Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley.
Speaker 1: We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg So
Speaker 1: we spoke to many finance ministers, but now let's get
Speaker 1: back to someone who we haven't spoken to yet because
Speaker 1: he's a newly minted economy minister and he is Romano Escolano,
Speaker 1: the new Economy Minister of Spain. Mr Escolano, thank you
Speaker 1: for joining us. There's a lot that we want to
Speaker 1: talk about. We want to talk about trade ters reforms.
Speaker 1: But first of all, what was the biggest surprise in
Speaker 1: the job. So you've been in the job, you've always
Speaker 1: followed the economy. Is there something that surprised you. Well,
Speaker 1: I've been as a economic Minister of Spain for just
Speaker 1: one month, very veteran. Well it's been it's still brand
Speaker 1: new in the position. But I'm being surprised by many things.
Speaker 1: I mean the intensity of the European debate. I just
Speaker 1: joined a train which is in full speed. We have,
Speaker 1: you know, prospects who find important agreements. I mean the
Speaker 1: much of June, the debate in Europe is at full speed.
Speaker 1: But then I have in my own ministry in the
Speaker 1: area also responsibility and many interesting things like science, which
Speaker 1: is an important and research, which is an important part
Speaker 1: of the policies of the government. And this is of
Speaker 1: course extremely interesting. The discussion of the budget of Spain
Speaker 1: happened to coincide exactly with the first weeks of my
Speaker 1: stats as the ministry, so the things as you mentioned,
Speaker 1: and all of them coinside at the same time. So
Speaker 1: it's been a busy time, but a very important time
Speaker 1: for Spain and for Europe. Do you find there's commonality
Speaker 1: in the G twenty Are a lot of G twenty
Speaker 1: ministers rallying against people asking for the end of globalization? Well,
Speaker 1: I think that there is a broad consensus. If you
Speaker 1: ask me, there's a full consensus. Maybe I wouldn't go
Speaker 1: that far, but there's a broad consensus on many of
Speaker 1: the issues that have been discussed. First of all, protection
Speaker 1: is m I think that there is very very wide
Speaker 1: consensus among our colleagues that we have to avoid escallation
Speaker 1: in the matters of protectionism. There is a perception that
Speaker 1: via sunny shining in the global economy, but there are
Speaker 1: underlyingable and abilities, and we have to be aware. In
Speaker 1: many of the areas we see normalization of monetary policies,
Speaker 1: including in Europe, of course, and we have to be
Speaker 1: prepared for that. We still have an economy which is
Speaker 1: full of debt. So I would say that these basic
Speaker 1: elements are part of the consensus that I find when
Speaker 1: discussing with my colleagues. May I say that there is
Speaker 1: also consensus among my colleagues to see that the Spanish
Speaker 1: economy is doing well, if you permit me, that is
Speaker 1: also a part that frankly, I can tell that all
Speaker 1: my colleagues I wanted to go to in this atrium
Speaker 1: six seven, eight years ago, friends and acquire and I
Speaker 1: noticed the pain to swear the crisis, and what has
Speaker 1: been noted is Spain led the way to greater stability.
Speaker 1: As you look back five years, six years, seven years,
Speaker 1: what we would call the pixie dust, What was the
Speaker 1: pixie dust of Spain that allowed for you to recover
Speaker 1: so promptly. Well, I think they've been uh, not just
Speaker 1: when reason, but few reasons. Uh. If you want to
Speaker 1: put a summary to what happened in Spain. I would
Speaker 1: say that the main economic reforms that we're undertaken in
Speaker 1: two thousand and ten are which are depending the covering recovery. Particularly,
Speaker 1: we had a change in the law regarding the budget
Speaker 1: and that that creates a path for physical consolidation, which
Speaker 1: has been actually important. Then we have a banking reform.
Speaker 1: We have a very intense banking reform. The banking landscape
Speaker 1: has been completely transformed in Spain as opposed to the
Speaker 1: last six years when you were mentioning. And finally we
Speaker 1: have labor market reform. So you put the three together
Speaker 1: that has called for this transformation. Talk about europe valuations
Speaker 1: and we talk about Germany, the Netherlands, maybe we talk
Speaker 1: about countries struggling firm work than a successful Spain. Do you,
Speaker 1: ever you had an octomo euro valuation, I would not.
Speaker 1: I would not comment on the eurovaluation. Next month you will,
Speaker 1: but I will tell you. But I will tell you
Speaker 1: is that despite the evaluation of the Euro, the Spanish export,
Speaker 1: particularly Spanish sport, outperforming not only the European or the
Speaker 1: euro Area average of export, but the world trade as such.
Speaker 1: So we are gaining actually wait, Spain is gaining ground
Speaker 1: in the world trade and this is extremely part of
Speaker 1: the recovery. Let me say, if you compare the Spanish
Speaker 1: economy today when west was six seven years ago, there
Speaker 1: has been a reduction of eight points of GDP of construction.
Speaker 1: We used to be a country with that had that
Speaker 1: this real estate boom and then a lot of construction,
Speaker 1: a lot of jobs link with construction. This has disappeared
Speaker 1: essentially and now this eight ten points are exports. So
Speaker 1: we have moved from this non tradeable economy to a
Speaker 1: tradeable economy. And this is the underpinning the present the
Speaker 1: Spanish budget bill. It is difficult to get past next
Speaker 1: week well and then not actually this week. It is
Speaker 1: a bit more of time. But let me say that
Speaker 1: the main features of the Spanish budget are very important.
Speaker 1: First of all, reduction in deficit. We are really have
Speaker 1: an ambitious target for reduction deficit. H the consolidation of
Speaker 1: the growth. We will be growing more than the European
Speaker 1: average for the fort in a row. Among the largest
Speaker 1: European economy in Spain is the leading performer this year
Speaker 1: will be as a mention for the four year in
Speaker 1: a row. And then there is socialistic particular regard intentions
Speaker 1: there have been some social groups that have been left
Speaker 1: behind because of the economic crisis, and we try to
Speaker 1: compete to that. So in political terms, I think there's
Speaker 1: no reason for the rest of the political not to support.
Speaker 1: We are still confident that this agreement with Minister were
Speaker 1: Plumberg surveillance from London and from New York, wonderful coverage
Speaker 1: of the crisis in Barcelona. The domestic politics of Spain.
Speaker 1: Give us an update and how the nation is coming
Speaker 1: together after the challenges that you saw in person. Well,
Speaker 1: the nation assumation is coming together around the constitution and
Speaker 1: are around the constitutional order. Spain is a fully modern
Speaker 1: and advanced democracy. Around are very i would say respected
Speaker 1: in the constitution. The polls, the latest polls, including from
Speaker 1: the Catalan government itself, showed that the support from independence
Speaker 1: is diminishing, and it's diminishing quite fast. Actually, we see
Speaker 1: that in terms of the economic situation and the business situation,
Speaker 1: the financial situation. Actually we'll see a clear recovery in
Speaker 1: Catalonia after difficult months at the end of the year,
Speaker 1: and we are calling for the Catalan government to be formed,
Speaker 1: to have a majority in parliament and to go back
Speaker 1: to normal relations with the national government. I think that
Speaker 1: this is an extremely important economic area in Spain. It's
Speaker 1: around twenty of the Spanish GDP and we want normal
Speaker 1: relations to get restable. It's as responsible with the new
Speaker 1: Catalan government so well, we want this to happen. And
Speaker 1: let me say that with the current existing data, we
Speaker 1: see that the business situation in Catalonia is recovering pretty much. Minister,
Speaker 1: if we talk about European integration, so Marianna Avoy like
Speaker 1: zero bounds, he likes the European budget and a finance minister,
Speaker 1: what will Germany likely say or you know, push, push
Speaker 1: through and watch the priorities be Our priorities is essentially
Speaker 1: the completion of the missing parts of the economic and
Speaker 1: monetary union. We have made a tremendous advance in the
Speaker 1: last four years, probably more than people actually realize. We
Speaker 1: have a single supervisory system, we have a single bank
Speaker 1: resolution system, but there's still some missing parts. Namely, we
Speaker 1: need a common the possible guaranty scheme. I mean, the
Speaker 1: Americans have this for seventy eighty years, but we lack.
Speaker 1: We still have national systems. We need a backstop for
Speaker 1: the resolution system to really function in times of stress.
Speaker 1: These are missing parts. So these are priorities. We think
Speaker 1: that the Spanish government and we will publish next week
Speaker 1: a paper on that we need a kind of physical
Speaker 1: stabilization mechanism that we think will complement the monetary policy,
Speaker 1: particularly in times of shocks and times of prise. As
Speaker 1: we get it in our lifetime, we'll we even get
Speaker 1: a banking union. I love you. It must be at
Speaker 1: the end of them cynical. As you may see, I'm
Speaker 1: a Europhile. We are used to have step by step process.
Speaker 1: We used to have difficulties. We need to have a
Speaker 1: quarreling between ourselves, arguing between ourselves. At the end of
Speaker 1: the day, sometimes at the very latest moment, agreements are found.
Speaker 1: This is the typical European way. So in this sense,
Speaker 1: I think that we are optimistic. We are clearly pushing
Speaker 1: for European integration. You will find in Spain one of
Speaker 1: the countries which is pushing more for your pintanzization. Why
Speaker 1: because our population is clearly in favor of the more
Speaker 1: you in integration, and we think that we benefit from this.
Speaker 1: In the historical sense, this maybe are if your remit,
Speaker 1: but I'm going to take a risk here because you've
Speaker 1: only been doing this for one month. There's going to
Speaker 1: be a new e c V president here in a
Speaker 1: year and a half or so, and there's a raging
Speaker 1: debate that we observe in London and New York about well,
Speaker 1: should it be German, should it be this, or should
Speaker 1: it be that? What does Spain feel about the leadership
Speaker 1: of the e c B and US Spain could fit
Speaker 1: into that equation. What I will tell you is that
Speaker 1: soft June July, the CP will have a brand new
Speaker 1: vice president from Spain, which is my predecessor, which is
Speaker 1: an extremely talented and respected economies and he would make
Speaker 1: an impact. He will leave his mark in the working
Speaker 1: of the e CP, so he'll be from rushould be
Speaker 1: able to move right up. He will leave his mark
Speaker 1: and his talents at the service of the works of
Speaker 1: the CB. Apart from that, if you expect me to comment,
Speaker 1: I will not at MR on Bankia it has to
Speaker 1: be fully privatized by two thousand nineteen. Will that that
Speaker 1: deadline stick Bank will be fully privatized. We don't think
Speaker 1: that there is any role for the government to be
Speaker 1: in the in all been banking, and that's clear the
Speaker 1: government policy. Second, we want to be sure that the
Speaker 1: money and the support that was given by the taxpayers
Speaker 1: to the rescue, let's say, of the depositors of the
Speaker 1: banks are to the maximum extent possible recovery. So these
Speaker 1: are the two pillars of our policy. In the frame order,
Speaker 1: these two pillars we will advance, but in mind that
Speaker 1: banking will be privatized, because we do not see any
Speaker 1: role of public own banks. Minister, thank you so much
Speaker 1: for joining for our net World Bank special. That was
Speaker 1: the Spanish Economy Minister. He's Roman Escolano. David Lipton is
Speaker 1: the American representative. He has four titles here, but usually
Speaker 1: to Medroow McCard. He's the important number two. Many of
Speaker 1: you will know John Lipsky of another time in play,
Speaker 1: serving in the same important dude, He's Ductr Lifton. Wonderful
Speaker 1: to see you again. What do you do every day
Speaker 1: for Madame Leguarde? What's the real job of the first
Speaker 1: deputy director to manage the staff and the work of
Speaker 1: the staff and make sure that everybody is uh doing
Speaker 1: what they've got to be doing. Thinking about the policy,
Speaker 1: the strategy and the crisis situations. We give us the
Speaker 1: stereotype of one PhD making the Green Book, the Blue Book,
Speaker 1: the Fiscal Book. Give us an example of who that
Speaker 1: PhD is. It's giving you your brain power. You know,
Speaker 1: we've got people from all around the world. They're the
Speaker 1: very well educated PhD economists. But what separates them from
Speaker 1: others is we are clinical economics. We're gonna go economists,
Speaker 1: meaning you have to practice what you preach. It has
Speaker 1: to not just work in theory, it has to work
Speaker 1: in practice. And these are people who've been doing this
Speaker 1: around the world, in real world situations, dealing with the
Speaker 1: actual problems, and the leaders who have to bring about
Speaker 1: the changes. The zeitgeist of the nineteen fifties and nineteen
Speaker 1: sixties I m F was maybe over week, over a quarter,
Speaker 1: maybe out six months. The zeitgeist now is one or
Speaker 1: two days. How do you see here within these spring media, Well,
Speaker 1: we have to be agile. What everyone is saying this week,
Speaker 1: one way or another is very simple. Things are good,
Speaker 1: but they're getting risky. And our message, of course, is
Speaker 1: in that kind of setting, while things are still good,
Speaker 1: it's time to try to prolong this recovery in ways
Speaker 1: that will be sustainable and prepare for those risks, try
Speaker 1: to lessen the risks and be in a better position
Speaker 1: to deal with them if they materialize. You have a
Speaker 1: beautiful social media effort. I can tell you that in
Speaker 1: the bars now, maybe Arsenal football with the British continue
Speaker 1: today will be different. But in the bars of the
Speaker 1: I M F of cocktails, there is one video people
Speaker 1: are looking at, and it's the debt video of all
Speaker 1: the nations with improving debt structure, and there's one nation
Speaker 1: with a red bar, and it's the United States of America.
Speaker 1: Is the United States of America's saving for a rainy day? Well, look,
Speaker 1: there are debt issues all around the world. The key
Speaker 1: number you're referring to is a hundred and sixty four trillion.
Speaker 1: That's a big number. That's more than twice global GDP.
Speaker 1: So there are a range of countries around the world
Speaker 1: that will not have the buffers, will not have the
Speaker 1: space and room to maneuver if something goes wrong, and
Speaker 1: so they should be doing something about that, trying to
Speaker 1: rebuild space. The United States is in that category. It's
Speaker 1: important and we've been saying this for years that the
Speaker 1: US soon reduces the budget deficit and tries to get
Speaker 1: the debt to GDP ratio to come down because you
Speaker 1: never know what will happen tomorrow. The arch theory for
Speaker 1: all Americans and frankly for many in the advanced economy
Speaker 1: is growth will solve everything within your forecast in the
Speaker 1: blue book, your World Economic Outlook. Thank you, Marie Sobsfeld.
Speaker 1: Can you yank it over to the brown book the
Speaker 1: fiscal space and say the growths will be there for
Speaker 1: every unique story, include in the United States. Well, we
Speaker 1: would like to see people countries, all of our member
Speaker 1: countries try to take steps to improve growth in the
Speaker 1: medium term, because this is a cycle and you have
Speaker 1: to look over the crest of the hill and see
Speaker 1: what's going to come. And we believe that actually potential
Speaker 1: growth will be somewhat lower in the future, uh than
Speaker 1: it's been in the past. So they will have to
Speaker 1: be affirmative steps through infrastructure and structural reforms to improve
Speaker 1: the growth prospects. But I would say that there are
Speaker 1: there are there are new wild cards on the horizons.
Speaker 1: I think example, well, the three subjects non traditional subjects
Speaker 1: in a sense, that are on everyone's minds this week
Speaker 1: are the three t s, Trade, technology, and trust. Trade
Speaker 1: is a semi traditional subject because it used to be
Speaker 1: a big deal. But everyone's been in agreement for years
Speaker 1: that there should be liberal trade. We need to on trade.
Speaker 1: We need to pivot from where we are. Two country
Speaker 1: is that have gained from globalization and know their future
Speaker 1: is linked to globalization, but are now big enough to matter.
Speaker 1: They need to be thinking about opening up their own economies.
Speaker 1: And at the same time, the United States needs to
Speaker 1: be letting go of uh unilateral pressures to achieve its
Speaker 1: goals here at the here, at these meetings, people are
Speaker 1: really now talking about all together trying to find ways
Speaker 1: to shift to more market access, more competition. Countries are
Speaker 1: now strong enough to open themselves up to competition. They
Speaker 1: will all gain the template. This is so important, David.
Speaker 1: The template here is a multilateral effort in this idea
Speaker 1: of trust butter stuff against an America with the president
Speaker 1: who is to be kind bilateral, maybe unilateral, or maybe
Speaker 1: my way or the highway. How do you draw the
Speaker 1: present administration into a more success us full trust relationship.
Speaker 1: I think that are politically the breakdown and trust is
Speaker 1: very is very broad in the United States, in Europe.
Speaker 1: In many places, trust is um between international partners. Trust
Speaker 1: in national institutions is diminished. And I think that's a problem.
Speaker 1: The way it has to work is that people cooperate
Speaker 1: and show that cooperation leads to gains, and then you
Speaker 1: start to rebuild a sense that there is something to
Speaker 1: be achieved together. I was talking to Jason Furman about
Speaker 1: the wonderful economist Robert Barrow and the trust over time
Speaker 1: are we destroying within your study of trust at the IMF,
Speaker 1: I did a panel on this, and Dr Lipton will
Speaker 1: do a panel on this as well. Do large deficits,
Speaker 1: do burgeoning debt over the long term, they must destroy
Speaker 1: institutional and societal trust, which I think the globalization and
Speaker 1: the dislocation, the financial crisis, technology, all of the as
Speaker 1: things have led to an erosion of trust. People don't
Speaker 1: believe that institutions government has taken care of them, and
Speaker 1: so there's globalization. Uh, you know, we've been saying this
Speaker 1: for years. Globalization has to be managed in a way
Speaker 1: that it is going to be durable. You have to
Speaker 1: deal with the dislocations that come from globalization. And I think,
Speaker 1: as you're saying, you have to make sure that you
Speaker 1: maintain stability. Because the financial crisis was the biggest destroyer
Speaker 1: of trust. We've not really we've recovered in the sense
Speaker 1: that people trust financial institutions because we did a huge
Speaker 1: reform to make banks safe again. But more broadly, it's
Speaker 1: very important to maintain uh stability of public finances in
Speaker 1: order to that people will trust in their governments. Within
Speaker 1: this is China, and within this is a trade This
Speaker 1: has been a wonderful discussion centered on the United States,
Speaker 1: but there are changes in the Pacific room, their changes
Speaker 1: in China, and maybe the dialogue into May is about
Speaker 1: t p P. The President swings back and forth. Who
Speaker 1: knows where the President will be on t PP review.
Speaker 1: The I m F stands on the efficacy the benefits
Speaker 1: that all can see from TPP, even the China potentially
Speaker 1: excluded from it. I mean at the root is the
Speaker 1: proposition that we still can gain from more interconnectedness and
Speaker 1: that that's key to the future of the of the
Speaker 1: Asia Pacific region UM and I think that that there's
Speaker 1: there's certainly having high standard trade agreements where there can
Speaker 1: be a deepening of links and countries can open themselves
Speaker 1: up to competition and everyone gains from competition. It's a positive.
Speaker 1: Some game is important. It's been a shame that the
Speaker 1: United States hasn't found yet found a way to participate
Speaker 1: in that, because the United States could be a real
Speaker 1: driver of growth. David lefton thank you for this spirited
Speaker 1: conversation that they of course with the International Monetary Fund.
Speaker 1: On behalf of Tom and I am now a spokesman.
Speaker 1: We say good morning to you for the second day
Speaker 1: of coverage from the world back I m F meetings
Speaker 1: here in Washington, d C. An interview that we've both
Speaker 1: been looking forward to all week is speaking to the
Speaker 1: e Commissioner for Monetary and Physical Affairs here is Mr
Speaker 1: piamos Covic and joins US now Commissioner. When you look
Speaker 1: at what Europe wants, a lot of countries want more integration.
Speaker 1: Others want to maybe toned down the integration. What are
Speaker 1: the Germans as are they getting a little bit more
Speaker 1: cold feet than maybe six months ago on banking on
Speaker 1: capital markets, union and getting closer together? Well, it took
Speaker 1: time after the elections for the German government to be formed.
Speaker 1: It has been done recently. The country is may be
Speaker 1: more divided than it used to be. It has its
Speaker 1: own cultural stability. The political lens is quite difficult to
Speaker 1: strike and this can explain why I wouldn't say they're reluctant,
Speaker 1: but they are careful. But I think that they need
Speaker 1: to understand that the situation Europe is as well positive
Speaker 1: for the economy and complex politically, and that they need
Speaker 1: to take their responsibility as economic leaders and to show
Speaker 1: that well, their tradition of risk reduction must be respected,
Speaker 1: but that they also need to show solidarity, and that
Speaker 1: means also taking Mr mccon's and the Commission's hand in
Speaker 1: order to reinforce the Economic and Monetary Union to have
Speaker 1: a Eurozone which is stronger for all its members, and
Speaker 1: also to recreate the tools to converge for our economies
Speaker 1: to reduce inequalities A commissioner, can any good come of
Speaker 1: of the trade ward a possible trade war between the
Speaker 1: U S and China, And I'm not talking about economically,
Speaker 1: but we've heard in the last eighteen months twenty four
Speaker 1: months that European countries lacked commonality. Now they have something
Speaker 1: to try and avoid together up. You cannot define yourself
Speaker 1: against another one, but we must not be divided by that.
Speaker 1: There is no French, German, Italian interesting that as far
Speaker 1: as trade is concerned, we are all together. The Commission
Speaker 1: is responsible for negotiating on trade. My colleague Manstrom is
Speaker 1: in charge of that. I will meet Phil Burass in
Speaker 1: a few minutes. I met yesterday Stephen Millucin. I saw
Speaker 1: people in the White House, and I think that we
Speaker 1: must get down on the tone on that trade. War
Speaker 1: is as every war, it's bad, nothing, nobody wins, it's
Speaker 1: lose lose, and we need to find protectionism. Here. We
Speaker 1: are in the temple of multilateralism. Will be in a
Speaker 1: gwenty meeting in a few seconds, and there we must
Speaker 1: say protection is m is not a solution, it is
Speaker 1: a problem, and we must do that all together. But
Speaker 1: that's not enough for Europe. For Europe, we really need
Speaker 1: to integrate more where it's necessary, not everywhere. I'm not
Speaker 1: asking for a federal Europe, but I'm saying there are
Speaker 1: items such as migration, trade that you mentioned, monetary union
Speaker 1: on which we must make decisive progress in order to
Speaker 1: have more investment, to have a better and stronger growth
Speaker 1: for the future. Secretary Molutions also giving you the gift
Speaker 1: of a trillion dollar deficit, and it seems like chronic
Speaker 1: trillion dollar American deficits. How does that affect your your
Speaker 1: inner recovery? And yet the story of this IMF as
Speaker 1: a US it has a tone of fiscal irresponsibility. How
Speaker 1: does that affect era well? Without short term effects, make
Speaker 1: pro commically long term effects that we cannot really falsey,
Speaker 1: and there are political effects. For the short term effects,
Speaker 1: they are positive since the American growth is picking up,
Speaker 1: and with a booming American economy, it's good for the
Speaker 1: rest of the world because we are partners a lies,
Speaker 1: we exchange together. There is no trade war for the
Speaker 1: time being, so that's good for the medium term. As always,
Speaker 1: when you've got to high debt and a high deficit,
Speaker 1: you need to watch that carefully to avoid imbalances. And
Speaker 1: this is not only for Europe, this is worldwide. Politically,
Speaker 1: our situation is not the same. We have a high debt.
Speaker 1: We don't have the privilege of having the world currency,
Speaker 1: which is the dollar, so we must still be careful
Speaker 1: about our public and private debt. And as Mara Lagal said,
Speaker 1: debt is still the problem for the future. The two
Speaker 1: main risks for growth, which is now very solid all
Speaker 1: over the world are on the one hand, protectionism and
Speaker 1: trade attentions, and on the other hand, debt and our
Speaker 1: pop culture in Europe must not change. We must reduce
Speaker 1: debts because without question, without that, we cannot finance our
Speaker 1: public It's it easier to actually sell austerity to the
Speaker 1: Europeans than it is to the US. As a political
Speaker 1: ewer politician before do we talk about it differently? And
Speaker 1: this was a point town that you today about austerity
Speaker 1: was I was not a politician. I'm still a political appointee.
Speaker 1: Being a commissioner is being a political appointee. Uh. And
Speaker 1: so I think about that politically. I never was in
Speaker 1: favor of austerity. Austerity is when you become poor and
Speaker 1: you cannot develop public services, you cannot invest. You need
Speaker 1: to be serious, and that's somehow different. That means that
Speaker 1: you need to reduce your debt, you need to reduce
Speaker 1: your deficits. Our rules are there for that, but you
Speaker 1: can also apply these rules with flexibility. And that's what
Speaker 1: we've done. We We never punished or or made constraints
Speaker 1: to one of our member states need a Portugal, need
Speaker 1: to Spain, neither Italy, neither France. And this was positive
Speaker 1: because at the same time they reduced that debt. The
Speaker 1: average deficit per year is under one percent in Europe. Uh.
Speaker 1: And that is getting down and we did that without Austere.
Speaker 1: That's the same case with Greece. I hope that now
Speaker 1: in a few moments will have grease out of its
Speaker 1: program because well, being serious must not damage growth. And
Speaker 1: that's that balance is the one we are looking for.
Speaker 1: You mentioned here at the I m F, in this
Speaker 1: beautiful atrium, the temple of multilateralism great four blocks down
Speaker 1: is a temple of my way or the highway. How
Speaker 1: does Europe adapt to President Trump in his claim of
Speaker 1: a bilateral discussion which everyone agrees is my way or
Speaker 1: the highway? Do you wait out the president of the
Speaker 1: United States? Or do you sense a structural change in
Speaker 1: American negotiations with its allies. That's the least we can say.
Speaker 1: The change with President Trump and his team is huge.
Speaker 1: Uh and well, when the words I pronounced multilateralism, refusal
Speaker 1: of protectionism, fighting climate change, it's not really in the
Speaker 1: vocabulary and in the culture of this administration. So we
Speaker 1: know that we need to to defend our own values.
Speaker 1: I don't mean against Trump. Europe cannot be built against Trump,
Speaker 1: but for our own sake. But at the same time,
Speaker 1: we have to negotiate, We have to discuss with the administration.
Speaker 1: Here I meet everybody and we are trying to establish
Speaker 1: with them the best possible discussion climate. But longer term,
Speaker 1: could this actually hurt growth? And I'm not talking about
Speaker 1: US growth. I'm talking about US growth and world growth
Speaker 1: and therefore European growth. I said, there is short term
Speaker 1: effect which is positive, and medium term effects have to
Speaker 1: be certainly ablibrated. First, we need to avoid the fact
Speaker 1: that at one moment the economy seems to be overeated.
Speaker 1: And the second thing is protectionism is really a pain
Speaker 1: for the economy for various reasons, uh for itself, but
Speaker 1: also for the climate, for what the message it sends
Speaker 1: to markets who don't like this, for the risk of voluntiny. No,
Speaker 1: I'm quite sure. Here in Washington, I told you that
Speaker 1: we are different from the Trump administration by all means,
Speaker 1: but at the same time we respect them the legitimate
Speaker 1: here they've been elected and they were in the country.
Speaker 1: And so I think the messages we are trying to
Speaker 1: define together and again I met a few of them,
Speaker 1: are that we need to avoid that trade war, that
Speaker 1: finally we need to refuse protectionism, That we need to
Speaker 1: defend free trade, even an organized free trade. We need
Speaker 1: certain need to resolve some problems. The over capacity is
Speaker 1: still in China our problem, but we need to resolve
Speaker 1: them together. But in twenty seconds, so you're saying those
Speaker 1: U S officials told you that actually they were ready
Speaker 1: to ratch it down the rhetoric. I wouldn't say that.
Speaker 1: I'm not a spokesman, but I feel that the climate
Speaker 1: is a climate of exchange of use, not of imposing views,
Speaker 1: neither of confronting views. And that's true dialogue, dialogue between
Speaker 1: different people thinking differently, that we will find a way. Almost.
Speaker 1: Thank you so much. Yes, we are here. It's stay
Speaker 1: two of our coverage and I am delighted to be
Speaker 1: joined by the French finance minister. He is Mr and
Speaker 1: he joins us now to talk about reforms that tariffs.
Speaker 1: Trade minister, thank you for giving a little bit of
Speaker 1: your time to Bloomberg. How word are you that a
Speaker 1: trade tensions escalate into trade war. I'm rorried because I
Speaker 1: think that there is a risk of having a tad
Speaker 1: war between the United States and China, between the United
Speaker 1: States and the rest of the world, and I really
Speaker 1: think that we should do our best to avoid that
Speaker 1: tad war, which would lead to a less growth, lesser
Speaker 1: employment and more job political difficulties. But in the more
Speaker 1: immediate term, it's about also convincing the US so not
Speaker 1: to impose terrors on Still for the moment, we cannot
Speaker 1: accept France and Europe to be hit by new terrorists
Speaker 1: coming from the United States. And what we really want
Speaker 1: is a full and permanent exemptions for the EU of
Speaker 1: the new American terrorists. We are allies and we cannot
Speaker 1: understand that kind of policy which might jeopardize growth and
Speaker 1: private companies, either in France or in other Upan states.
Speaker 1: So we are waiting. I want to be very clear
Speaker 1: on that we are waiting for a full and permanent
Speaker 1: exemptions from the American terrifs on Europe. Do you think
Speaker 1: that you will get some kind of indication that the
Speaker 1: US will be willing to grant you that today? I hope. So.
Speaker 1: I've been very clear with Steven Minuchine. We have a
Speaker 1: very good relationship, and I think that it allows us
Speaker 1: to have very clear and very frank discussion on that
Speaker 1: question of trade. I will have also important meetings on
Speaker 1: Monday in Washington during the state visit of McCool to
Speaker 1: the United States with Bilbo House and with Mr Yser,
Speaker 1: and I hope that they will understand that we are allied,
Speaker 1: the United States and France. The United States and Upian
Speaker 1: countries are allied, and we cannot understand that between allies
Speaker 1: there are such trade coming from Newtais on steel an aluminium.
Speaker 1: Would that be the main message also from President Loco
Speaker 1: when it comes to Washington next week or will there
Speaker 1: be also talk about, you know, digital technologies. Says that
Speaker 1: will be other topics, of course, but that question of
Speaker 1: trade will be really one of the important questions that
Speaker 1: will be raised during the state visit of McCoo to
Speaker 1: the United States. United States, and I want to see
Speaker 1: the opportunity although G twenty and just seven meetings here
Speaker 1: in Washington to explain the pot called position of France
Speaker 1: and of all Upan countries. We are allied, we want
Speaker 1: at full and permanent exemption and we do not want
Speaker 1: to run the risk of having decisions coming from one
Speaker 1: of our closest allies, I mean the United States jopodizing
Speaker 1: growth and the economic situation in France. How much of
Speaker 1: the talks at the G twenty and seven level was
Speaker 1: on China, on what China will do next and what
Speaker 1: Europe can do to bring China closer to We have
Speaker 1: to engage China and we won't China to abide by
Speaker 1: their international commitments. We won't China to help us to
Speaker 1: build a new mudiatal approach as far as trade is concerned.
Speaker 1: But the right solution is not to engage into any
Speaker 1: kind of war against China. The right solution is to
Speaker 1: engage China, to have China on board trying to improve
Speaker 1: the multilatal institutions related to trade. When you're looking at
Speaker 1: the current situation, we all know that there is a
Speaker 1: full weakening of all multilitable institutions related to trade. We
Speaker 1: want to build a new multiatle approach and a new
Speaker 1: multiatle order as far as trade and economy is concerned,
Speaker 1: and we want Shanna to be onboard with us. Minister. Domestically,
Speaker 1: the French President yourself are pushing for a lot of reforms,
Speaker 1: but there are strikes almost every week. Does that mean
Speaker 1: that they're at risk or will you double down? And
Speaker 1: does you even have more resolve to actually person's reportful.
Speaker 1: We will keep the path of reforms, We will keep
Speaker 1: the pace of reforms because with Eminem mccon we strongly
Speaker 1: believe that we need those reforms to improve the competitiveness
Speaker 1: of French companies, to improve the attractiveness of France, and
Speaker 1: at the end of the game, to create more jobs
Speaker 1: for French people. So we have already decided last here
Speaker 1: to introduce a total of a whole of the French
Speaker 1: tax system. We have been able to modernize the liberal
Speaker 1: market in France, and this year we will adopt a
Speaker 1: new law on competitiveness for French companies, especially for French samese,
Speaker 1: which will allow us to have more competitiveness within French companies.
Speaker 1: Because the key issue is first of all to improve
Speaker 1: the level of growth and the creation of jobs in France,
Speaker 1: but also to restore the credibility of the French political power.
Speaker 1: But the French want to be reformed or you concerned
Speaker 1: that the large majority of French people one of those reforms,
Speaker 1: because we are in a democracy and in the democracy
Speaker 1: there are people that are against reforms. For there are strikes.
Speaker 1: This is something normal and we have to live with that.
Speaker 1: But at the end of the game, we will keep
Speaker 1: the reforms, we will adopt the laws, and we will
Speaker 1: improve the situation of the French people. And for the moment,
Speaker 1: there's no talk of retracting some of them or watering down.
Speaker 1: It is really not the right solution. It's what have
Speaker 1: been down during the last three decades. I would say
Speaker 1: we wanted to do something, there were strikes and the
Speaker 1: French governments decided to withdraw that we formed. We won't
Speaker 1: do that. We will stand firm and we will put
Speaker 1: those reforms to the end for the sake of improving
Speaker 1: the situation of French people. We are not doing reforms
Speaker 1: of the sake of doing reforms and being able to say, well,
Speaker 1: there are a lot of reforms in the front. That's
Speaker 1: not the point. The point is to improve the economic
Speaker 1: situation of France and the political credibility of our nation.
Speaker 1: But as the one final question, do you worry about
Speaker 1: the high level of the earl? And then well you
Speaker 1: go because a lot of these people are waiting to
Speaker 1: go into your photo opportunity for the G twenty, But
Speaker 1: are you worried about your own I'm not worried about
Speaker 1: the level of the euro because I think that it
Speaker 1: reflects the growth and the economic recovery in Europe. So
Speaker 1: that's not the point of concern for us. My point
Speaker 1: of concern is really linked to the situation on trade. Okay, minister,
Speaker 1: thank you so much for joining you. Deputy Prime Minister,
Speaker 1: same check, thank you for joining us today. On Bloomberg,
Speaker 1: there were a couple of days ago a huge red
Speaker 1: Bloomberg flash saying Turkey was calling its snap elections. Is
Speaker 1: that good for investors or is that bad for investors?
Speaker 1: It's actually good news market reactions so that the reason
Speaker 1: is that assessive saves investors from getting worried for a
Speaker 1: t months. Normally elections were scheduled for November, so that
Speaker 1: brings it forward and that eases essentially uncertainty, reduces it. Plus,
Speaker 1: you know, it's snapped elections means you don't have a
Speaker 1: prolonged campaign period, only two months. Election economics is highly
Speaker 1: likely to be very limited, noise usually associated with elections
Speaker 1: likely be subside. So in that sense, I think it's
Speaker 1: good needs for investors. It will provide clarity, get a
Speaker 1: fresh mandate and hopefully start with the reforms. What is
Speaker 1: the question you've got the most here in the I
Speaker 1: m F. Is it on the snap elections or is
Speaker 1: it around the following era. Well, yesterday I had meetings
Speaker 1: with investors. You know a number of US investment banks
Speaker 1: hosted a number of events, so I was able to
Speaker 1: interact with almost hundred investors. I think the key question
Speaker 1: in their mind is what sort of policy framework post election? Well,
Speaker 1: Turkey moved to a more of an orthodox, monitored policy.
Speaker 1: Will Turkey jump start second third generation reforms to avoid
Speaker 1: the middle income trap? Things like that. Those were the
Speaker 1: key questions. There was less about the outcome of the elections.
Speaker 1: It seems like everybody seemed to be banking on and
Speaker 1: you Turk. You had a story career, Mary Lynch, and
Speaker 1: then you've had your public service to your nation of Turkey,
Speaker 1: and part of that has been a constant depreciation of
Speaker 1: a Turkish lera for any set of reasons. There hasn't
Speaker 1: been a lot of central bank action on the lira yet.
Speaker 1: Are we at a tipping point where if there's further
Speaker 1: lira erosion depreciation, devaluation, that you and Mr Arawana have
Speaker 1: to act well? For ten years they appreciated in nominal
Speaker 1: terms last few years, which has been traumatic for Turkey
Speaker 1: because of geopolitics and all other you know, domestic and
Speaker 1: external shocks, leadra has been weak. Some support for Lada
Speaker 1: would help, you know, I can't make a call on
Speaker 1: monetary policy because center back is independent. However, having said that,
Speaker 1: clearly some support would help within that and whether the
Speaker 1: idea that some support would help is do you do
Speaker 1: it yourself or do you need institutional allies to help
Speaker 1: Turkey to stabilize lira or even strengthen it. Can you
Speaker 1: go by? Can you go to long? Well, it's gonna
Speaker 1: be a combination of factors. First of all, I think
Speaker 1: uh elections and post election, you know, reviving reform program,
Speaker 1: you know, moving to a more simplified monetary policy framework.
Speaker 1: I think that would provide a strong message. The worst
Speaker 1: is likely behind Turkey in the sense that you know,
Speaker 1: tourism is recovering very strongly. Economy has done very well
Speaker 1: last year. Momentum is still reasonably strong. It's moderating. We
Speaker 1: should ease pressure both on inflation and on current account deficit.
Speaker 1: So fundamentally we still have a strong fiscal position. We
Speaker 1: have load that to GDP, and the banking sector is
Speaker 1: still in reasonably good health. The two rough spots in
Speaker 1: Turkish economy current account deficit and inflation. I think with
Speaker 1: some moderation in credit growth and some reform effort, we
Speaker 1: could kind of like regain market confidence and put behind
Speaker 1: you know, these difficult episode. And I want to get
Speaker 1: on Turkish credit in a second. But when you look
Speaker 1: at the devaluation of the leri ten percent in large,
Speaker 1: why has the central bank not active? Well, center Bank
Speaker 1: has reasonably indicated that they will act. I think it
Speaker 1: is important that we bring inflation back on a lasting
Speaker 1: basis to a single digit. Now this is very critic
Speaker 1: go the only way Turkey was able to deliver very
Speaker 1: strong growth and by the way, it's like five point
Speaker 1: eight percent for fifteen years. He was on the back
Speaker 1: of disinflation, sound macroeconomic policies, structural reforms. Now we cannot
Speaker 1: afford to let that slip. But it is the central
Speaker 1: bank truly independent Turkey. Well, legally there's nothing holding them back.
Speaker 1: They get appointed for five years, they cannot be removed.
Speaker 1: They only mandate is price stability and in death sense
Speaker 1: is independent. But there has been there has been, you know,
Speaker 1: strong debate about where the monetary policy stands should be.
Speaker 1: Now whether or not that has been effective obviously that's
Speaker 1: open to questions. But the central Bank meets on Wednesday.
Speaker 1: Do you think on Wednesday they will take decisions independently
Speaker 1: of political influence. I again, Center Bank is independent and
Speaker 1: they can act independent day. So it's all boils down
Speaker 1: to the Monetary Policy Committee. I'm saying this. Legally it
Speaker 1: is so, and practically it is so. There has been
Speaker 1: occasions that has been cases West Center Bank did respond
Speaker 1: despite despite an intense debate where monetary policy should be. Minister,
Speaker 1: I want to ask you about the sprawl of the
Speaker 1: levant in the Middle East and the Turkey that we
Speaker 1: see right now. Your remit his financial Your claim is
Speaker 1: what you did for the Turkish economy. I think of
Speaker 1: Robert Calvin's Brook, the return of Marco Polo, that's just
Speaker 1: out just talking of a new Eurasia. How did your
Speaker 1: Turkey and with a domestic tumult of Turkey, how does
Speaker 1: it fit into the region in three years or five years? Well,
Speaker 1: first of all, we Turkey right now is the world
Speaker 1: the largest refugee hosting country. We host a combined Iraqi
Speaker 1: Syries about four millions. Are you're getting enough support from
Speaker 1: the West on that you've got the current We appreciate
Speaker 1: Europeans support, even though it's been very slow and limited.
Speaker 1: Turkey has spent close to thirty four billion dollars over
Speaker 1: the past six seven years of refugees. We can afford it,
Speaker 1: and we're doing it simply because we feel that we
Speaker 1: have to do it, you know, because they have no choice.
Speaker 1: They're running for their lives. So my point is Turkey
Speaker 1: is looking forward to somewhat more stable, more democratic, more
Speaker 1: peaceful region. Why and we want to help reconstruction. We
Speaker 1: want to help. I'm not talking about business yet, purely helping,
Speaker 1: but we need to have a lull in violence. The
Speaker 1: good news is the barbaric Isis has been dismantled. That's
Speaker 1: very important, very important. We it's time now to stabilize Syria.
Speaker 1: Iraq has gone a long way in terms of stabilization,
Speaker 1: even though it's not fully there. Then we can talk
Speaker 1: about reconstruction. You're excerpt really important voice your childhood in
Speaker 1: southeastern Turkey. With all the different tensions within Turkey, do
Speaker 1: you see out of the present chaos of the political
Speaker 1: domestic damage has been done? Do you see a new
Speaker 1: Turkey where there can be a more domestic piece from
Speaker 1: the west of Turkey to the east. Well, the current Turkey,
Speaker 1: unfortunately is a product of a number of traumas that
Speaker 1: we have experienced. It is very unusual to have a
Speaker 1: cultish religious network try to grab the power. It's an
Speaker 1: alien concept. I mean, it's very hard for our friends
Speaker 1: and all lies to understand, but it's largely behind us.
Speaker 1: At some point, Turkey was subject to intense terror attacks
Speaker 1: thirty major terrorist attacks between mid two thousand fifteen and
Speaker 1: of two thousand sixteen, and that was because we had
Speaker 1: nine d eleven. We have nine hundred eleven kilometers of
Speaker 1: border with Syria, and Syria is no longer a functioning state.
Speaker 1: Turkey now has a good grasp. We build a wall,
Speaker 1: we're there, so it's under control. So what I'm trying
Speaker 1: to say is that most likely the worst is behind us.
Speaker 1: Rebuilding new Turkey. We require going back to strengthening rule
Speaker 1: of law, enhancing standards of democracy, continue to boost fundamental
Speaker 1: rights and freedoms for everybody. Now, I don't believe that
Speaker 1: there is less of a commitment to this. What is
Speaker 1: happening right now, the threat level, the perceived threat, and
Speaker 1: the real threat is there, and that's why Turkey is
Speaker 1: responding the way it has response. In depicting Premners, we
Speaker 1: want to go back to the economy and back to
Speaker 1: the lira. Is there anywhere to support the Lira that
Speaker 1: the central Bank could do without raising interest rates. Well,
Speaker 1: I think we're beyond talking. Uh, you know, clearly, at
Speaker 1: some point we have to convince the markets that we
Speaker 1: are able to bring inflation down, that we are able
Speaker 1: to contain current account deficit. The world around us is changing.
Speaker 1: I mean right now, global growth is there and maybe
Speaker 1: sustained for a little, you know, for a couple of years,
Speaker 1: but this is the time when we address underlying vulnerabilities.
Speaker 1: Now the bright spots are we have a strong fiscal position,
Speaker 1: we have a healthy banking system. The real economy is
Speaker 1: doing well, but the rough sports needs attention. Does that
Speaker 1: mean that that something on Wednesday? It would be a
Speaker 1: strong message to the investor. I know it is that.
Speaker 1: I know you're trying to get me to say, but
Speaker 1: you know, it wouldn't be appropriate for me to really
Speaker 1: comment on what sentiment will will not do on Wednesday.
Speaker 1: We wouldn't be of course, of course, Deputy Premieres. So
Speaker 1: thanks so much for joining it. It's a great pleasure.
Speaker 1: Thank you. Thanks for listening to the Bloomberg Surveillance Podcast.
Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or
Speaker 1: whichever podcast platform you prefer. I'm on Twitter, Tom Keane
Speaker 1: before the podcast. You can always catch us worldwide. I'm
Speaker 1: Bloomberg Radio