WEBVTT - The IMF & the World Bank Spring Meetings 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:34.000 Bloomberg dot Com, and of course on the Bloomberg So 0:00:34.040 --> 0:00:36.960 we spoke to many finance ministers, but now let's get 0:00:36.960 --> 0:00:39.440 back to someone who we haven't spoken to yet because 0:00:39.440 --> 0:00:43.599 he's a newly minted economy minister and he is Romano Escolano, 0:00:43.840 --> 0:00:47.080 the new Economy Minister of Spain. Mr Escolano, thank you 0:00:47.120 --> 0:00:49.080 for joining us. There's a lot that we want to 0:00:49.120 --> 0:00:51.720 talk about. We want to talk about trade ters reforms. 0:00:52.080 --> 0:00:54.080 But first of all, what was the biggest surprise in 0:00:54.120 --> 0:00:56.240 the job. So you've been in the job, you've always 0:00:56.280 --> 0:00:59.440 followed the economy. Is there something that surprised you. Well, 0:00:59.480 --> 0:01:02.279 I've been as a economic Minister of Spain for just 0:01:02.320 --> 0:01:07.520 one month, very veteran. Well it's been it's still brand 0:01:07.520 --> 0:01:10.600 new in the position. But I'm being surprised by many things. 0:01:10.640 --> 0:01:13.480 I mean the intensity of the European debate. I just 0:01:13.920 --> 0:01:16.880 joined a train which is in full speed. We have, 0:01:17.360 --> 0:01:21.399 you know, prospects who find important agreements. I mean the 0:01:21.440 --> 0:01:24.480 much of June, the debate in Europe is at full speed. 0:01:24.880 --> 0:01:27.039 But then I have in my own ministry in the 0:01:27.080 --> 0:01:30.839 area also responsibility and many interesting things like science, which 0:01:30.880 --> 0:01:33.280 is an important and research, which is an important part 0:01:33.319 --> 0:01:35.440 of the policies of the government. And this is of 0:01:35.480 --> 0:01:39.120 course extremely interesting. The discussion of the budget of Spain 0:01:39.520 --> 0:01:43.360 happened to coincide exactly with the first weeks of my 0:01:44.080 --> 0:01:47.120 stats as the ministry, so the things as you mentioned, 0:01:47.319 --> 0:01:49.120 and all of them coinside at the same time. So 0:01:49.160 --> 0:01:52.160 it's been a busy time, but a very important time 0:01:52.240 --> 0:01:54.800 for Spain and for Europe. Do you find there's commonality 0:01:54.800 --> 0:01:57.559 in the G twenty Are a lot of G twenty 0:01:57.600 --> 0:02:02.279 ministers rallying against people asking for the end of globalization? Well, 0:02:02.320 --> 0:02:05.360 I think that there is a broad consensus. If you 0:02:05.360 --> 0:02:07.840 ask me, there's a full consensus. Maybe I wouldn't go 0:02:07.920 --> 0:02:10.200 that far, but there's a broad consensus on many of 0:02:10.280 --> 0:02:13.040 the issues that have been discussed. First of all, protection 0:02:13.080 --> 0:02:15.640 is m I think that there is very very wide 0:02:15.639 --> 0:02:18.919 consensus among our colleagues that we have to avoid escallation 0:02:18.960 --> 0:02:22.080 in the matters of protectionism. There is a perception that 0:02:22.840 --> 0:02:25.920 via sunny shining in the global economy, but there are 0:02:26.000 --> 0:02:29.480 underlyingable and abilities, and we have to be aware. In 0:02:29.520 --> 0:02:32.120 many of the areas we see normalization of monetary policies, 0:02:32.120 --> 0:02:34.320 including in Europe, of course, and we have to be 0:02:34.400 --> 0:02:36.880 prepared for that. We still have an economy which is 0:02:37.080 --> 0:02:40.160 full of debt. So I would say that these basic 0:02:40.200 --> 0:02:43.000 elements are part of the consensus that I find when 0:02:43.040 --> 0:02:45.400 discussing with my colleagues. May I say that there is 0:02:45.440 --> 0:02:48.440 also consensus among my colleagues to see that the Spanish 0:02:48.480 --> 0:02:50.800 economy is doing well, if you permit me, that is 0:02:50.840 --> 0:02:53.919 also a part that frankly, I can tell that all 0:02:53.960 --> 0:02:56.559 my colleagues I wanted to go to in this atrium 0:02:56.800 --> 0:02:59.360 six seven, eight years ago, friends and acquire and I 0:02:59.440 --> 0:03:03.040 noticed the pain to swear the crisis, and what has 0:03:03.080 --> 0:03:07.400 been noted is Spain led the way to greater stability. 0:03:07.720 --> 0:03:11.079 As you look back five years, six years, seven years, 0:03:11.120 --> 0:03:13.640 what we would call the pixie dust, What was the 0:03:13.680 --> 0:03:17.480 pixie dust of Spain that allowed for you to recover 0:03:17.960 --> 0:03:21.480 so promptly. Well, I think they've been uh, not just 0:03:21.560 --> 0:03:26.400 when reason, but few reasons. Uh. If you want to 0:03:26.400 --> 0:03:28.440 put a summary to what happened in Spain. I would 0:03:28.440 --> 0:03:31.840 say that the main economic reforms that we're undertaken in 0:03:31.880 --> 0:03:37.280 two thousand and ten are which are depending the covering recovery. Particularly, 0:03:37.280 --> 0:03:40.640 we had a change in the law regarding the budget 0:03:41.120 --> 0:03:43.800 and that that creates a path for physical consolidation, which 0:03:43.840 --> 0:03:47.120 has been actually important. Then we have a banking reform. 0:03:47.840 --> 0:03:50.480 We have a very intense banking reform. The banking landscape 0:03:50.520 --> 0:03:53.440 has been completely transformed in Spain as opposed to the 0:03:53.520 --> 0:03:56.240 last six years when you were mentioning. And finally we 0:03:56.280 --> 0:03:58.760 have labor market reform. So you put the three together 0:03:59.000 --> 0:04:02.800 that has called for this transformation. Talk about europe valuations 0:04:02.840 --> 0:04:05.560 and we talk about Germany, the Netherlands, maybe we talk 0:04:05.600 --> 0:04:09.160 about countries struggling firm work than a successful Spain. Do you, 0:04:09.240 --> 0:04:12.560 ever you had an octomo euro valuation, I would not. 0:04:13.920 --> 0:04:17.120 I would not comment on the eurovaluation. Next month you will, 0:04:17.320 --> 0:04:19.320 but I will tell you. But I will tell you 0:04:19.480 --> 0:04:23.840 is that despite the evaluation of the Euro, the Spanish export, 0:04:23.839 --> 0:04:29.039 particularly Spanish sport, outperforming not only the European or the 0:04:29.080 --> 0:04:32.120 euro Area average of export, but the world trade as such. 0:04:32.200 --> 0:04:34.920 So we are gaining actually wait, Spain is gaining ground 0:04:35.600 --> 0:04:38.120 in the world trade and this is extremely part of 0:04:38.160 --> 0:04:40.800 the recovery. Let me say, if you compare the Spanish 0:04:40.800 --> 0:04:44.320 economy today when west was six seven years ago, there 0:04:44.360 --> 0:04:47.320 has been a reduction of eight points of GDP of construction. 0:04:47.640 --> 0:04:49.280 We used to be a country with that had that 0:04:49.520 --> 0:04:52.680 this real estate boom and then a lot of construction, 0:04:52.760 --> 0:04:56.040 a lot of jobs link with construction. This has disappeared 0:04:56.080 --> 0:05:00.200 essentially and now this eight ten points are exports. So 0:05:00.240 --> 0:05:03.320 we have moved from this non tradeable economy to a 0:05:03.360 --> 0:05:07.719 tradeable economy. And this is the underpinning the present the 0:05:07.760 --> 0:05:11.240 Spanish budget bill. It is difficult to get past next 0:05:11.240 --> 0:05:14.000 week well and then not actually this week. It is 0:05:14.040 --> 0:05:16.200 a bit more of time. But let me say that 0:05:16.320 --> 0:05:19.680 the main features of the Spanish budget are very important. 0:05:19.680 --> 0:05:23.039 First of all, reduction in deficit. We are really have 0:05:23.160 --> 0:05:26.560 an ambitious target for reduction deficit. H the consolidation of 0:05:26.560 --> 0:05:28.840 the growth. We will be growing more than the European 0:05:28.839 --> 0:05:32.080 average for the fort in a row. Among the largest 0:05:32.080 --> 0:05:35.720 European economy in Spain is the leading performer this year 0:05:35.760 --> 0:05:37.640 will be as a mention for the four year in 0:05:37.640 --> 0:05:41.440 a row. And then there is socialistic particular regard intentions 0:05:41.720 --> 0:05:43.719 there have been some social groups that have been left 0:05:43.720 --> 0:05:46.760 behind because of the economic crisis, and we try to 0:05:46.760 --> 0:05:49.560 compete to that. So in political terms, I think there's 0:05:49.640 --> 0:05:52.479 no reason for the rest of the political not to support. 0:05:52.680 --> 0:05:55.520 We are still confident that this agreement with Minister were 0:05:55.560 --> 0:05:59.320 Plumberg surveillance from London and from New York, wonderful coverage 0:05:59.680 --> 0:06:03.560 of the crisis in Barcelona. The domestic politics of Spain. 0:06:04.000 --> 0:06:07.599 Give us an update and how the nation is coming 0:06:07.600 --> 0:06:11.520 together after the challenges that you saw in person. Well, 0:06:11.600 --> 0:06:15.560 the nation assumation is coming together around the constitution and 0:06:15.600 --> 0:06:18.720 are around the constitutional order. Spain is a fully modern 0:06:18.800 --> 0:06:22.640 and advanced democracy. Around are very i would say respected 0:06:22.640 --> 0:06:26.400 in the constitution. The polls, the latest polls, including from 0:06:26.440 --> 0:06:30.080 the Catalan government itself, showed that the support from independence 0:06:30.120 --> 0:06:33.599 is diminishing, and it's diminishing quite fast. Actually, we see 0:06:33.640 --> 0:06:36.840 that in terms of the economic situation and the business situation, 0:06:36.920 --> 0:06:40.800 the financial situation. Actually we'll see a clear recovery in 0:06:40.880 --> 0:06:43.760 Catalonia after difficult months at the end of the year, 0:06:44.040 --> 0:06:46.599 and we are calling for the Catalan government to be formed, 0:06:46.960 --> 0:06:49.440 to have a majority in parliament and to go back 0:06:49.440 --> 0:06:52.760 to normal relations with the national government. I think that 0:06:52.800 --> 0:06:55.640 this is an extremely important economic area in Spain. It's 0:06:55.680 --> 0:06:58.960 around twenty of the Spanish GDP and we want normal 0:06:59.000 --> 0:07:01.200 relations to get restable. It's as responsible with the new 0:07:01.240 --> 0:07:04.880 Catalan government so well, we want this to happen. And 0:07:05.640 --> 0:07:08.000 let me say that with the current existing data, we 0:07:08.040 --> 0:07:11.760 see that the business situation in Catalonia is recovering pretty much. Minister, 0:07:12.080 --> 0:07:15.000 if we talk about European integration, so Marianna Avoy like 0:07:15.120 --> 0:07:18.520 zero bounds, he likes the European budget and a finance minister, 0:07:19.000 --> 0:07:22.360 what will Germany likely say or you know, push, push 0:07:22.440 --> 0:07:26.720 through and watch the priorities be Our priorities is essentially 0:07:26.720 --> 0:07:30.320 the completion of the missing parts of the economic and 0:07:30.400 --> 0:07:34.000 monetary union. We have made a tremendous advance in the 0:07:34.040 --> 0:07:37.400 last four years, probably more than people actually realize. We 0:07:37.480 --> 0:07:40.280 have a single supervisory system, we have a single bank 0:07:40.360 --> 0:07:43.720 resolution system, but there's still some missing parts. Namely, we 0:07:43.800 --> 0:07:46.920 need a common the possible guaranty scheme. I mean, the 0:07:46.920 --> 0:07:50.240 Americans have this for seventy eighty years, but we lack. 0:07:50.360 --> 0:07:53.640 We still have national systems. We need a backstop for 0:07:53.800 --> 0:07:58.120 the resolution system to really function in times of stress. 0:07:58.320 --> 0:08:01.440 These are missing parts. So these are priorities. We think 0:08:01.520 --> 0:08:05.160 that the Spanish government and we will publish next week 0:08:05.360 --> 0:08:07.760 a paper on that we need a kind of physical 0:08:08.160 --> 0:08:12.120 stabilization mechanism that we think will complement the monetary policy, 0:08:12.360 --> 0:08:14.920 particularly in times of shocks and times of prise. As 0:08:14.960 --> 0:08:16.600 we get it in our lifetime, we'll we even get 0:08:16.600 --> 0:08:19.200 a banking union. I love you. It must be at 0:08:19.240 --> 0:08:23.600 the end of them cynical. As you may see, I'm 0:08:23.640 --> 0:08:27.600 a Europhile. We are used to have step by step process. 0:08:27.680 --> 0:08:30.200 We used to have difficulties. We need to have a 0:08:30.360 --> 0:08:33.440 quarreling between ourselves, arguing between ourselves. At the end of 0:08:33.480 --> 0:08:37.680 the day, sometimes at the very latest moment, agreements are found. 0:08:37.960 --> 0:08:40.679 This is the typical European way. So in this sense, 0:08:40.760 --> 0:08:44.240 I think that we are optimistic. We are clearly pushing 0:08:44.320 --> 0:08:47.480 for European integration. You will find in Spain one of 0:08:47.520 --> 0:08:50.680 the countries which is pushing more for your pintanzization. Why 0:08:50.920 --> 0:08:53.679 because our population is clearly in favor of the more 0:08:53.760 --> 0:08:56.400 you in integration, and we think that we benefit from this. 0:08:56.760 --> 0:08:58.920 In the historical sense, this maybe are if your remit, 0:08:59.000 --> 0:09:00.520 but I'm going to take a risk here because you've 0:09:00.559 --> 0:09:02.480 only been doing this for one month. There's going to 0:09:02.559 --> 0:09:04.920 be a new e c V president here in a 0:09:05.040 --> 0:09:07.720 year and a half or so, and there's a raging 0:09:07.760 --> 0:09:10.959 debate that we observe in London and New York about well, 0:09:11.000 --> 0:09:13.800 should it be German, should it be this, or should 0:09:13.800 --> 0:09:17.760 it be that? What does Spain feel about the leadership 0:09:17.840 --> 0:09:20.120 of the e c B and US Spain could fit 0:09:20.240 --> 0:09:23.280 into that equation. What I will tell you is that 0:09:24.040 --> 0:09:27.640 soft June July, the CP will have a brand new 0:09:27.760 --> 0:09:31.000 vice president from Spain, which is my predecessor, which is 0:09:31.000 --> 0:09:34.480 an extremely talented and respected economies and he would make 0:09:34.559 --> 0:09:37.079 an impact. He will leave his mark in the working 0:09:37.120 --> 0:09:39.079 of the e CP, so he'll be from rushould be 0:09:39.120 --> 0:09:41.760 able to move right up. He will leave his mark 0:09:41.880 --> 0:09:44.240 and his talents at the service of the works of 0:09:44.280 --> 0:09:46.880 the CB. Apart from that, if you expect me to comment, 0:09:46.920 --> 0:09:49.800 I will not at MR on Bankia it has to 0:09:49.800 --> 0:09:53.680 be fully privatized by two thousand nineteen. Will that that 0:09:53.760 --> 0:09:57.559 deadline stick Bank will be fully privatized. We don't think 0:09:57.559 --> 0:09:59.280 that there is any role for the government to be 0:09:59.360 --> 0:10:02.000 in the in all been banking, and that's clear the 0:10:02.040 --> 0:10:06.000 government policy. Second, we want to be sure that the 0:10:06.040 --> 0:10:08.600 money and the support that was given by the taxpayers 0:10:08.920 --> 0:10:11.600 to the rescue, let's say, of the depositors of the 0:10:11.640 --> 0:10:15.600 banks are to the maximum extent possible recovery. So these 0:10:15.640 --> 0:10:18.199 are the two pillars of our policy. In the frame order, 0:10:18.200 --> 0:10:20.880 these two pillars we will advance, but in mind that 0:10:21.120 --> 0:10:23.719 banking will be privatized, because we do not see any 0:10:23.840 --> 0:10:27.000 role of public own banks. Minister, thank you so much 0:10:27.000 --> 0:10:29.760 for joining for our net World Bank special. That was 0:10:30.200 --> 0:10:47.920 the Spanish Economy Minister. He's Roman Escolano. David Lipton is 0:10:47.960 --> 0:10:51.680 the American representative. He has four titles here, but usually 0:10:51.760 --> 0:10:55.000 to Medroow McCard. He's the important number two. Many of 0:10:55.040 --> 0:10:58.160 you will know John Lipsky of another time in play, 0:10:58.240 --> 0:11:01.640 serving in the same important dude, He's Ductr Lifton. Wonderful 0:11:01.679 --> 0:11:03.520 to see you again. What do you do every day 0:11:03.559 --> 0:11:06.959 for Madame Leguarde? What's the real job of the first 0:11:07.000 --> 0:11:10.760 deputy director to manage the staff and the work of 0:11:10.760 --> 0:11:14.760 the staff and make sure that everybody is uh doing 0:11:14.760 --> 0:11:17.560 what they've got to be doing. Thinking about the policy, 0:11:17.640 --> 0:11:20.200 the strategy and the crisis situations. We give us the 0:11:20.240 --> 0:11:25.160 stereotype of one PhD making the Green Book, the Blue Book, 0:11:25.280 --> 0:11:27.800 the Fiscal Book. Give us an example of who that 0:11:27.920 --> 0:11:30.520 PhD is. It's giving you your brain power. You know, 0:11:30.600 --> 0:11:32.560 we've got people from all around the world. They're the 0:11:32.920 --> 0:11:36.920 very well educated PhD economists. But what separates them from 0:11:36.920 --> 0:11:41.240 others is we are clinical economics. We're gonna go economists, 0:11:41.280 --> 0:11:43.679 meaning you have to practice what you preach. It has 0:11:43.720 --> 0:11:45.920 to not just work in theory, it has to work 0:11:45.920 --> 0:11:48.400 in practice. And these are people who've been doing this 0:11:48.480 --> 0:11:52.520 around the world, in real world situations, dealing with the 0:11:52.600 --> 0:11:55.120 actual problems, and the leaders who have to bring about 0:11:55.160 --> 0:11:58.080 the changes. The zeitgeist of the nineteen fifties and nineteen 0:11:58.160 --> 0:12:01.280 sixties I m F was maybe over week, over a quarter, 0:12:01.440 --> 0:12:04.280 maybe out six months. The zeitgeist now is one or 0:12:04.320 --> 0:12:07.000 two days. How do you see here within these spring media, Well, 0:12:07.040 --> 0:12:10.360 we have to be agile. What everyone is saying this week, 0:12:10.480 --> 0:12:14.000 one way or another is very simple. Things are good, 0:12:14.280 --> 0:12:18.280 but they're getting risky. And our message, of course, is 0:12:18.400 --> 0:12:21.080 in that kind of setting, while things are still good, 0:12:21.400 --> 0:12:25.120 it's time to try to prolong this recovery in ways 0:12:25.200 --> 0:12:28.640 that will be sustainable and prepare for those risks, try 0:12:28.679 --> 0:12:31.520 to lessen the risks and be in a better position 0:12:31.559 --> 0:12:34.080 to deal with them if they materialize. You have a 0:12:34.120 --> 0:12:37.960 beautiful social media effort. I can tell you that in 0:12:38.000 --> 0:12:41.040 the bars now, maybe Arsenal football with the British continue 0:12:41.160 --> 0:12:43.520 today will be different. But in the bars of the 0:12:43.559 --> 0:12:47.439 I M F of cocktails, there is one video people 0:12:47.480 --> 0:12:50.800 are looking at, and it's the debt video of all 0:12:50.880 --> 0:12:54.240 the nations with improving debt structure, and there's one nation 0:12:54.320 --> 0:12:57.319 with a red bar, and it's the United States of America. 0:12:57.640 --> 0:13:01.760 Is the United States of America's saving for a rainy day? Well, look, 0:13:01.880 --> 0:13:03.920 there are debt issues all around the world. The key 0:13:03.960 --> 0:13:06.800 number you're referring to is a hundred and sixty four trillion. 0:13:07.160 --> 0:13:10.280 That's a big number. That's more than twice global GDP. 0:13:10.559 --> 0:13:12.720 So there are a range of countries around the world 0:13:13.400 --> 0:13:16.160 that will not have the buffers, will not have the 0:13:16.200 --> 0:13:19.040 space and room to maneuver if something goes wrong, and 0:13:19.080 --> 0:13:22.480 so they should be doing something about that, trying to 0:13:22.640 --> 0:13:26.120 rebuild space. The United States is in that category. It's 0:13:26.160 --> 0:13:28.280 important and we've been saying this for years that the 0:13:28.400 --> 0:13:33.880 US soon reduces the budget deficit and tries to get 0:13:33.880 --> 0:13:37.240 the debt to GDP ratio to come down because you 0:13:37.320 --> 0:13:40.640 never know what will happen tomorrow. The arch theory for 0:13:40.720 --> 0:13:43.559 all Americans and frankly for many in the advanced economy 0:13:44.040 --> 0:13:48.280 is growth will solve everything within your forecast in the 0:13:48.360 --> 0:13:52.199 blue book, your World Economic Outlook. Thank you, Marie Sobsfeld. 0:13:52.480 --> 0:13:54.840 Can you yank it over to the brown book the 0:13:54.880 --> 0:13:58.240 fiscal space and say the growths will be there for 0:13:58.320 --> 0:14:02.760 every unique story, include in the United States. Well, we 0:14:03.120 --> 0:14:06.360 would like to see people countries, all of our member 0:14:06.400 --> 0:14:11.560 countries try to take steps to improve growth in the 0:14:11.600 --> 0:14:13.720 medium term, because this is a cycle and you have 0:14:13.760 --> 0:14:15.960 to look over the crest of the hill and see 0:14:16.000 --> 0:14:18.960 what's going to come. And we believe that actually potential 0:14:19.000 --> 0:14:22.320 growth will be somewhat lower in the future, uh than 0:14:22.400 --> 0:14:24.080 it's been in the past. So they will have to 0:14:24.120 --> 0:14:29.560 be affirmative steps through infrastructure and structural reforms to improve 0:14:30.200 --> 0:14:33.000 the growth prospects. But I would say that there are 0:14:33.200 --> 0:14:35.920 there are there are new wild cards on the horizons. 0:14:35.960 --> 0:14:40.520 I think example, well, the three subjects non traditional subjects 0:14:40.520 --> 0:14:43.880 in a sense, that are on everyone's minds this week 0:14:43.960 --> 0:14:47.920 are the three t s, Trade, technology, and trust. Trade 0:14:48.000 --> 0:14:50.840 is a semi traditional subject because it used to be 0:14:50.880 --> 0:14:53.360 a big deal. But everyone's been in agreement for years 0:14:53.720 --> 0:14:56.520 that there should be liberal trade. We need to on trade. 0:14:56.720 --> 0:14:59.960 We need to pivot from where we are. Two country 0:15:00.080 --> 0:15:03.600 is that have gained from globalization and know their future 0:15:03.680 --> 0:15:07.240 is linked to globalization, but are now big enough to matter. 0:15:07.840 --> 0:15:12.080 They need to be thinking about opening up their own economies. 0:15:12.440 --> 0:15:15.080 And at the same time, the United States needs to 0:15:15.120 --> 0:15:19.880 be letting go of uh unilateral pressures to achieve its 0:15:19.920 --> 0:15:22.440 goals here at the here, at these meetings, people are 0:15:22.520 --> 0:15:27.480 really now talking about all together trying to find ways 0:15:27.960 --> 0:15:34.160 to shift to more market access, more competition. Countries are 0:15:34.200 --> 0:15:37.000 now strong enough to open themselves up to competition. They 0:15:37.040 --> 0:15:40.240 will all gain the template. This is so important, David. 0:15:40.280 --> 0:15:44.600 The template here is a multilateral effort in this idea 0:15:44.720 --> 0:15:48.960 of trust butter stuff against an America with the president 0:15:49.000 --> 0:15:53.400 who is to be kind bilateral, maybe unilateral, or maybe 0:15:53.440 --> 0:15:56.920 my way or the highway. How do you draw the 0:15:57.000 --> 0:16:01.800 present administration into a more success us full trust relationship. 0:16:02.040 --> 0:16:04.880 I think that are politically the breakdown and trust is 0:16:05.000 --> 0:16:08.840 very is very broad in the United States, in Europe. 0:16:08.840 --> 0:16:15.200 In many places, trust is um between international partners. Trust 0:16:15.240 --> 0:16:19.520 in national institutions is diminished. And I think that's a problem. 0:16:19.720 --> 0:16:22.560 The way it has to work is that people cooperate 0:16:22.680 --> 0:16:26.560 and show that cooperation leads to gains, and then you 0:16:26.640 --> 0:16:28.960 start to rebuild a sense that there is something to 0:16:29.000 --> 0:16:31.760 be achieved together. I was talking to Jason Furman about 0:16:31.760 --> 0:16:35.080 the wonderful economist Robert Barrow and the trust over time 0:16:35.640 --> 0:16:38.800 are we destroying within your study of trust at the IMF, 0:16:39.080 --> 0:16:41.840 I did a panel on this, and Dr Lipton will 0:16:41.880 --> 0:16:45.160 do a panel on this as well. Do large deficits, 0:16:45.320 --> 0:16:49.600 do burgeoning debt over the long term, they must destroy 0:16:50.120 --> 0:16:54.480 institutional and societal trust, which I think the globalization and 0:16:54.520 --> 0:17:00.200 the dislocation, the financial crisis, technology, all of the as 0:17:00.200 --> 0:17:03.720 things have led to an erosion of trust. People don't 0:17:03.720 --> 0:17:07.959 believe that institutions government has taken care of them, and 0:17:08.000 --> 0:17:11.600 so there's globalization. Uh, you know, we've been saying this 0:17:11.680 --> 0:17:14.760 for years. Globalization has to be managed in a way 0:17:14.800 --> 0:17:16.800 that it is going to be durable. You have to 0:17:16.880 --> 0:17:20.840 deal with the dislocations that come from globalization. And I think, 0:17:21.160 --> 0:17:23.080 as you're saying, you have to make sure that you 0:17:23.119 --> 0:17:26.960 maintain stability. Because the financial crisis was the biggest destroyer 0:17:27.359 --> 0:17:30.800 of trust. We've not really we've recovered in the sense 0:17:30.800 --> 0:17:34.160 that people trust financial institutions because we did a huge 0:17:34.200 --> 0:17:37.200 reform to make banks safe again. But more broadly, it's 0:17:37.320 --> 0:17:41.919 very important to maintain uh stability of public finances in 0:17:42.040 --> 0:17:46.480 order to that people will trust in their governments. Within 0:17:46.600 --> 0:17:50.439 this is China, and within this is a trade This 0:17:50.480 --> 0:17:53.440 has been a wonderful discussion centered on the United States, 0:17:53.840 --> 0:17:56.879 but there are changes in the Pacific room, their changes 0:17:56.920 --> 0:18:00.440 in China, and maybe the dialogue into May is about 0:18:00.520 --> 0:18:03.640 t p P. The President swings back and forth. Who 0:18:03.640 --> 0:18:06.840 knows where the President will be on t PP review. 0:18:06.960 --> 0:18:11.760 The I m F stands on the efficacy the benefits 0:18:11.800 --> 0:18:15.760 that all can see from TPP, even the China potentially 0:18:15.760 --> 0:18:18.359 excluded from it. I mean at the root is the 0:18:18.440 --> 0:18:23.480 proposition that we still can gain from more interconnectedness and 0:18:23.480 --> 0:18:25.520 that that's key to the future of the of the 0:18:25.560 --> 0:18:29.400 Asia Pacific region UM and I think that that there's 0:18:29.440 --> 0:18:34.040 there's certainly having high standard trade agreements where there can 0:18:34.080 --> 0:18:38.960 be a deepening of links and countries can open themselves 0:18:39.080 --> 0:18:42.560 up to competition and everyone gains from competition. It's a positive. 0:18:42.640 --> 0:18:45.919 Some game is important. It's been a shame that the 0:18:46.000 --> 0:18:49.240 United States hasn't found yet found a way to participate 0:18:49.240 --> 0:18:51.520 in that, because the United States could be a real 0:18:51.640 --> 0:18:55.080 driver of growth. David lefton thank you for this spirited 0:18:55.119 --> 0:18:58.880 conversation that they of course with the International Monetary Fund. 0:19:12.240 --> 0:19:14.240 On behalf of Tom and I am now a spokesman. 0:19:14.320 --> 0:19:16.159 We say good morning to you for the second day 0:19:16.200 --> 0:19:18.560 of coverage from the world back I m F meetings 0:19:18.600 --> 0:19:21.120 here in Washington, d C. An interview that we've both 0:19:21.160 --> 0:19:24.320 been looking forward to all week is speaking to the 0:19:24.359 --> 0:19:27.160 e Commissioner for Monetary and Physical Affairs here is Mr 0:19:27.200 --> 0:19:30.800 piamos Covic and joins US now Commissioner. When you look 0:19:30.840 --> 0:19:33.840 at what Europe wants, a lot of countries want more integration. 0:19:33.960 --> 0:19:38.000 Others want to maybe toned down the integration. What are 0:19:38.000 --> 0:19:40.800 the Germans as are they getting a little bit more 0:19:40.840 --> 0:19:43.840 cold feet than maybe six months ago on banking on 0:19:43.960 --> 0:19:47.440 capital markets, union and getting closer together? Well, it took 0:19:47.480 --> 0:19:51.040 time after the elections for the German government to be formed. 0:19:51.720 --> 0:19:54.280 It has been done recently. The country is may be 0:19:54.400 --> 0:19:56.959 more divided than it used to be. It has its 0:19:57.000 --> 0:20:01.439 own cultural stability. The political lens is quite difficult to 0:20:01.480 --> 0:20:05.520 strike and this can explain why I wouldn't say they're reluctant, 0:20:05.560 --> 0:20:08.840 but they are careful. But I think that they need 0:20:08.880 --> 0:20:12.960 to understand that the situation Europe is as well positive 0:20:13.119 --> 0:20:16.920 for the economy and complex politically, and that they need 0:20:16.960 --> 0:20:20.720 to take their responsibility as economic leaders and to show 0:20:20.760 --> 0:20:24.560 that well, their tradition of risk reduction must be respected, 0:20:24.920 --> 0:20:27.560 but that they also need to show solidarity, and that 0:20:27.640 --> 0:20:31.959 means also taking Mr mccon's and the Commission's hand in 0:20:32.040 --> 0:20:35.600 order to reinforce the Economic and Monetary Union to have 0:20:35.640 --> 0:20:38.960 a Eurozone which is stronger for all its members, and 0:20:39.000 --> 0:20:42.360 also to recreate the tools to converge for our economies 0:20:42.400 --> 0:20:45.760 to reduce inequalities A commissioner, can any good come of 0:20:45.760 --> 0:20:48.280 of the trade ward a possible trade war between the 0:20:48.400 --> 0:20:50.920 U S and China, And I'm not talking about economically, 0:20:51.000 --> 0:20:53.360 but we've heard in the last eighteen months twenty four 0:20:53.400 --> 0:20:57.439 months that European countries lacked commonality. Now they have something 0:20:57.480 --> 0:21:02.639 to try and avoid together up. You cannot define yourself 0:21:02.840 --> 0:21:07.040 against another one, but we must not be divided by that. 0:21:07.480 --> 0:21:12.040 There is no French, German, Italian interesting that as far 0:21:12.080 --> 0:21:15.240 as trade is concerned, we are all together. The Commission 0:21:15.400 --> 0:21:20.320 is responsible for negotiating on trade. My colleague Manstrom is 0:21:20.440 --> 0:21:22.719 in charge of that. I will meet Phil Burass in 0:21:22.760 --> 0:21:26.040 a few minutes. I met yesterday Stephen Millucin. I saw 0:21:26.119 --> 0:21:28.520 people in the White House, and I think that we 0:21:28.600 --> 0:21:32.359 must get down on the tone on that trade. War 0:21:32.760 --> 0:21:36.960 is as every war, it's bad, nothing, nobody wins, it's 0:21:37.040 --> 0:21:40.680 lose lose, and we need to find protectionism. Here. We 0:21:40.760 --> 0:21:43.480 are in the temple of multilateralism. Will be in a 0:21:43.560 --> 0:21:47.520 gwenty meeting in a few seconds, and there we must 0:21:47.560 --> 0:21:50.720 say protection is m is not a solution, it is 0:21:50.760 --> 0:21:53.159 a problem, and we must do that all together. But 0:21:53.280 --> 0:21:56.359 that's not enough for Europe. For Europe, we really need 0:21:56.480 --> 0:22:00.359 to integrate more where it's necessary, not everywhere. I'm not 0:22:00.480 --> 0:22:03.959 asking for a federal Europe, but I'm saying there are 0:22:04.080 --> 0:22:10.280 items such as migration, trade that you mentioned, monetary union 0:22:11.000 --> 0:22:13.320 on which we must make decisive progress in order to 0:22:13.359 --> 0:22:18.600 have more investment, to have a better and stronger growth 0:22:18.680 --> 0:22:22.520 for the future. Secretary Molutions also giving you the gift 0:22:22.600 --> 0:22:25.760 of a trillion dollar deficit, and it seems like chronic 0:22:26.000 --> 0:22:30.280 trillion dollar American deficits. How does that affect your your 0:22:30.359 --> 0:22:33.520 inner recovery? And yet the story of this IMF as 0:22:33.560 --> 0:22:38.000 a US it has a tone of fiscal irresponsibility. How 0:22:38.080 --> 0:22:41.199 does that affect era well? Without short term effects, make 0:22:41.240 --> 0:22:44.439 pro commically long term effects that we cannot really falsey, 0:22:44.800 --> 0:22:46.959 and there are political effects. For the short term effects, 0:22:47.040 --> 0:22:51.080 they are positive since the American growth is picking up, 0:22:51.800 --> 0:22:55.480 and with a booming American economy, it's good for the 0:22:55.520 --> 0:22:58.720 rest of the world because we are partners a lies, 0:22:58.880 --> 0:23:01.159 we exchange together. There is no trade war for the 0:23:01.240 --> 0:23:05.520 time being, so that's good for the medium term. As always, 0:23:05.680 --> 0:23:07.560 when you've got to high debt and a high deficit, 0:23:07.680 --> 0:23:12.520 you need to watch that carefully to avoid imbalances. And 0:23:12.680 --> 0:23:15.480 this is not only for Europe, this is worldwide. Politically, 0:23:16.280 --> 0:23:20.120 our situation is not the same. We have a high debt. 0:23:20.359 --> 0:23:22.960