00:00How concerned are you about this persistent increase in oil prices, even if there is a peace accord and the
00:07prospect of physical shortages in Europe?
00:14Good afternoon. Obviously, we are concerned on the economic implications of this Iran war.
00:22So we have run certain simulations on potential impacts on the EU economy.
00:30And we see that depending on different scenarios, how protracted the conflict is, how big the oil price shock is,
00:38the negative effect on EU economy somewhere between 0.2 and 0.6 percentage points simultaneously with increased inflation,
00:48which in some scenarios can increase by more than one percentage point.
00:53So essentially, what we are seeing, we are facing a stagflationary shock for European economy.
01:00To compare prior to the war, our economic forecast for EU economic growth was 1.5% both this year
01:08and next.
01:09We are currently not seeing physical shortages of oil and gas supplies, but something we continue to monitor,
01:21notably in a sector of jet fuels.
01:25And obviously, we are engaged in diplomatic efforts to put an end of this war,
01:30to ensure freedom of navigation in Hormuz Strait, also to ease the current supply limitations we are facing.
01:41Well, and when we consider those supply challenges, knowing that not much can be done about that, Commissioner,
01:48absent a reopening fully of the Strait of Hormuz, how much room is there within Europe for some kind of
01:56fiscal policy response?
01:57Do you see the need for that at this time?
02:02Yes, obviously, there is immediate response in the area of energy markets,
02:09including we are working with International Energy Agency on coordinated release on oil reserves.
02:16We are looking also at certain aspects of the design of EU energy market.
02:22In terms of fiscal policy response, what we are emphasizing is that it's important that it remains temporary and targeted.
02:30also does not create incentives for increased demand for oil and gas at the time when we actually need to
02:37decrease this demand.
02:40Of course, you were the prime minister of Latvia, so your viewpoint is unique when it comes to Russia.
02:47It's clear that Vladimir Putin is making a lot of money here, that this war with Iran is actually enriching
02:52Russia and helping to pay for its war with Ukraine.
03:01Well, indeed, Russia, unfortunately, is emerging as a winner from this Iran war because this additional oil and gas revenue
03:11helps to fuel Russia's war machine.
03:14So that's why our message from European Union is very clear.
03:19We need to continue to provide all necessary support to Ukraine and currently at the EU level, we are working
03:28on a new financing package of 90 billion euros for this year and next.
03:33And we need to continue to put pressure on aggressor Russia with a G7 oil price cap with sanctions which
03:42are being applied against Russia.
03:44So now it's not a time to ease pressure against Russia.
03:49We need to put up this pressure to make sure that Russia gets serious also about peace negotiations and stopping
03:57its aggression in Ukraine and stopping in more general its kind of aggressive expansionist policy.
04:05Well, as you referenced that financing package for Ukraine, obviously, the path to that approval has gotten much easier, given
04:12that there is going to be a power change in Hungary with the defeat of Prime Minister Viktor Orban in
04:17the elections over the weekend.
04:19As the new prime minister, as I'm sure you're well aware, Commissioner, says he wants to be more a part
04:24of Europe.
04:24What kind of rebuke did that deliver to Vladimir Putin and the Kremlin?
04:33Well, clearly, that's welcome news because indeed the potential prime minister, Magrera, has confirmed that he is willing to stick
04:44with the agreement we reached as European Union in December last year in providing this support for Ukraine, 90 billion
04:52euros.
04:53So we hope that new Hungarian government will unblock it.
04:57We hope also for unblocking the 20 sanctions package.
05:02So correspondingly, we will be able to speak as European Union and one voice and to provide more forceful message,
05:12both of support of Ukraine and also of pressure against Russia and Vladimir Putin.
05:18Commissioner, there has been talk, and I'm sure you've heard some of these conversations and have been part of them
05:24about creating a standing army for the EU.
05:28Thanks to Russia's aggression, now this war with Iran, does this moment in time hasten that conversation?
05:38Well, I think we are still some steps and time away from European army, but it's clear that European Union
05:46must and is doing much more for security and defense, strengthening our defense capabilities, strengthening our defense industrial base,
05:57also streamlining our defense industries, ensuring interoperability, ensuring complementarity, so all of this is underway because the threat of Russia
06:13is there, not only in a context of aggression against Ukraine,
06:16but Russia is openly talking about invading other European countries, so therefore we need to be very serious about our
06:26defense capabilities and also about strong deterrence against Russia.
06:31And Commissioner, I am sure all of these conversations are happening at the meetings here in D.C. this week.
06:38I also wonder to what extent you're engaged in conversations around the economic threat or benefit posed by artificial intelligence.
06:45Obviously, productivity is part of your purview and artificial intelligence is seen as something that would increase productivity,
06:51but it also could potentially pose a threat in terms of replacing existing jobs.
06:57How are you thinking about it at this time?
07:02Well, from the EU side, we are very much focused on being able to derive the benefits from artificial intelligence.
07:12So we have developed what we call the AI continent action plan, where we are looking at both supply side
07:22of artificial intelligence on AI gigafactories and initiatives like this,
07:26and also on demand side facilitating companies and institutions' uptake of AI.
07:35At the same time, it's clear that we also need to mitigate risks, so that's why we are focusing on
07:42what we call human-centric artificial intelligence.
07:45So we see strong potential for productivity gains, for boost for economy, but we need, obviously, to properly use those
07:57opportunities.
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