Real Economy

In a very short time, the German government and the federal states have erected a protective shield worth billions, including a large number of credit programmes for companies and the self-employed. To ensure successful implementation and efficient disbursement, policymakers can rely on an efficient infrastructure with a four-tier system comprising the state, development banks, principal banks and borrowers.

Read more

Hubertus Väth: COVID-19 is a global crisis, don’t make it worse by making it a crisis of globalization

An exceptionally long period of growing prosperity seems to be abruptly drawing to an end. Since the 1990s, globalization has lifted hundreds of millions from poverty and led the world to unique prosperity. This was made possible by lowering barriers and opening borders to multi-national enterprises. These enterprises have successfully worked for decades to optimize their supply chains, reduce costs, minimize inventories, expedite deliveries and improve resource utilization. In their wake, they increased productivity around the globe resulting in widely dispersed prosperity.

Emergency Brakes Pulled

Is COVID-19 ending globalization as a model for wealth creation, a model already challenged by a trade war and growing national assertiveness? One could jump to this conclusion as the virus’s properties make its spread around the world easier when borders are more open.

These properties are:

  • A varied incubation period, up to even two weeks
  • Easy transmission similar to a seasonal flu
  • Asymptotic in an uncomfortably high number of cases
  • No existing vaccine
  • No proven treatments
  • A significant mortality rate; at least 5 times that of severe influenza and rising sharply if medical facilities are insufficient.

These properties create mortal danger for too many people for it to be socially acceptable to allow the virus to simply run its course, as severe cases of influenza usually would. It is also equally difficult to contain and isolate those affected, particularly in today’s globalized world, where interconnectedness has helped quickly spread the virus far and wide.

For too long, the response was to downplay or even deny the risks. The public warnings which followed had little or no sanctions attached. Policy responses such as expanding testing facilities, stockpiling critical equipment and personal protective equipment, increasing capacity at medical facilities, retraining medical staff, and establishing safeguards for vulnerable populations were often implemented too late, with some noteworthy exceptions. What followed did not come easy and again mostly too late: Disrupting the links through which the virus spreads such as mass gatherings or mass transport. Time, being so crucial, was waisted despite early and sufficient news coming from the front lines in the fight against the virus.

When these modest measures and urging the public to practice social distancing did not slow the spread, countries and cities have pulled the emergency brakes on individual life and economic activities. Increasingly, leaders effectively closed the borders to travellers directly or mandated strict quarantines for those arriving from an ever-growing list of countries. The EU was particularly slow to respond and now struggles to catch up, as medical services are pushed to their limits in several countries. Difficult to imagine, but in some places, doctors are forced to prioritize medical treatments, a decision they are not prepared to make in peacetime, least of all in such numbers.

Faced with such stark choices, country after country banned events, flights, tourism, restaurants, bars, clubs and even haircuts. What usually starts with a fortnight of restrictions, already is or is likely to be extended, and no one knows how often or for how long. In a way, it’s a race and a bet. A race of human ingenuity to develop a vaccine and/or a treatment and a bet that the virus will follow seasonal patterns, much like seasonal influenza. Some characteristics point to that, but we can by no means be certain. Most importantly, is to flatten the curve, i.e. the rate and volume of infections, so that the number of patients does not exceed medical systems’ capacity. At the same time, medical infrastructure is being rapidly expanded, because mortality rates would surge if capacity were to be breached.

As a result, the world economy is grinding to a halt, reversing decades-long growth trends. What we are seeing has the potential to become the mother of all recessions. Economists generally only differ in their view whether the economic shock by COVID-19 will become the biggest slump since the Great Depression or even exceed this traumatic experience from over 90 years ago. The International Monetary Fund casts doubt on traditional views of a V-shaped recovery and shows that all types of recessions—including those arising from external shocks and small domestic macroeconomic policy mistakes—lead to permanent losses in output and welfare.[i]

Losses of 12 trillion USD are expected, 1/6th of which will fall on a financial industry that is much better capitalized than in 2008, but clearly not strong enough to handle a crisis of such proportions.[ii] Losses will be unequally distributed, with the weakest suffering the most and existentially[iii]. The toll from food shortages, loss in education and health provisions will be hard to measure. The potential for political disruptions, as a result, should not be underestimated.

Philip Thomas, professor of risk management at Bristol University, already warns that measures could “do more harm than good.” There is indeed a clear link between GDP and life expectancy, not least due to the ability to spend more on healthcare and safety. The measures taken, leading to massive losses in GDP, could impact life expectancy for many.

How long can the world sustain a near economic shutdown? One, two, three months? Most certainly not much longer. And how will we react if it becomes evident that relaxing restrictions leads to an increased number of infections? Or the potential loss of human life due to shrinking GDP exceeding that caused by the virus? Navigating between a rock and a hard place has never been harder and politicians have nothing win but blame for whichever direction they choose.

Rapidly spread around the globe

COVID-19 is a crisis of global dimensions but responses have mainly been national. Now the risks are high that we will make it worse by creating a crisis of globalization.

Traditional measures to cope with major disruptions to supply chains or monetary transmission will not suffice in this case. How could monetary or fiscal policy translate into economic activity in a shutdown economy? Past remedies, like broader sourcing to avoid supply chain disruptions after the Fukushima Nuclear Disaster in 2011 or central banks’ wonderfully successful opening of taps following the financial crisis in 2008, will obviously prove insufficient.

In contrast to previous pandemics, COVID-19 has spread around the globe within only a few weeks. But on a positive note, never before have scientists from all over the world identified crucial elements of the disease in a coordinated or competing manner. Knowledge on the pandemic has itself spread virally from those on the front line providing treatment and experiencing some success. Naturally, these successes were initially reported from China, Japan and Singapore, and later South Korea.

Doctors and politicians around the world already possess quite a bit of information on reducing the risk of infection, incubation times, protecting high-risk groups, specifically elderly populations, and how to effectively treat the sick. Certainly, this will save the lives of many infected, despite an effective vaccine only becoming available, hopefully, in the not too distant future.

Interconnectedness is not only a cause but a cure as well

COVID-19 exposes the risks and highlights the opportunities of an interconnected world. Clearly, governments must act to restrict free movement in order to protect human lives, but at the same time, better interconnectedness will be key to a long-term solution. In an ideal world, Europe and the U.S. would have had more than two months of time to prepare, if, and that is a big if, there were proper systems and processes in place. A lot of pain, lives, and economic damage could have been spared if those precious weeks were used to stockpile testing materials, expand treatment facilities, retrain medical staff, enable quick testing at borders, and swiftly and efficiently isolate those infected.

Now is not the time for hypotheticals and finger-pointing.[iv] Rather, it is the time to cooperate on a global response. A multilateral approach is needed to respond on a truly global scale. It is time for the G20 to revive its leadership by providing a framework for the exchange of best practice and medical resources in the short term, and to put in place a future alert and containment framework.

Five steps for international cooperation

In this respect, five areas of global cooperation are necessary.

  • Global information system

Comprehensive, resilient and comparable information is key for decision-makers. Information on a pandemic must be standardized. For example, the world wonders how infection or mortality rates can vary so widely. Do these deviations point to the effectiveness of solutions or are they a result of differences in definition and methodology? Data sources, time lags, intensity and triggers of testing, as well as methods of attributing lethal cases, all can change the outcome and either create panic or an illusion of safety, neither of which is desirable. In addition, clear criteria must be met for declaring an infection a pandemic.

  • Global cooperation on tackling infections

A recent study from Imperial College London expects that “more intensive interventions could interrupt transmission and reduce case numbers to low levels. However, once these interventions are relaxed, case numbers are predicted to rise. This gives rise to lower case numbers, but the risk of a later epidemic in the winter months unless the interventions can be sustained.”[v] The same is true if there are still undetected cases in places that lack the public health infrastructure to manage testing and monitoring of such an outbreak. The decades-long struggle to eradicate smallpox and measles around the globe show just how difficult this will be. Less developed countries will especially need practical and financial support to cope with these challenges.

  • Stabilization of economic activity

Like any system in intensive care, the world now faces a severe threat to stability that deserves immediate attention. Right now, the key challenge is business continuity, otherwise, insolvencies will rise and cause lasting damage to productivity, which could result in a lasting impact on prosperity and life expectancy. When COVID-19 started in Wuhan, a central part in the global manufacturing ecosystem, it posed a disruptive challenge to supply chains and thus, to business continuity. This certainly put a lot of pressure on authorities to delay action. This reluctance to act was basically repeated in every location the virus spread. The resulting economic crisis puts the very merits of globalization into question. Supply chains need to be redrawn, the lessons of Fukushima learned after all.

Authorities were, however, quick to respond to the wider economic fall-out of their measures. First and foremost affected is the global financial system, the canary in the coalmine. Governments must ensure the financial system’s ability to provide the liquidity needed to restart the economies after the shutdown. However, the monetary measures widely applied by almost all central banks have so far proven to be on their own painfully inappropriate tools in the wake of the current pandemic. Central banks slashing rates, buying bonds or otherwise pumping money into the system will not suffice. Financial institutions are needed to disburse and allocate capital to give businesses a fair chance to survive the storm. To enable them to fulfil this scope, a government-backed special risk absorption mechanism, essentially a state guarantee, is needed. Otherwise, given the current environment, any risk assessment would only lead to calling loans, rather than giving new ones.

These relief instruments should be targeted at SME’s and key industries. This can realistically only bridge a limited period of time, such as the famed German Kurzarbeitergeld, that provides a temporary furlough, subsidized by social insurance unemployment benefits.

Institutions like AFCA have a new role: to conduct research on the impact of fiscal and monetary policy responses, advise on how to allocate the money to those companies which are not fatally wounded, and to individuals suffering income loss. These findings should allow the international community to develop a proven set of measures to avoid structural disruptions and thus, maintain economic, social and financial stability.

  • Provisions against Black Swans

Many countries have been overrun by the virus and face shortages in hospital capacity, ventilators, personal protective equipment, and medicine. Pandemics are Black Swan events which require a coordinated response. Hence, it is important that the international community provides for a sufficient stock of critical equipment and establishes a dedicated fund which allows affected countries – based on the principles of insurance – to quickly receive additional assistance. This would be similar to strategic reserves of oil or other strategically important resources.

  • Maintaining global supply chains by alert and containment systems

Business continuity can only work if global supply chains are stress-resistant. Supply chains are only as good as their weakest links. Alert systems are only as good as the willingness and ability to hear and react to them. Therefore, COVID-19 calls for the global supply chains to be equally global alert, contain and coordinate mechanisms for such a crisis.

Not even the lessons from Fukushima’s impacts on global supply chains were fully implemented. For some medicines, the active pharmaceutical ingredients were only produced at one or a few nearby locations. COVID-19 has induced disruptions in production and shortages of many generic medications.

The international community must find solutions for a sustainable supply system, identifying essential products and their multiple potential sources, ideally as independent from each other as possible. The decisions should not be based solely on geography, but also account for specific risks like natural disasters, civil unrest or pandemics.

A wake-up call for global coordination

The current crisis makes us aware of our interconnectedness. The world needs a framework to learn as fast as possible from those who’ve faced the crisis early on, medically, economically or financially. These learnings will be critical in the coming weeks, as we plan out how and when to get our economies back to work, sooner rather than later. A lack of coordination will expose those who go it alone and create a dilemma leading to inaction or resource absorbing on-and-off decisions.

Getting back to work will only happen as and when the risks to human life are under control. Younger and elderly people, younger and elderly nations will differ in their views on when this point has been reached. But a debate is unavoidable and either way, the choices will have significant consequences and repercussions. Collectively, the world must become more agile to cope with COVID-19 and hopefully be better prepared for the next virus, which will certainly come.

Failure to cooperate, however, should not be an option.



[i] See https://blogs.imf.org/2018/03/21/the-economic-scars-of-crises-and-recessions/

[ii] (https://www.chathamhouse.org/expert/comment/lasting-effects-financial-crisis-have-yet-be-felt#.)

[iii] (https://blogs.imf.org/2018/03/21/the-economic-scars-of-crises-and-recessions/).

[iv] See The Times, https://www.thetimes.co.uk/edition/world/pandemic-blame-game-widens-rift-between-trump-and-furious-china-gfqtflkc2, inspected 22 March 2020.

[v] See https://www.imperial.ac.uk/news/196234/covid19-imperial-researchers-model-likely-impact/, inspected 22 March 2020.

Hessian Ministry of Economics informs about Corona Pandemic

The Hessian Ministry for Economic Affairs, Energy, Transport and Housing is supporting Hessian citizens and companies during the Corona pandemic. We have compiled a list of the most important information platforms and hotlines provided by the Ministry of Economics.


Information for citizens:


Phone: 0611/32 111 000


Information for companies:


Phone: 0611/32 111 000


Immediate assistance for companies with up to 50 employees:



Loans for companies:


Hotline: 0611/ 774 7333

Germany after Brexit: Now there is a need for doers – Guest contribution by Hubertus Väth in “die bank”

The countdown was projected on to the side of Prime Minister Boris Johnson’s office and residence at 10 Downing Street until Brexit’s completion on 31 January 2020, midnight Brussels time. Negotiations on future relations are underway. However, regulatory questions for the financial sector remain largely unresolved. London will – also in the well-understood interests of the EU – remain the leading financial centre in Europe for a long time to come. This does not mean, however, that the UK’s withdrawal will be without consequences. The cake will be newly cut, and Germany should use this opportunity to establish Frankfurt as the leading financial centre in the EU, all the while striving for constructive cooperation with London and Paris.

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