The small German city hosting BioNTech

This is an audio transcript of the FT News Briefing podcast episode: The small German city hosting BioNTech

Marc Filippino
Good morning from the Financial Times. Today is Wednesday, January 5th, and this is your FT News Briefing.

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Banks in China are worried about the country’s economy. Travel stocks are shooting up, even though the Omicron variant is still surging, and the EU is pushing to be in on the talks over the Ukraine crisis that are taking place next week. Plus, a small city in Germany is home to BioNTech, and this city wants to hang on to the vaccine maker for dear life.

Joe Miller
Policymakers are slightly concerned the golden egg may go elsewhere.

Marc Filippino
I’m Marc Filippino, and here’s the news you need to start your day.

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Chinese banks are trying to play it safe by snapping up low-risk financial instruments instead of handing out loans. It’s a sign that banks are worried about China’s slowing economy and that there aren’t as many qualified borrowers out there. But Chinese banks have these state-mandated quotas they’re required to meet. So they spent last month buying these low-risk financial instruments. Loan officers say these instruments are the safest way to hit government policy objectives. This comes as China’s president Xi Jinping wants the country’s banks to lend more, especially to medium and small clients. And loan officers told the FT that Xi’s regulatory crackdowns hurt many of their best borrowers and real estate and private education, and that there’s no sign that conditions would improve soon.

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The European Union is demanding a role in negotiations over Ukraine. The US has said that Russia has amassed more than a 100,000 troops along Ukraine’s border. They fear Russia is preparing for a potential invasion. Moscow and Washington plan to talk about the situation next week. The FT’s European diplomatic correspondent Henry Foy says Brussels wants to be there largely because of Russia’s demands.

Henry Foy
What Russia really wants to talk about is security guarantees, with the west writ large over the European strategic arena, if you like — where and when Nato can do military exercises, where and when US troops can be deployed — effectively drawing a line down the continent and saying this side is western Europe, this side is Russia’s sphere of influence, returning to a more cold war set-up. And the EU is saying, well, if you’re gonna be discussing our backyard effectively, we deserve a seat at that table.

Marc Filippino
So Henry, you used to be the FT’s Moscow bureau chief. What might Russia say to the EU’s involvement here?

Henry Foy
Well, Russia has zero respect for the EU. There’s a number of reasons for that, but the primary one is that it believes in nation states. It doesn’t believe in these federal or multinational agencies such as the EU. It says, look, we wanna deal with people who can actually make decisions. That’s Washington primarily. But it’s also Paris. It’s Berlin. It’s Rome. It does, however, make an exception for Nato. It recognises that Nato is a powerful and important actor in the European strategic arena, and so says we’ll have talks with Nato; we’ll have talks with the US, but the EU, I’m sorry; we don’t respect you. Also, we don’t think that you speak with a united voice, and there, I think, Russia has a point. The EU is very divided over its defence posture and in some ways, its relations with Russia.

Marc Filippino
So Henry, considering that these talks are about Ukraine, it doesn’t really have a seat at the table. What does the US have to say about this?

Henry Foy
Well, the US has said stringently and repetitively that there will be no talks about the future of Ukraine that don’t involve Ukraine. Now that’s gonna be hard to deliver on, given that the Russians are insistent that Ukraine will not be a party to these talks. It also raises the question, well, are you gonna talk about Europe without Europe at the table? And I think, to that the Americans will say, well, look, Nato’s at the table, and effectively when we think of European security, European defence and European power politics, which is what is at stake here ultimately, these are tanks and troops on the borders with Ukraine, Nato is the voice that speaks for that. And that also comes up against some problems with the EU because some members of the EU, notably Paris, but other member states, believe that the EU should have more of its own defence and security policy independent of Nato and the so-called “strategic autonomy” push, which is going to be a massive focus of the next six months inside Brussels.

Marc Filippino
Henry Foy is the FT’s European diplomatic correspondent.

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The US recorded more than a million Covid cases in a single day on Monday. It’s the highest daily tally since the start of the pandemic. But despite the Omicron variant surging, travel stock prices rose sharply on Tuesday. The London-listed budget carrier Wizz, British Airways owner IAG and easyJet all closed above or nearly 10 per cent higher yesterday. Investors are standing by the data that says Omicron cause less intense illness than previous strains. Plus, new evidence shows the current vaccines hold up against even severe Covid-19 outcomes. Omicron has caused thousands of flights to be cancelled over the past two weeks, but even major airlines aren’t worried about a hit to their summer peak season.

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What happens when your small city suddenly hits the jackpot? Mainz is located just south-west of Frankfurt, Germany, and is home to BioNTech, and along with Pfizer, created a highly successful Covid vaccine. The jab has made tens of billions of dollars, and some of that money has made its way to Mainz. The city’s tax haul jumped from €173m in 2020 to well over a billion in 2021 because of the vaccine. But the FT’s Frankfurt correspondent Joe Miller says you wouldn’t know that Mainz is sitting on a pile of cash just by looking at it.

Joe Miller
The centre of Mainz is by no means wealthy. In fact, the city is in, the city centre’s in desperate need of revival. It’s suffered quite a lot during the pandemic. It’s quite empty, a lot of shuttered storefronts. And so while, you know, there’s been this great windfall, it’s not like the city itself has prospered for many years.

Marc Filippino
So what are city leaders gonna do with all this money?

Joe Miller
The mayor’s first priority is to pay off the €634m-odd cash debt that the city has before thinking about where else to spend the money. But he did outline, you know, some of the plans that the city has, and that is to essentially make sure that it isn’t so reliant on one single company in the future by trying to attract many, many more BioNTechs.

Marc Filippino
That’s not the only sensible thing city leaders plan to do with their newfound riches.

Joe Miller
There’s another way in which locals will benefit from this, and that is that Mainz intends to sink corporation tax quite drastically next year. At least the part of the corporation tax that is up to city is certain parts of corporation tax in Germany are left to the discretion of cities. And so Mainz will be sinking that, saving businesses space there hundreds of of millions of euros, potentially in the next years. The hope is that more companies come to the area, but also I think the hope, the unspoken point of this policy is to make sure that BioNTech, which is now, you know, one of the most valuable pharma companies in the world, doesn’t leave Mainz. There’s no indication that they will, but I think policymakers are slightly concerned the golden egg may go elsewhere.

Marc Filippino
Now, if you think all German cities are as responsible with their finances, think again. Mainz is actually learning a lesson from another city that was less practical.

Joe Miller
There’s a city called Sindelfingen, which got a large Mercedes plant a few decades ago and with it a large tax windfall. And it famously spent some of its money on installing a marble slab pedestrian crossings, which require upkeep every year, as well as a large swimming pool and other buildings that require a lot of upkeep. So Mainz is making a sort of concerted effort not to do the same thing.

Marc Filippino
Joe Miller is the FT’s Frankfurt correspondent.

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And before we go, just a quick correction. Yesterday, we told you that a jury found former Theranos CEO Elizabeth Holmes guilty of conspiring to defraud investors. We said Holmes could appeal against the verdict in a state appeals court. It’s actually a federal appeals court.

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You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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