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00:00Can you explain to us what exactly your understanding is of the threat that has been put forward now by
00:04Donald Trump,
00:04why it's coming now and what the European response should be?
00:07First of all, I'm delighted to be joining you, Oliver.
00:09And needless to say, I think this discussion that is currently taking place is quite unnecessary and quite unfortunate.
00:17The last thing the global economy and the European economy needs right now
00:19is an extra layer of uncertainty on top of what is happening in the Strait of Hormuz and in the
00:24Middle East.
00:25And needless to say, our side of the bargain has been fully met,
00:29has been fully kept with regards to the joint statement commitments
00:31and the legislative timetable which we had in order to pass them.
00:35We have met all prerequisites in this equation.
00:39So in this regard, our number one choice always is dialogue.
00:42We want to be a predictable partner in the international economy.
00:45We believe in the transatlantic relationship.
00:47We consider it to be important, existentially important for the world.
00:51But having said this, if there is a deviation from what we have agreed upon,
00:56obviously all choices will be on the table, all options will be on the table.
00:59So that is to say that retaliation is on the table.
01:01There's also potentially suspending the deal, which we saw the first time
01:04when there were terror threats made on Greenland.
01:06But is there also an alternative in which they accelerate the ratification process?
01:09This has been one of the big frustrations from the United States,
01:12is that till to this day, despite the fact that the trade deal was agreed to in July,
01:15it has still not been implemented.
01:16As I said, dialogue is our number one choice, our number one option.
01:21And we want to keep our side of the bargain.
01:23The legislative timetable is well known on every occasion at the European level.
01:28So we're hoping to meet that because, as I said,
01:30we want to be predictable partners and predictable players in the international economy.
01:33So that's option number one.
01:34What I'm saying is, if we deviate from this,
01:37if an extra layer of uncertainty comes into the table practically,
01:41not only in terms of vocabulary,
01:42then obviously we will have all options available.
01:45But we're hoping not to reach that point
01:47because it's existentially important to coordinate, collaborate,
01:50and keep an open channel of communication with the United States.
01:53And is the trade deal implementable,
01:54despite the fact that there are still these steel and aluminum tariffs
01:57that some of the EU are saying are in contravention to the deal?
02:00Is that still an implementable deal from your perspective?
02:02I mean, we want to ratify the deal that has been defined in the joint statement.
02:06So the idea is that everything shall be implemented.
02:09That was the plan all along.
02:11But having said this, it's quite problematic.
02:14Let me repeat the original point to add layers of uncertainty right now
02:17because there is a dire impact in the global economy
02:19from what is happening in the Middle East.
02:21You say that the legislative process in Europe is well advertised,
02:23but is the legislative process and the speed at which it operates,
02:25is that a problem?
02:26Generally speaking, we need to speed up.
02:28We know that.
02:28But having said this, there is predictability on our end.
02:31And I think that predictability at the end of the day,
02:33be that the tariff discussion or be that our legislative process,
02:36is far more important than the processes and the policies themselves
02:40from the standpoint of the global economy.
02:42You need to be a predictable player.
02:43And we are.
02:44And I think there is a premium in being a predictable player.
02:47And something that has been unpredictable is the price of energy recently.
02:49And this is going to be one of the main topics for you.
02:51I'm speaking to finance ministers a little bit later today.
02:53Can you give us a sort of your appraisal of the severity of this energy shock here in Europe?
02:57And we've heard from the actually Central Bank Governor of Greece saying
03:00that recession is a real risk here in Europe.
03:02How big of a risk is recession in Europe?
03:04Well, there is a stagflationary tendency.
03:05That's obvious.
03:07Our projections of growth are downwards looking.
03:10Our projections of inflation are upwards looking.
03:12So in this regard, the tendency is stagflationary.
03:15But I will agree with Christine Lagarde that we're not yet in the 1970s perimeter.
03:19Obviously, this is a function of many things that can happen in the Middle East.
03:24It's a function of the duration of the crisis, the severity of the impact vis-Ã -vis the energy assets
03:29once the straits are fully open as before in the ex-ante equilibrium.
03:36And finally, it's also a function of the status that we will see in the Strait of Hormuz after
03:40and what type of integration you will see in the risk premia.
03:43All governments are taking measures.
03:45The European Commission has advanced a perimeter of acceptable measures
03:49which should be targeted, tailored, and by definition, temporary.
03:53The IMF is also joining us today to make an assessment of those measures.
03:57Also, from the standpoint of what worked and what didn't work in 2022.
04:01And I want to get into some of those measures.
04:03But first, I'd like to just get your appraisal at the top line.
04:05When you think about the sort of trade-off between rising inflation, diminishing growth in Europe,
04:09which is a bigger threat, do you think, to Europe at the moment?
04:11I don't think we should be ranking them.
04:12I think both are threats which exist on the table.
04:15And again, we have uncertainty in this equation.
04:16And that's the biggest problem, I would say.
04:18We have various scenarios which we're studying.
04:20Europe is much better prepared compared to 2022 with regards to those scenarios.
04:24I mean, if you look at energy, we're more diversified than 2022.
04:28We have invested more in grids than 2022.
04:30Should we do more?
04:31Yes, we should do more in this regard.
04:33And part of your function today in having the conversation with these finance ministers
04:36to appraise what measures that have been taken, that have been functional, which have been less functional.
04:41Do you have an idea of what has worked well in sort of dampening the effect of this energy crisis
04:44and are appropriate at the national level?
04:47And also, what needs to be done at the European level?
04:49We've heard some dissatisfaction from some leaders relaxing or having some flexibility on debt rules, for example.
04:53Is that on the table?
04:54Well, first of all, the measures that have worked are the ones that are most targeted,
04:59that fit the perimeter that I described before, targeted, tailored, and temporary.
05:03And we know that we should be helping those who are most in need.
05:06So those are the measures that worked best in 2022.
05:08They are the measures that work best today.
05:11Most countries are implementing them at the moment.
05:13We should implement more of them should the crisis persist.
05:16Now, what should be and what shouldn't be at the table at the European level?
05:19I think that right now, what we're doing is the proper, I would say,
05:23we have a proper analysis of the state of play.
05:25We have the proper response at the European level.
05:27Why?
05:27Because you don't want the energy crisis to fuel a fiscal crisis.
05:32At the end of the day, we have new fiscal rules in place.
05:35Generally speaking, the debt levels, the deficit levels, they are higher compared to 2022.
05:39And we have already had the escape clause with regards to defense.
05:43So all of those things need to be taken into account.
05:45But having said this, the European response should be a function of the severity of the crisis that we have
05:51in front of us.
05:52We have a different discussion if the crisis persists for another two months or three months,
05:56or if the crisis ends in the next couple of weeks.
05:58So if I understand you, at the moment, you don't think it's appropriate to extend, for example,
06:01the escape clause to the energy shock right now.
06:04But that is something that could be a conversation the next couple of weeks and months.
06:07What I can tell you is that at the European level, the conversation will evolve as a function
06:11of the severity of the crisis that we will have in front of us.
06:14But given the state of play, the European response is the appropriate one.
06:17And I'd like to get your appraisal of something that we've seen that's sort of outside of your remit,
06:20but the consequence it will have for fiscal policy.
06:22The United States says that it's going to be withdrawing 5,000 troops from Germany.
06:26Obviously, this puts more sort of pressure on spending and defense at the European level
06:30at a time with, as you mentioned, you know, there is much more fiscal strain.
06:33Is this going to reanimate, do you think, a conversation about how to pay for all this defense spending
06:37and reanimate a conversation about joint debt for defense?
06:39No, we have already taken measures with regards to financing defense.
06:42I think this is existential.
06:45This is Europe's moment of truth, in a way.
06:47We need to decide whether we're going to be a single market or a global power,
06:52what type of status we will seek.
06:53And I think we should seek the latter.
06:56The Russia's invasion in Ukraine manifested the need for that.
07:00Defense is a common European public good.
07:02And in this regard, we already activated the escape clause.
07:05Greece was amongst the first countries to sign the activation of the escape clause nationally.
07:10We have created instruments like the safe instrument at the European level.
07:13Can we do more?
07:14Yes, we can.
07:15We can do joint procurement, for instance, much more compared to what we previously did.
07:19And there can be many spillover effects in the economy, should we be doing that.
07:22Generally speaking, I can tell you that defense is certainly one of the core priorities.
07:26And it's quite interesting, Oliver, that many of the topics that we're discussing,
07:30be they energy, be they defense, be they technology,
07:33they're integrated in the debates of the European finance ministers right now.
07:36Because we seem and we must to be focused on a full scope,
07:40on a full spectrum of issues which touch upon the finance minister portfolio.
07:44Because the job itself has evolved because of the crisis that we have in front of us
07:47and because of the challenges that we have in front of us.
07:49And thinking about the broader picture, the long-term future of Europe
07:52and sort of unlocking some of that firepower, of course,
07:54the thing, the sort of low-hanging fruit we've been talking about for many years
07:57is the capital markets union, saving investment union,
07:59or whatever name we're sort of going with right now.
08:01How close are we to making any kind of significant progress there?
08:05There's still a big question on supervision.
08:06Can you make any progress without having settled that question?
08:09We can certainly have progress quite soon.
08:10I think we're close to having very significant progress.
08:12The market and supervision package is one such manifestation.
08:16We need more centralized supervision in our capital markets.
08:20And, you know, it's one of those areas where, on the one hand,
08:22we have been discussing, as you say, the capital markets union,
08:25the banking union for many years.
08:27All of those things integrate into what we call the savings and investment union.
08:31We can see progress in many elements of those portfolios quite soon.
08:34Frankly, I think it's quite existential to do so,
08:36because if we look at it practically, for the people who are watching the show,
08:39a startup in Europe cannot scale up quickly enough.
08:42At some point, it necessitates American investment,
08:44for instance, at mezzanine funding.
08:46Why shouldn't we have the option of having European funding at the same level?
08:50It's one of the things we're discussing today, actually.
08:51We have the Cookies No Air report discussed today at the Eurogroup,
08:54where we're going to see how a startup can grow in Europe much more quickly
08:58than what it does today.
08:59Anyway, this is a core element of what the SIU is.
09:02And is it easier to make progress or to envision making progress
09:04on these pan-European sort of initiatives in the absence of Viktor Orban?
09:08How do you think that changes the dynamic at the European level?
09:10Well, it's good to have European governments that are pro-European,
09:15let me put it this way.
09:16And in this regard, I'm very much looking forward to collaborate closely
09:19with the new Hungarian government.
09:21We're actually in discussions about a potential visit in Hungary
09:25on behalf of myself and my team.
09:27And I was quite happy to listen to them say that they're interested in joining the Euro.
09:31Obviously, we want a further expansion of the Eurozone.
09:34We had Bulgaria joining in at the beginning of the year.
09:36And we're very much eager to see more countries joining in,
09:38should they meet the criteria.
09:39So we're quite eager to collaborate with them.
09:41Are you able to establish a sort of timeline for potentially joining the Euro?
09:45For Hungary, is it too early?
09:46We're not.
09:46It's too early to say.
09:47And just a final question in terms of market stability
09:49and something that you've been thinking a lot about is AI.
09:50We've been talking about the Mythos model.
09:52It's been a big issue and concern over in the United States, the Federal Reserve.
09:55I spoke to Deutsche Bank last week.
09:56They wouldn't say whether or not they've had access to the model.
09:58How important is it to get access to these models
10:00for the sort of financial standing of our banks?
10:03What I can tell you is that the discussion on AI
10:05is existentially important to the level that renders it probably
10:08the most important thing that we will be discussing this year
10:10and in the coming years.
10:11The thing is that the changes on the AI field are exponential,
10:15whereas we think linearly.
10:16And the problem is that the accusation that political systems
10:19and politicians typically receive is that they react sublinearly.
10:23This is going to change everything in the coming years
10:25from both a security standpoint
10:28and from an opportunity and productivity standpoint.
10:30It's both a moon race and a nuclear arms race.
10:34It has both elements.
10:35So in this regard, we need to be able to have an acute understanding
10:38of what is happening on the ground.
10:39And this is why we're bringing it to today's discussions
10:41and in future discussions as well.
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