00:00The European Union is looking for ways to secure funding for Ukraine for its military
00:12and budgetary needs going into 2026 and 2027. One of the options that is being floated
00:18is an unprecedented reparations loan pegged to Russia's frozen assets. But the proposal
00:23comes with questions and a lot of strings attached to it. To debrief, we're joined by
00:28Pascal Donoghue, head of the Year Group. Sir, thank you very much for joining us on Year
00:33and it's always great to see you. Of course, this idea, the reparations loan, there's never
00:38been a financial operation, not even Germany after the Second World War was made to pay
00:42reparations in this way. What makes you think this is going to work?
00:46So firstly, Europe and the European Union have been at the forefront of supporting the people
00:51of Ukraine and their struggle for freedom. Through various financial instruments, we've
00:56made available very substantial financial support so far. And as you acknowledge in your
01:01question, the debate is now underway here regarding what will be the next way in which this will
01:06be done. We're awaiting a formal proposal from the Commission with regard to it. Our Prime
01:12Minister has discussed it here a number of weeks ago. And one way or the other, we will
01:17find a way of continuing to support the economy and the people of Ukraine and the debate regarding
01:24that. And the discussion in relation to us is now firmly underway.
01:28Because one way or another, this is going to happen. However, there are many options,
01:32not a formal proposal, but there are options that we know are being considered. And some
01:36is just straight cash, bilateral agreements, going to markets and tap markets together for
01:41joint debt. Some still argue the best way to do it is the frozen assets. That is really
01:46the best option on the table. Is that your view? I know it's a difficult question as head of
01:50your group, but is that your view? There are strong merits in relation to that proposal,
01:54but there are also trade-offs and issues that are being considered. At the heart of how we've
01:59been able to support the people of Ukraine and their security needs, is we've also managed to
02:04maintain the stability of the European Union and our financial stability. And that is why I go back
02:10to the earlier point that I made. We have been at the forefront, as we should be, for reasons of
02:16choice and necessity in supporting the people of Ukraine and their freedom and their security,
02:22and Europe will continue to do that. And this is obviously a leading option regarding how it will
02:28be done. And when we receive a formal proposal from the Commission, the progress and debate in
02:34relation to that will intensify. But I'm clear on what the end point and what the objective is,
02:38and that's what we're all striving to, to find further medium-term funding, and even sooner than
02:44that, for the people of Ukraine and their security.
02:46And just a final point. Of course, you have discussions with your Belgian counterparts. I've
02:51been told by diplomats that their concerns are very fair, but the requests they're making,
02:56they're too maximalist, because there is no zero risk operation. Do you understand where they're
03:02coming from? And do you think ultimately you'll find a form of compromise where everyone feels comfortable?
03:07I entirely understand the concerns that our Belgian colleagues have,
03:11their Prime Minister and their Finance Minister has put forward. I understand where they are coming
03:16from. And their view, their issues are a really important ingredient in the process that is underway.
03:22And all I would say is, as very important as this route is, and it's a route that has been thoroughly
03:27explored, we should not lose sight of all of the financial support that has been made available so far,
03:33and the different avenues that are being explored to ensure that it's continued.
03:37And now you're back for a new term. There's a lot of expectations around the Eurogroup this time
03:44around. I've heard many times the Eurogroup has to go back to its big days, where it really served to push
03:49through breakthroughs in Europe. How do you see your new role? And also, what's top of your agenda now?
03:54What's the one thing that you say this cannot wait? The digital Euro, number one. Number two,
04:00how we continue to maintain financial stability through the coordination of budget policy. And
04:06number three, the work that we have underway regarding investment and savings union.
04:11And you mentioned the digital Euro. I'm going to ask you a question, perhaps if you indulge me. There's
04:14a question that I keep asking myself, which is the European Central Bank, and you yourself,
04:20you just said, it's very important that we get the digital Euro. But when you look at the US,
04:24they have issued an executive order in which they say, no, they do not want to push for one,
04:29and they do not want to promote one. So if they think it's a risk, why are we saying it's European?
04:34It's a good thing.
04:35Well, it's up to the US to determine what is the right way of developing their currencies,
04:41or currencies within their own regime, and they will make a decision in relation to that.
04:47From our point of view, I think there are really two strong merits in relation to the development
04:51of the digital Euro. First, that it will be a spur then, a catalyst for the innovation that we need
04:58regarding a proper European payments infrastructure in this area. And second, I have seen how the
05:05physical Euro is an economic force for integration and ultimately for long-term stability. I believe the
05:13same will happen with the digital Euro. The US have made their choice. That is entirely their right.
05:19And it's up to us here in Europe to determine what we believe is the right avenue for us. And that's
05:24what we're doing.
05:25And of course, I also want to ask you about progress made, but also progress to be made.
05:31The Drag report, it has been talked about now for a year, some believe only 20%, and that's really the
05:36upper estimate has been accomplished. Do you worry there is a sense now of fatigue? Do you worry that there's
05:43a sense that it's very difficult to turn this from a report into reality? And how do you accelerate this
05:49process? Because there is criticism that this report is not being taken as seriously as it should be.
05:54I see no evidence of fatigue, given the circumstances that Europe is confronting.
06:00We have to explore all the avenues that are there to accelerate a rate of growth that is higher than
06:08many predicted, but not high enough. And I can see very clearly, while of course compromises will have
06:14to be found. Creativity will have to be utilised. I can see very clear recognition from all governments
06:21within the European Union of the scale of challenge and opportunity that we are now confronting,
06:26and the need to do more at a faster pace than we have done before.
06:31And what do you make of, of course, the criticism that the Drag report came out a year ago,
06:35he said this is existential, is radical change or slow agony. And some would argue a year later,
06:40not only the implementation is slow or slower than it could be, but also Europe is in a much
06:44weaker spot, meaning a trade deal that was very imbalanced, 15% tariff, expenditure to NATO, 5%
06:53additional spending. There is no definitive path work in terms of how defence spending is going to
06:58be carried through. The idea of joint debt still is a debate that nobody wants to touch. What do you
07:02say to those who argue, well, it's been a year, not only we're not doing the job, it's actually worse.
07:06That we've revised our growth forecast up for the Euro area over the last number of weeks,
07:12that all of the predictions that many offered with complete certainty regarding the economic
07:18effects of the war of Ukraine leading the economy of Europe into a recession, not only have they not
07:23materialised, we've managed to maintain stability, that many parts of the European Union have record
07:28levels of employment, and that I am seeing a very comprehensive effort within the European
07:34Union to get what I believe is the correct and appropriate balance between the maintenance of
07:39medium-term financial stability and investing in our future. Now, none of this is to say for a moment
07:44that we don't have a huge amount of work to do, and I've been at pains in our interview to acknowledge,
07:49Maria, that we actually need to go faster in what we are doing. But what I would respectfully make
07:55the case for is the foundation of stability that Europe and the European Union is creating at the
08:01moment has real value. And I believe we need to make the case for it, we need to make the case
08:07from an economic and from a security perspective.
08:10And the impact of the tariffs, just very quickly, have you digested what that is going to look like
08:16for the real economy? Would you argue the worst is over? Or do you still need time to see how this is
08:20going to manifest? Because if, I mean, they triple, it's a significant amount.
08:25Well, maybe if I just speak as Finance Minister for Ireland with regard to that at the moment,
08:29there's little doubt at all that the impact of tariffs is going to have an effect on the medium-term
08:35growth outlook for the Irish economy, and we've already acknowledged that. But then what falls
08:40to us then as political leaders with agencies, as a group of democracies, is to look at what are the
08:46decisions that we can take that over the medium-term are capable of offsetting that. In the short-term,
08:53the hit, the impact has not yet been as high as many would have expected. That is in no small part
08:59due to the work the Commission have done. But of course, for an open trade-intensive part of
09:05the world as we are, when the rules of trade change, it has an effect. And it's now up to
09:10all of us to respond back and to look after ourselves in a different way.
09:14Do you still believe in hindsight this deal was the best decision? You still see a lot of
09:18pain in Brussels. A lot of voices will still think we should have been tougher.
09:22From a European perspective, it is an agreement that I support. It is an agreement that with all of the
09:30other pressures and issues that we must manage and must be aware of, I believe President van der
09:35Leyen and her team did the best job that was possible. And now we know where we stand. It's
09:41incumbent on all of us, as I said, to manage the risks around us and to do all we can to optimize the
09:48upsides and find the sources of growth. And I can see the efforts of many, if not all,
09:54governments in the European Union at the moment to do so.
09:56From what I hear you're saying, growth is going to come from Europe. It's only Europeans that are
10:02going to have to exponentially increase our growth. It's not going to come externally.
10:06So I see it maybe just slightly differently. I see the responsibility for European growth,
10:12first and foremost, sitting for us here in Europe. And what we can do with the single markets is more
10:19of an ingredient in that in the future than maybe it has been in our past. But external engagement,
10:26trade with the rest of the world will continue to be an indelible part of our future because we're
10:31so trade intensive and we're so open. And that is why, as I said a moment ago, it is the relationship
10:38that we have with the US and the efforts that we have now to restructure, to develop new trade
10:44agreements with the rest of the world and make more of the trading relationships that we have in the
10:49past. That diversity is something that we'll need to make more of. And just lastly, on the
10:54Savings and Investment Union, what progress do you see going into 2026?
10:57I see two areas of progress being made. I see at national level, an acceleration of activity,
11:04which is happening regarding what can be done to support the development of capital markets on a
11:10national level. And I see then at an EU level, I see the work with regard to securitisation
11:17accelerating, potentially being complete. And I see the efforts that are being underway to deal with
11:24issues regarding market infrastructure, being brought forward by the Commission and all of us
11:29working hard on them. But this is a project that from my point of view, as a participant in us, momentum
11:36is very steadily building. But of course, our challenge is, even though we are growing, we're not
11:41growing at the pace or speed that others are. And that is what has to motivate us in our work month after month.
11:48And that's going to change. Well, Pascal Jonaghy, thank you so much for joining us on Year on Year.
11:52It's always great to see you.
11:53Great to see you.
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