On 24 and 25 November, the Bundesbank held its fifth Euro20+ event in Frankfurt am Main, inviting young people between the ages of 18 and 30 to discuss key economic policy and social issues with ECB President Christine Lagarde and Bundesbank President Joachim Nagel, amongst other guests. 

The current good earnings situation is enabling institutions to further strengthen their capital base and thus their resilience to adverse developments,said Claudia Buch, Vice-President of the Deutsche Bundesbank, at the presentation of the 2023 Financial Stability Review. Even in adverse scenarios, financial institutions should have sufficient levels of capital and liquidity to be able to absorb shocks on their own. Resilience, noted Vice-President Buch, would also require investment in IT infrastructure in order to be equipped to deal with cyber risks.

The German economy is set to recover only arduously from the period of weakness that has persisted since the outbreak of Russia’s war against Ukraine, write the Bundesbank’s experts in the Monthly Report. The industrial sector is still up against difficult conditions, and households’ mood for spending remained subdued in the third quarter. The experts do not expect economic output to see slight growth again until the first quarter of 2024.

In a speech at the European Banking Congress, Bundesbank President Joachim Nagel warned against any premature easing of the tight monetary policy currently in place in the euro area. “According to Bundesbank model estimates, the tightening can be expected to have its maximum impact on economic activity in 2023 already, and on inflation only in 2024,” he said at the event in Frankfurt am Main. In other words, much of the inflation-dampening effect induced by monetary tightening is yet to materialise.

The European Central Bank and numerous Eurosystem central banks are merging their representative offices in Brussels into a shared hub. A team from the Bundesbank will also be stationed at the House of the Euro.

Bundesbank President Joachim Nagel believes digitalisation could provide further considerable impetus for growth and prosperity. “This can be achieved if digital transformation is approached with openness to new ideas and room for innovative solutions,” he said, speaking at the Ludwig Erhard Lecture of the INSM (Initiative New Social Market Economy) in Berlin. Mr Nagel also touched on the current monetary policy stance.

Initial figures from the Federal Statistical Office indicate that Germany’s gross domestic product (GDP) fell by 0.1% in the third quarter of 2023 compared to the previous quarter after adjustment for price, seasonal and calendar effects. The data suggest that private consumption, in particular, declined. By contrast, investment in machinery and equipment provided positive stimuli.

The Council of the European Union has appointed Claudia Buch as Chair of the Single Supervisory Mechanism (SSM) of the European Central Bank (ECB). “I would like to thank the Council of the European Union for my appointment as Chair of the Supervisory Board and for the trust placed in me.  It will be a great honour for me to take on this role at the European Central Bank, Ms Buch said. During her term of office, she will work to ensure a resilient European banking sector that serves the people of Europe.

Real gross domestic product (GDP) is likely to have contracted somewhat in the third quarter of 2023, according to the latest Monthly Report. Weak foreign demand and higher financing costs weighed on the German economy. Tailwinds came from the still robust labour market and steep wage increases amidst subsiding inflation, the economists report.

Two years have been spent exploring the possible design and distribution of a digital euro. Now, the Governing Council of the ECB is moving to the next phase of the project. This will lay the foundations for a potential digital euro. It will involve, amongst other things, finalising the digital euro rulebook and selecting providers that could develop a digital euro platform and infrastructure. However, a decision on whether to actually issue a digital euro will be made at a later date.