• 04/21/2020
  • Corona-Krise

"1 Million Million = 1 Trillion"

CEO Ernst Prost explains how the government may benefit from the current low interest period in order to boost the economy after the Covid19 crisis.

Dear fellow entrepreneurs, dear colleagues,

I'm prone to reach into the martial vocabulary of heroic struggle and battles, usually after a glass of a red wine or when I read Clausewitz... The only thing I don't like is war rhetoric - no matter how drastically I want to describe our situation and tasks. War is something completely different than a crisis, and I have described the difference between survival and war before. War kills people - fighting for survival saves lives and I see another serious difference between a war and this crisis: in a war everything is destroyed, machines, factories, plants, houses - simply everything. All values, all assets. We don't experience such damage on private or company property and state structures, even if some things have been impacted quite badly. But we don't have to rebuild anything like we did after the Second World War, we just need to get the whole system moving again. Not a small task, but not impossible. This difference is important to me, because many are now writing about a destroyed economy, maybe we should look at it as an involuntary hibernation...

The good thing about us Germans is our diligence, our ambition and our downright work ethic, that's 90% of what we need now to get back on track... Plus 1,000 billion euros or in other words, 1 million million... That makes 1 trillion euros, two trillion, if you like. So what? Money costs nothing at the moment. The cost of money is interest, and the state doesn't have to pay it at the moment. Lucky again.... At the time of the high interest rate phase, Germany was paying between 20 and 40 billion euros annually in interest on its national debt.  The black zero and above all the interest-free period allows us to save these billions in interest in the federal budget, for the most part every year. That is good and what happens now on the cost side of the state budget if we add another 2 trillion euros in debt to the existing 2 trillion? - Exactly! Nothing! As long as the state doesn't have to pay interest on it, it has no additional costs and therefore doesn't have to save on anything else. - Even better. 

It would be fatal if, because of the crisis, we were to incur high debts now and, because of these debts would have to make hard savings somewhere else. But we do not have to, debts on which no interest has to be paid are good to live with. Especially when you have this debt with your own citizens. Keyword "government bonds". Now, I'm not a finance minister, I'm just a simple CEO - but that's how I would do it. Shouldering the big bazooka and shouting "whatever it takes" like Mario Draghi did in his days and incurring as much debt as I need to get the economy going again, saving money at this point would be as nonsensical as stopping the clock to save time. "By the way", urgently needed investment programs could now finally be launched to get the partly ailing German infrastructure back on track: Schools, bridges, digitization, energy system transformation and health care. 

So there is a lot to do, there is plenty of work, and if the lubricant i.e. fresh money is pumped into the engine now, things will be better after the crisis than before it. If you do it properly this is not only a recipe for Germany but for the rest of Europe. However, one must not be ideologically, nationalistically or even fundamentally embedded in it. Euro bonds issued by the ECB would bring fresh money to our neighbors and this at low interest rates - and low interest rates are all that matters!


Ernst Prost