The Intersection of European Banking and Politics

Published on
May 21st, 2020
74 minutes

Epidemics and Society: From the Black Death to the Coronavirus

The Intersection of European Banking and Politics

The Interview ·
Featuring Bernd Ondruch and Brent Johnson

Published on: May 21st, 2020 • Duration: 74 minutes

Bernd Ondruch, CIO of Astellon Capital Partners & DCI Fellow at Stanford University, joins Brent Johnson, founder and CEO of Santiago Capital, to break down the current discord within the European Union. Ondruch talks about the current state of European banks, the interaction between European central banks and the ECB, and the further merging of European politics and capital markets. He discusses the bifurcation between northern and Southern European Union member states and sheds light on why on the large discrepancy between the two geographies. Filmed on May 19, 2020.



  • DS
    David S.
    21 May 2020 @ 19:47
    Italy's national debt is around 2.3 trillion Euros. How will a gift from German taxpayers of 200 billion Euros help? Why not gift all Euro countries who are in debt 200 billion of German taxpayers’ money? Under the treat-every-one-the-same Euro doctrine- where is the fairness. What will stop this or the next Italian government from continuing to borrow as much as possible for years? Who in Germany would propose this? Chancellor Merkel is waning in power. France is accelerating debt. Germany is in a recession. Germany’s best markets are in recession – US and China. I just do not see how the German Parliament would be willing to give Italy 200 billion Euros knowing the history. The German could leave the Euro along with other countries to provide cover. The Euro is a political animal. Anything is possible as has been shown in the past. You may be correct. As and aside, it seems to me that peace in Europe has more to do with Europeans working together in NATO since WWII. DLS
    • CD
      Christopher D.
      21 May 2020 @ 21:08
      re 2.3tn, you just need to buy time for the debt that needs to be rolled in the near future. i havent looked up the number but 200bn with a layer of leverage may well do the trick. italy used to devalue the lira when the poor (crony) credit decisions turned into npl.s the euro 'straightjacket' forces discipline but you cant change the culture that easily. look how they bailed out small provincial non tbtf banks in 2018 and pissed off the eu establishment. a lot of paper will be needed to reconcile that cultural difference, or perhaps they dont really want to be part of the club.
    • DS
      David S.
      22 May 2020 @ 05:09
      The ECB's own debt is mounting every day. Only the ECB could restructure Italian debt - who else would buy it at low interest rates. If the ECB restructures Italian debt why not Greek, Spanish and others. The ECB is not a sovereign that can print any amount of money like the US. We will see what Ms. Lagarde can come up with. Maybe everyone will go along with printing any amount of money by the ECB too. I think the long COVID-19 recession will pull the plug on the ECB. In any event buy gold. DLS
    • PV
      P V.
      27 May 2020 @ 10:13
      Agree w/your assessment. Incidentally as of Apr 2020 Italy's debt is 2.55 Trillion Euros.
    • EK
      Erik K.
      5 June 2020 @ 17:43
      this is just the first of the "grants" the facilities have been set up and now ready for a second, third, forth, ... until the "only way out" of the fiscal crisis is supranational government and taxation
  • SB
    Stephen B.
    21 May 2020 @ 23:28
    Denmark is next to leave. They are a "northern country" (ie a net contributor) without Germany's WW2 legacy plus they are outside the Eurozone. Moreover, they are historically a close trading partner of the UK and only joined the EU because the UK did. They also have the most to loose on fishing. I give it less than 12 months.
    • CP
      Curt P.
      22 May 2020 @ 00:59
      Denmark is extremely integrated into Deutschland GmbH. It can't leave without destroying itself. It does not have the geographic options which UK does.
    • EK
      Erik K.
      5 June 2020 @ 17:40
      there you are again Burnage! yeah Denmark doesn't even use the Euro either and its conservative culture doesn't easily tolerate the financial and ideological shenanigans like the EU plays. the politics is more favorable than in Italy too
  • DS
    David S.
    22 May 2020 @ 04:50
    The Euro gave exporting countries a low currency. The Euro gave borrowing nations the ability to borrow a ton of Euros at much lower interest rates. Poor decisions by bureaucrats in Brussels added fuel to the fire. The game is about over. If the ECB does not buy Italian debt, Spanish debt, Greek debt, etc. their interest rate will rise markedly. Mr. Draghi showed Italy this when he did not buy the Italian debt for a short time. I am not sure that anyone is smart enough to solve the Euro problems. Even France is getting into debt problems. I also think COVID-19 will force the issue as we enter a year and a half recession. It is still my opinion that the EU – European Union – is viable in the long run. I see sovereign nations as the basic political system in Europe. The EU will be a confederation of European nations working for the common good, but never a sovereign. I understand Mr. Ondruch’s position as he came of age during the hope of the Euro for peace and prosperity. (Europe’s shining light on the hill.) Unfortunately, the shining light on the hill is an aspiration. Reality is never the same. Europe is a treasure for the whole world. I wish all of them the best through the this most difficult time. DLS
    • wj
      wiktor j.
      22 May 2020 @ 08:54
      I have an idea. Lets ask the European people if they want to continue with the "experiment". I know I would vote against it.
    • WM
      Will M.
      22 May 2020 @ 14:24
      Very much agree. I was very pro EU when it was focussed on trading block and voted to join in the 70s. However Margret Thatcher saw through the attempt to centralize power in Brussels. After the Maastricht Treaty I began to have my doubts. I love the European concept and have always supported the need for a strong united Europe as a deterrence against any resurgence of both German or Russian aggression. However, the left wing leanings and associated EU bureaucratic parphanalia / waste coupled with the disastrous non federalized debt decision with lead to EU break up. The UK is the first, not the last to exit and we are now witnessing the last death throes...... The coming crisis in the EU will dwarf that of 2011/14 and will rip it asunder.
    • RK
      Roger K.
      23 May 2020 @ 08:59
      The EU is too damaged to bother about. Again and again the British public are vindicated. How ironic is that the same people who stood against the tyranny 75 years ago did the same again!! while every sheeple (brain dead/ uninformed ) is criticizing them left and right.
    • DS
      David S.
      24 May 2020 @ 05:07
      wiktor j. - I agree Europeans would vote to keep the Euro hands down. (We are not talking about the EU here.) Especially the young people like Mr. Ondruch. If I were reared in Europe during the same time, I would vote for it too. The problem is not in the voting, it is in the paying and the loss of sovereignty. If America were a confederation of states today instead of an established union, I am pretty sure we would have the same problems in trying to unify. I am completely in agreement that the Europeans are the ones who will decide what they are going to do. The price of the union is not just in the vote. DLS
    • EK
      Erik K.
      5 June 2020 @ 17:33
      No, I would think most wouldn't want to keep the Euro. which countries benefit from the Euro? Not the Eastern Europe, not Southern Europe! mainly Germany and France. that was the complaint back when the EU was expanding and its still a problem. by the way Denmark (also part of the EU) doesn't have the Euro and doesn't want it.
  • PV
    P V.
    27 May 2020 @ 10:20
    As Italian, I appreciate mr Ondruch optimistic opinion re Germany's commitment to the EU project. He's however wrong re Italy. Covid-19 has gravely deteriorated Italy's position and the debt is on route to hit 160% of GDP by the end of the year. Furthermore, given the status of Italian politics & opinion, the rate at which such debt will increase over the next years will only accelerate as the cost of debt will continue to greatly exceed GDP's growth. Unless the ECB continues to buy all Italian debt, the Eurozone is going to have to be restructured.
    • Bo
      Bernd o. | Contributor
      28 May 2020 @ 14:16
      What do you make of the Merkel/Macron plan.. Italy is the largest beneficiary. And it is grants, not loans. Xmas comes early this year
    • EK
      Erik K.
      5 June 2020 @ 17:28
      those grants aren't disbursed until 2021. that's too late for Italy.
  • AT
    Andrea T.
    29 May 2020 @ 13:14
    "Why Italy doesn't tax its people properly?" Cause you know, private wealth and public wealth are different things.
  • TP
    Tedd P.
    26 May 2020 @ 12:49
    If the goals really are peace, open borders, and free trade, the EU should drop the Euro and switch to Bitcoin.
  • FG
    Flavio G.
    24 May 2020 @ 12:43
    Great interview, very informative. There is one point in which I totally disagree with Bernd. That is the EU as a tool for peace within the EU. The reason why there are no more wars in Europe are two: 1) Studies suggest that young countries go to war, old ones don't. Demographics in Europe play an extremely important role in their attitudes towards conflict. 2) Hard to go to war between NATO members. Let's keep in mind that the EU as we know it today is a recent product of 1992, with much looser versions of it prior to that.
  • DT
    David T.
    22 May 2020 @ 23:14
    There is no way Italy or any other country will leave EU or Euro zone. UK that wasn't part of Euro zone and has strong economy compare to Italy, still is not able to leave EU. Chances of any other country with its current state of economy leaving is equal to zero. They will be forced to unite their fiscal and monetary policies eventually.
    • DS
      David S.
      24 May 2020 @ 04:54
      That may be the most likely outcome, but there are many more problems for them to face. The EU will hold together. DLS
  • DP
    David P.
    21 May 2020 @ 07:38
    Very interesting and nuanced german perspective. Thanks gentlemen.
    • RK
      Rafal K.
      22 May 2020 @ 19:56
      It's just a selected, connected, well off singular German perspective. I imagine the perspective of average East German differs..
  • CP
    Curt P.
    21 May 2020 @ 13:19
    EU project is not about 'peace'. Why is there never anyone interviewed on RV who understands geopolitics?
    • JL
      James L.
      21 May 2020 @ 14:04
      Very normal German perspective.
    • MT
      Mark T.
      21 May 2020 @ 20:46
      I think you need to go look back in history. The EU project was always about keeping Germany and France from going to war with one another. Since before Napoleon, the various German kingdoms were constantly being invaded and occupied. Since 1870, Germany was the super power in Europe and invaded France 3 times. A United Europe, where France and Germany gave up their ability to produce weapons of war has been in the works since at least 1946. The EU is simply the incarnation of those efforts.
    • CP
      Curt P.
      21 May 2020 @ 21:02
      Mark T. - you miss the big picture. Read Karl Haushofer
    • MT
      Mark T.
      21 May 2020 @ 21:15
      Curt P. You mean this guy: Karl Haushofer, the man who popularized the term Lebensraum (living space), has been accused of many misdeeds. In 1945, US Chief of Counsel, Sidney S. Alderman, writing for Justice Robert H. Jackson at Nuremberg, wrote that “Haushofer was Hitler’s intellectual godfather. It was Haushofer, rather than Hess, who wrote Mein Kampf…” (xi).
    • DS
      David S.
      21 May 2020 @ 21:28
      Maybe very normal German political perspective, especially Chancellor Merkel's party . How deep do you think it actually runs in the voting public? Enough to bail out Greece, Italy, Spain, Portugal, etc.? I do not know. DLS
    • CP
      Curt P.
      22 May 2020 @ 00:37
      Mark T. - just read Mac Owens paper for the US Naval War College entitled In Defense of Classical Geopolitics . And suspend your ideological blinders for a while.
    • CP
      Curt P.
      22 May 2020 @ 01:02
      James L. - yes, the response is typical German response when speaking to an American. Everyone knows Americans are historically illiterate.
    • MT
      Mark T.
      22 May 2020 @ 18:02
      @Curt P. We're all aware of many American blindspots and their dreadful education system. But generally speaking whenever someone holds up a Nazi as someone to listen to or take wisdom from, that person's opinion is discounted tremendously if not altogether. If you'd like to discuss historical geo-politics without reference to the merits of Nazi philosophy, we're all ears. If you think Nazi philosophy had any credence, you are written off.
  • JL
    James L.
    21 May 2020 @ 14:03
    This was SO interesting, RV has been absolutely KILLING it in the last 2 weeks
    • SS
      Shanthi S.
      22 May 2020 @ 11:43
  • DF
    David F.
    21 May 2020 @ 23:18
    I would love to hear what Brent Johnson told Bernd Ondruch about gold. Is that available anywhere?
    • DS
      David S.
      22 May 2020 @ 04:15
      Probably the same thing Mr. Johnson told us in his RVTV presentations. Check the old videos. DLS
  • PQ
    Pascal Q.
    22 May 2020 @ 00:32
    The peace argument is overstated, Nato occupying Germany till today and Frenchs and Brits obtaining nukes brought peace. Japan which had similar position than Germany in Asia was also in peace like Germany since then.
    • CP
      Curt P.
      22 May 2020 @ 00:56
      EU is not about 'peace'. It's about unity for two reasons: 1) US likes it to prevent Russia reacquiring its old colonies 2) Germany/France like it to create independent pole counter US or Russia The world is organized into Empires and vassals. EU (and Euro) is an attempt to create a non-vassal Europe.
  • DF
    David F.
    21 May 2020 @ 23:20
    thank you for the transcript . ( adds a lot after the recorded discussion.)
  • SB
    Stephen B.
    21 May 2020 @ 22:43
    Cool Airstream! Great guest too.
  • NR
    Nathan R.
    21 May 2020 @ 21:41
    EU = Hysteresis Rex Curious what happens as the over 50s age out...
  • VS
    Ville S.
    21 May 2020 @ 20:47
    A great pleasure to listen to!
  • rr
    rlw r.
    21 May 2020 @ 17:12
    Yep, another good one thanks B & B
  • se
    steve e.
    21 May 2020 @ 16:32
    Excellent interview. Interesting about average Italian family net worth.
  • MC
    Michael C.
    21 May 2020 @ 13:15
    That was great. Best opinions on Europe are always from Europeans. It's their backyard. Please keep bringing guests from diverse backgrounds.
  • PU
    Peter U.
    21 May 2020 @ 12:20
    good interview
  • NF
    Neal F.
    21 May 2020 @ 12:09
    Enjoyed the insights on client expectations diverging from short term volatility and opportunities. Excellent interview by both professionals.