Toespraak minister Heinen bij de halfjaarlijkse vergadering van de IIEB

Toespraak | 14-10-2024

Dear members of the IIEB,

Thank you very much for inviting me to speak here today.

Here in the Netherlands, the public and private sector are often seen as two separate worlds. Which I don’t believe in.

The public sector needs a strong private sector.

And we need to work together to face the challenges coming our way.

Today I’d like to share my views on some of these challenges.

And by doing so, I’ll try to explain some of the policy choices being made.

I believe that for all of us here today,

our views are greatly shaped by our education and our careers.

For example, I started as an engineer, in Information Technology.

After which I got my Master’s degree in Economics and International Relations.

Then I began my career at the ministry of finance.

Went into politics. Became a member of parliament.

And now, I am standing before you as the Dutch minister of Finance.        

Meeting monthly with my European counterparts in Brussels.

Today I want to bring all these fields of expertise together.

Share with you what we are talking about at the European level.

And discuss a number of emerging and interrelated trends that we are seeing.

Which we believe will impacts the financial sector to a large extend.

Let me start with one trend we are all seeing: a rapidly changing world order.

The international situation is hardening.

And global tensions are increasingly visible in the economic sphere.

Take the invasion of Ukraine,

which had major consequences for our European economies.

It led, for example, directly to a spike in energy prices,

and after that to an overall rise in inflation and as a result, in interest rates.

Inflation has a direct impact on purchasing power of our citizens.

It impacts their sense of security. And it drives political voting behaviour.

We have seen it in the past. And we are seeing it now.

Inflation is an important factor in political change.

And it is often underestimated.

Recent IMF-studies also shows that these global tensions are causing economic fragmentation, which means more protection, less investment and less trade.

For example, the number of trade sanctions has tripled in just four years.

From one thousand in 2019 to three thousand in 2023.

These developments make us rethink our economic dependencies.

Such as on energy, on raw materials and above all, on technology.

I would like to zoom in on how the combination of politics,

economics and technology will impact business environments.

Because I also think this is often underestimated.

First of all, Technology increasingly is a tool in geopolitical conflict,

which can directly impact specific businesses sectors.

• You have seen this with respect to Chips, which impacted a Dutch company like ASML. And also led to European initiatives such as the Chips Act.
• You have seen this with respect to Telecom, which impacted European communication companies. As a result of banning Huawei equipment.
• And you can now see this with respect to Automotive companies, which lead to import-tariffs of foreign cars, which are basically computers on wheels.

Technology also has the protentional to disrupt entire industries,

such as the financial sector,

as it is facing competition from Big Tech and Fintech companies,

and is tackling new challenges with respect to cyber security.

At the European level, strategic autonomy is high on the agenda,

which I believe should include the financial sector.

Here, the public and private sector need to work together to face the main technological challenges. Which are:

• The need to reduce dependencies
• And the need for resilience.

Let me start with our dependencies

To a large extent, the financial sector is dependent on non-European parties.

And looking at the future, this probably will increase even more.

Take generative AI, decentralised finance and cloud computing.

These developments are all being driven by US tech companies.

Almost all European banks use the same cloud providers.

And Big Tech is now also dominant in payment services.

Including card payments and electronic payment solutions.

Not to mention crypto currencies, which of course to a large extent are pure speculative products, but please do not underestimate the impact that this technology will have on our economies and strategic dependencies.

The more we fall behind, the more wealth we lose.

But also, the more dependent we become on third-party standards and values.

Then on the need for resilience.

State actors and cyber criminals are trying to undermine our society.

We know this, and we see this.

This also should not be underestimated.

The use of strategic cyber-attacks is becoming more common.

And the financial sector is particularly receptive to cyber-crime.

The number of cyber attacks on banks has almost doubled since before Covid.

This is not limited to the hacking of personal data.

It also includes attempts to paralyse critical banking functions.

Which can endanger our financial and economic stability as a whole.

The recent CrowdStrike outage showed us how vulnerable our economy is to digital disruption.

So, what to do about this?

Well, first of all,

I think it is important that we are aware of these challenges we are facing.

I also see great initiatives already within the financial sector.

For instance, European banks are working together on the European Payments Initiative as an alternative to American Big Tech.

This initiative now uses the Dutch iDEAL system.

A great innovative system.

Second, governments can create level playing fields or work together with private parties setting industry standards.

For instance, with respect to cloud providers, there are great initiatives such as European Gaia-X initiative. And with respect to protecting market players, we now have the Digital Market Act.

Third, governments could provide an infrastructure which allows private parties to come up with new products.

For instance, with respect to digital currencies.

Which as I mentioned, I believe is one of the major new developments, and will be disruptive in ways we cannot imagine right now.

To prevent new dependencies on Big Tech or, more specifically, on foreign governments, we are now working on a digital euro,

so public money retains its role in an increasingly digital economy.

And we maintain autonomous on something fundamental: our currency.

And of course, this digital form of our single currency should function alongside commercial means of payment, with all the guarantees of privacy, non-programmability, maximum holding limits, low infrastructural cost, etc.

Fourth, as far as resilience is concerned, the EU has set the bar high.

None the least through the Digital Operational Resilience Act, DORA.

Which is important legislation, but as I understand it also has a large impact on your businesses as well.

Besides this, of course much more remains to be done.

And I can talk about this topic for hours.

But I am not here to lecture, I am also here to listen.

I am very keen to hear how you see these developments.

And to hear in what areas we need to strengthen our co-operation.

There are off course a lot of other topics, trends and challenges to discuss.

Such as the importance of economic growth, the need to further integrate European markets, the Banking Union, the much needed Capital Market Union.

And of course, related to that, the Draghi-report,

which now is on top of the European agenda as well.

Also in terms of boosting European strategic autonomy and emphasising the importance to catch up in terms of technological development.

But for now, I’ll stop here.

Once again, thank you very much for having me here today.

And I am looking forward to your questions.

Which of course can also be related to other topics as a discussed here.

Thank you very much.