UBS Chief Executive Sergio Ermotti is adding his voice to the chorus of concerned Europeans. The continent remains an important market for Switzerland's biggest bank, but needs reforming, he cautions.
«Let me put it diplomatically: there's room for improvement in Europe,» Sergio Ermotti, chief executive at UBS, told «Sueddeutsche Zeitung» (pay-wall) in an interview.
What follows is a pretty blunt assessment of Europe's ailments. A lack of growth, not least in the European powerhouse Germany, a lack of reform, deficiencies in the very structure of the European Union – in short, Ermotti is putting his finger on a number of sore points that are keeping European businesspeople awake at night.
Fiscal Union, Common Foreign and Security Policy
«If things keep going in this way, one day, Europe won't have a role to play between Asia and the U.S.,» he says. Without a fiscal union, it made no sense to have a common currency and monetary policy, Ermotti added. «In a federal model, Europe will need not only a common fiscal policy, but also a common foreign and security policy.»
The dynamic between the perceived inevitability of an ever closer union and the forces, which oppose this type of integration to the detriment of national sovereignty, has dogged the European Union ever since it was founded.
Reforms for Companies
Ermotti believes that the European Central Bank (ECB) is the only institution able to rekindle growth. «At the moment, the ECB is doing it in an American fashion,» he said, adding that «for Europe, it isn't necessarily the right medicine.» It would be much more important for governments to reform the conditions for companies, but this wasn't happening.
Therefore, the ECB will continue with its loose monetary policy. She had to. But the long-term effects of this policy was far from clear and one day, the underlying problems had to be tackled in any case.
UBS Believes in Germany
The situation was «very serious», Ermotti concluded, because the referendum in the United Kingdom about a continued membership in the EU was quickly approaching. Should the U.K. decide to leave the union, it was of uttermost importance that no major hurdles for the trade of goods and services were introduced. With a Brexit, the danger of further countries leaving the fold was also increasing.
UBS nevertheless believes in Europe and in particular in Germany, despite the problems Ermotti mentions in the interview. The bank is planning a new business unit Europe, which may get its headquarters in Germany. «We will have a decision by the end of the year and Germany might then have an even bigger role to play for us.
