“As of today I have something in common with Nouriel Roubini, which I never thought I would have,” Treichl said during a panel organized by Erste Bank in Vienna.
“I believe that it’s going to stay difficult, that markets are a little bit ahead of the developments that we actually have in Europe and in our [Central and Eastern European] region and that [2013] will be a year when we will start, much more than in the past, to see the difference between the good and the bad.”
He noted that despite the low interest rates, economic growth has remained weak and the political situation was tough because of high uncertainty, while the regulatory environment was “difficult.”
“We are by no means at the end of what started in 2008. We still live in insecure times and I believe these times are perfect to show who is really good and who is not as good.”
Among banks, only those that have the liquidity and capacity to lend to the companies that will bring future growth will be the ones for which things will get better this year, Treichl said.
But regarding the bad debt situation in CEE, where non-performing loans have grown dramatically since the onset of the financial crisis, “we have the worst behind us” and the situation will improve in 2013, he added.
Countries in the European Union need to do more to support entrepreneurs, “create respect for people who want to be entrepreneurs” and reduce the amount of regulation that prevents growth and breaches the principles of the free market, Treichl also said.
“I don’t think that Europe realizes the importance of fostering entrepreneurship. Do you see a movement in any country of Europe to make starting a business easier? To bring back the flow of talented people who are leaving?”
The CEO of Erste Bank said Europe’s famous social security safety net had made the continent a “nice place to live” but it partly acted as a brake on entrepreneurship because it was “making it too easy for people to live easily without being an entrepreneur.”
EUROPEAN UNION NO MORE?
Different regulations imposed by countries belonging to the European Union upon the banking sector in the wake of the financial crisis to limit the flows of capital across borders are contrary to the EU’s principles of free flow of goods, services, capital and labour, he said.
“During the financial crisis, a lot of countries, actually all countries in Europe, have set up fences in order to safeguard their local financial markets from the influence of the financial crisis,” Treichl told Emerging Markets after the panel.
“Europe was here to help borders fall, but in terms of liquidity and capital, during the last four years borders were set up again.”
“This is being done in Germany, this is being done in Austria, this is being done in the Czech Republic, it’s being done everywhere.”
In Western European countries, local regulators have imposed measures to ensure that banks finance the operations of their subsidiaries in CEE domestically rather than with money from the Western parents.
In their turn, Eastern European countries have imposed prudential measures to prevent sudden flows of capital back to the Western European parent banks.
“If it’s in time of financial crisis, it’s understandable, but if we want to have a Europe in an economic sense, this has to stop again,” Treichl said.
“Every country has a lot of abilities to prevent banks from moving funds outside of the country. There is nothing illegal that has been done, it’s just completely against the spirit of Europe.”