Studio guest: Jörg Rocholl

He is business analyst at the European School of Management and Technology. DW-TV: I'm joined by Jörg Rocholl of the European School of Management and Technology in Berlin. Do you understand why Siemens wants to invest into a country that's facing insolvency? Jörg Rocholl: First of all one has to consider that the investment horizons in the steel industry are very long. So this means that the decision to really establish a factory in the Ukraine a couple years ago so nobody could really foresee at that point in time that we are now in an economic crisis. So it just takes a lot of time. Nonetheless, it's a real option for Siemens to make this decision even if it knew there was an economic crisis because they can now serve as a shelter in the storm, meaning they have a competitive advantage over local competitors that do not have the financial backing of the headquarters as Siemens has, where the money is coming from international capital markets. DW-TV: But still what sort of risks are involved. Surely there are some. Jörg Rocholl: Certainly there are risks and certainly there are huge risks in this environment where it is not quite clear what the economic but also maybe the political stability in the Ukraine looks like. DW-TV: Now, we've heard of quite a few companies now recently going bankrupt--but it is still quite unusual when you hear something like that about a whole nation going bankrupt--how exactly does that work? Jörg Rocholl: Well it first of all means that the payment obligation that the country has and Argentina is one example in 2002 that they cannot meet those payment obligations anymore so this investors who invested in bonds for these countries will not receive their money back and thus there is a natural default of these countries." DW-TV: And who's affected in the country, the population? Jörg Rocholl: Certainly, it just means that the state budget will not be sufficient to generate enough surplus to pay back debt obligations from abroad. But it certainly then also means that any type of social subsidy and investments into education, into infrastructure will certainly be cut down, thus they will immediately affect also the population in these countries. DW-TV: You just mentioned also Argentina, I mean there has to be and there is a way out of such a crisis--the IMF is in high demand these days, handing out loans to various countries. Ukraine is one of them. What happens with the money? Jörg Rocholl: Well the money is immediately used for the purposes that I just described before. This means it just first is needed to balance the state budget to keep pension systems for example going, social security systems going, but also to invest in education and infrastructure. DW-TV: But what if a country fails doing all of that? Jörg Rocholl: So you mean if they fail to keep the payments going? Well certainly this will lead to immediate political unrest and this is what we see now in the summit of foreign ministers in the European Union who meet today to discuss exactly this--how to help a country that gets into this deep economic trouble and how this may also affect the political situation in the country. DW-TV: So obviously the rest of the European Union for example would be affected if a country like Ukraine or Hungary did go bankrupt indeed? Jörg Rocholl: Absolutely, and this both from an economic and a political perspective--European banks are heavily exposed to the climate, economic climate in Eastern Europe so they would be affected if debt would not be repaid at the same time also from the demand perspective, German exports, European exports into these countries could not work at some point and nonetheless, further more, we discussed the political part that is also quite critical. DW-TV: Okay, thank you very much Jörg Rocholl, for joining us. (Interview: Monika Jones)

DW-World | April 28, 2009

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