WEBVTT - Olli Rehn on the Big Competitiveness Challenge Facing Europe 0:00:02.720 --> 0:00:16.360 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:17.960 --> 0:00:20.920 Hello and welcome to another episode of the All Thoughts Podcast. 0:00:21.040 --> 0:00:22.400 I'm Tracy Alloway. 0:00:22.079 --> 0:00:23.200 And I'm Joe Wisenthal. 0:00:23.560 --> 0:00:26.720 Joe, do you remember earlier this year there was a 0:00:26.760 --> 0:00:30.159 moment when everyone got really excited about Europe for the 0:00:30.200 --> 0:00:32.640 first time in probably decades. 0:00:33.000 --> 0:00:35.479 So, you know, I always think about is for the 0:00:35.520 --> 0:00:38.440 two of us for a long time of our careers. 0:00:39.159 --> 0:00:41.479 One of the many sub themes that we go it's like, 0:00:41.520 --> 0:00:43.440 when is the Europe going to turn on the fiscal taps? 0:00:43.479 --> 0:00:47.000 When did you start spending money in Germany? All these questions, 0:00:47.000 --> 0:00:49.599 when are they going to be less so focus on 0:00:49.840 --> 0:00:53.080 austerity or balanced budgets, et cetera. And then finally, and 0:00:53.120 --> 0:00:55.160 maybe Trump had something to do with it, and defense 0:00:55.200 --> 0:00:57.680 spending had something to do with it, or politics, it's 0:00:57.800 --> 0:01:00.120 finally we're getting spending. It was like five minutes and 0:01:00.120 --> 0:01:02.280 everyone was really excited about some of the defense docks 0:01:02.280 --> 0:01:04.520 and the Euro's raillying and it looked, you know, a 0:01:04.560 --> 0:01:08.840 little bit more politically stable perhaps than the US. What's happening, though, 0:01:08.880 --> 0:01:11.520 I like, how's that going? I'm not sure I followed 0:01:11.520 --> 0:01:12.520 it as closely as I should. 0:01:12.520 --> 0:01:14.560 Have I will say, I mean, the Europe is still 0:01:14.560 --> 0:01:17.000 pretty strong against the dollar, and if you look at 0:01:17.040 --> 0:01:19.959 the eurostocks that's still doing pretty well as well. So 0:01:20.360 --> 0:01:23.520 there is some optimism that is still circulating the market. 0:01:23.560 --> 0:01:26.560 But you're absolutely right, we should talk about what this means. 0:01:26.680 --> 0:01:30.280 What does it actually mean for Europe to quote unquote 0:01:30.920 --> 0:01:33.920 seize this moment, right, this very particular moment, and what 0:01:33.959 --> 0:01:35.880 exactly does Europe want to achieve totally. 0:01:35.880 --> 0:01:37.640 And you know, a lot of the conversations that we 0:01:37.720 --> 0:01:40.920 have in the US context certainly apply in the European context. 0:01:40.920 --> 0:01:45.319 So industrial competition with China, whatever we're feeling here in 0:01:45.360 --> 0:01:48.600 the US, certainly very heightened anxiety in Europe with the 0:01:48.840 --> 0:01:51.960 stress on the auto industry and the chemicals industry and 0:01:52.040 --> 0:01:55.840 so forth. Energy prices, obviously, electricity costs in the US 0:01:55.920 --> 0:01:59.040 becoming a major topic, et cetera, just as big in Europe, 0:01:59.080 --> 0:02:00.760 if not big or especially in the wake of the 0:02:00.840 --> 0:02:04.160 Ukraine War, the shutting off of the nuclear power plants 0:02:04.200 --> 0:02:06.880 in some countries, et cetera. So pretty much everything that 0:02:06.920 --> 0:02:09.480 we're sort of wrestling with here, the right. 0:02:09.400 --> 0:02:12.440 The sort of productivity regulation. 0:02:12.120 --> 0:02:17.040 The splintering of the traditional parties within domestic politics. Our 0:02:17.240 --> 0:02:19.079 parties have a bit more of a monopoly than the 0:02:19.080 --> 0:02:22.280 European ones do, but there's similar stresses going on. So 0:02:22.360 --> 0:02:25.400 anything that we're talking about here, it's very useful to 0:02:25.480 --> 0:02:28.239 see how it comes across from the European line. 0:02:28.280 --> 0:02:30.800 Absolutely, so I'm very happy to say we do, in 0:02:30.800 --> 0:02:33.120 fact have the perfect guest we're going to be speaking 0:02:33.120 --> 0:02:35.400 with Aliren. He is, of course the governor of the 0:02:35.480 --> 0:02:39.120 Bank of Finland. He is also a governing council member 0:02:39.160 --> 0:02:41.520 over at the ECB. So Ollie, thank you so much 0:02:41.520 --> 0:02:42.600 for coming on our thoughts. 0:02:42.760 --> 0:02:45.160 Thanks very much for the newittation. Great to be here. 0:02:45.520 --> 0:02:48.600 So from your seat in Europe, Wait, where are you 0:02:48.600 --> 0:02:50.200 actually based in Europe? Where do you spend most of 0:02:50.240 --> 0:02:50.640 your time? 0:02:51.639 --> 0:02:54.800 I have a do on life, not schizophrenic, do a life. 0:02:54.840 --> 0:02:57.320 I have two home fields, two home terrans. One is 0:02:57.440 --> 0:03:00.720 Hesink Finland. The Bank of Finland is the Central Bank 0:03:00.800 --> 0:03:03.120 of Finland. But we also at the same time we 0:03:03.160 --> 0:03:07.799 are member a member of the Eurosystem and my second 0:03:07.800 --> 0:03:11.120 home terranist Frankfurt and the Governing Council of the ECB. 0:03:11.720 --> 0:03:14.679 And the same goes for the large part of our 0:03:14.840 --> 0:03:17.720 civil servants. Economis and lawyers at the Bank of Finland 0:03:18.240 --> 0:03:21.760 like in the other nineteen national central banks. That's the 0:03:21.760 --> 0:03:23.119 eurosystem perfect. 0:03:23.360 --> 0:03:26.440 So from your seat in Helsinki and Frankfurt, does it 0:03:26.480 --> 0:03:30.040 feel like something's changed within Europe? Does it feel like 0:03:30.120 --> 0:03:33.600 there is the sense that maybe the current time period 0:03:33.680 --> 0:03:34.960 is some sort of opportunity. 0:03:36.120 --> 0:03:39.200 Certainly things have changed in Europe a lot for the 0:03:39.280 --> 0:03:43.760 verses we know because of Russia's unjustified brutal war in Ukraine, 0:03:44.600 --> 0:03:47.720 but second as a wake up to that situation, including 0:03:47.800 --> 0:03:50.760 the impact of President Trump as well. And I would 0:03:50.760 --> 0:03:52.800 say that if you look at the Europe for the moment, 0:03:52.920 --> 0:03:55.480 we have one issue which is above others, and that 0:03:55.640 --> 0:04:00.960 is common defense and spending on common defense, from air 0:04:01.000 --> 0:04:06.280 defenses to drone production and other elements of military technology 0:04:06.600 --> 0:04:11.280 and production. And that's also very much an economic issue. Actually, 0:04:11.280 --> 0:04:14.120 it's a finest opportunity in a sense that the best 0:04:14.240 --> 0:04:19.360 argument for safe assets in Europe is in the defense spending. 0:04:19.600 --> 0:04:23.440 We need both national and European funding. This is, in 0:04:23.480 --> 0:04:26.479 my view, a possibility to pave the way for a 0:04:26.640 --> 0:04:29.040 deep and liquid European capital market. 0:04:29.800 --> 0:04:32.280 That's great, I'm glad you jump right into this question 0:04:32.480 --> 0:04:35.880 of further integration and some of the stakes here, particularly 0:04:35.880 --> 0:04:38.240 as it relates to defense, because this has been something 0:04:38.320 --> 0:04:40.599 that's been on my mind a lot, and I wanted 0:04:40.640 --> 0:04:43.360 to get in with you. When we think about industrial 0:04:43.400 --> 0:04:48.080 capacity or think about industrial competition, scale is really important. 0:04:48.120 --> 0:04:51.000 The size of the market is very important, and this 0:04:51.120 --> 0:04:54.159 is part of the whole premise of the euro Area, 0:04:54.279 --> 0:04:57.599 which is, let's have an integrated market. And yet, on 0:04:57.640 --> 0:05:00.120 the other hand, domestic politics are still a thing I 0:05:00.120 --> 0:05:03.560 have to imagine in defense specifically, there must be a 0:05:03.560 --> 0:05:07.359 lot of anxiety at each individual country. Do we want 0:05:07.440 --> 0:05:11.400 our national maker of X rolled up into some larger 0:05:11.480 --> 0:05:15.720 conglomerate to what degree, whether we're talking about defense or 0:05:15.760 --> 0:05:20.680 other any other industrial any other industrial sector, does there 0:05:20.760 --> 0:05:25.200 still remain attention between the scale required for competitiveness and 0:05:25.240 --> 0:05:29.120 the desire for some sovereignty within each country to have 0:05:29.320 --> 0:05:31.360 their maker of X or y. 0:05:32.600 --> 0:05:35.159 Yes, there is that tenstone. But that's why we do, 0:05:35.800 --> 0:05:38.400 we make policy, and that's why we try to change 0:05:38.400 --> 0:05:42.039 things in Europe. Actually, that brings to my mind an 0:05:42.080 --> 0:05:46.360 anecdote concerning precisely common defense. How things have changed. Okay, 0:05:46.720 --> 0:05:51.000 the country I know best, Finland in NATO in April 0:05:51.240 --> 0:05:55.680 twenty twenty three, and I recall my own time in 0:05:55.760 --> 0:06:00.559 military service in the early nineteen eighties in the SUBBA 0:06:00.640 --> 0:06:03.920 Brigade in eastern Finland, in the city which used to 0:06:03.920 --> 0:06:06.359 be the headquarters of US and manner Him during the 0:06:06.360 --> 0:06:12.200 Winter War. Today that garrison area is actually a regional 0:06:12.440 --> 0:06:16.400 sub headquarters of NATO. So you see the change in 0:06:16.920 --> 0:06:20.720 terms of defense in dissic caard in northern Europe. Talking 0:06:20.760 --> 0:06:25.200 about economies of scale, yes, we lack a genuine single 0:06:25.240 --> 0:06:29.320 market in many areas like services and to some extent capital, 0:06:29.880 --> 0:06:32.480 and that's why we are very committed to move forward with, 0:06:32.680 --> 0:06:36.640 for instance, the Savings an Investment Union, which aims at 0:06:37.120 --> 0:06:42.880 transforming the formidable savings of Europeans ten trillion. That's the 0:06:43.000 --> 0:06:50.400 estimate to productive investment by some kind of say popular capitalism. That's, 0:06:50.560 --> 0:06:54.000 in my view, one essential element of creating a more 0:06:54.080 --> 0:06:57.120 unified Europe and creating a more competitive Europe. 0:06:57.440 --> 0:06:59.720 The other thing, when it comes to building up a 0:07:00.080 --> 0:07:03.440 fence industry that is sometimes debated is this idea of 0:07:03.640 --> 0:07:07.839 should you spend money on investing in defense programs or 0:07:07.880 --> 0:07:10.760 should you spend money, you know, buying the products that 0:07:10.800 --> 0:07:14.520 these defense companies are actually producing because what's the point 0:07:14.600 --> 0:07:17.480 of building out this massive capacity if you don't have 0:07:17.640 --> 0:07:21.760 a dependable customer for the foreseeable future. How would you 0:07:21.880 --> 0:07:26.240 structure that sort of spending to make sure that it's durable, 0:07:26.360 --> 0:07:27.360 I guess and effective. 0:07:28.280 --> 0:07:31.360 That's a very critical question in the European context, and 0:07:31.600 --> 0:07:37.440 that's why as we are conducting joint European funding exercises 0:07:37.640 --> 0:07:41.640 in this like the one hundred and fifty billion euro 0:07:41.960 --> 0:07:46.120 Safe Instrument by the European Commission, it's a sense that 0:07:46.200 --> 0:07:51.600 we purchase those arms and arms technologies by common procurement 0:07:52.280 --> 0:07:57.680 and by investing in joint research and innovation projects. That's 0:07:57.720 --> 0:08:00.840 the way to get more bank for the euro and 0:08:00.960 --> 0:08:03.520 that's now the effort which the European countries and the 0:08:03.520 --> 0:08:06.600 Commission are engaged with. In fact, it is clear, it's 0:08:06.680 --> 0:08:09.000 quite clear that we are going to in Europe. We 0:08:09.040 --> 0:08:13.920 are going to purchase both say domestic European products and 0:08:14.000 --> 0:08:18.040 also American products. In some areas the US is more advanced. 0:08:18.640 --> 0:08:22.840 For instance, Finland is purchasing sixty four if thirty five 0:08:23.440 --> 0:08:28.200 to replace our existing fleet of sixty four eighteens which 0:08:28.280 --> 0:08:30.160 date from the early nineteen nineties. 0:08:30.680 --> 0:08:34.480 How costly is it I guess, to put it bluntly, 0:08:34.520 --> 0:08:37.200 I don't know that the US is not the reliable 0:08:37.240 --> 0:08:39.360 trading partner it might have seemed to be. I mean, 0:08:39.400 --> 0:08:41.199 I know there's still a lot of trading you just mentioned, 0:08:41.360 --> 0:08:44.600 you know, replaced the plain fleet, et cetera. But clearly 0:08:44.760 --> 0:08:46.800 we all read the news, we all know what's going on. 0:08:47.160 --> 0:08:50.160 How costly is it for Europe? And do you perceive 0:08:50.440 --> 0:08:55.760 there to be a lot of frankly unnecessary duplications of 0:08:55.920 --> 0:09:01.920 investment efforts across the Atlantic currently because of trade tensions. 0:09:02.880 --> 0:09:06.520 We do expect that, and that's having a negative impact 0:09:06.559 --> 0:09:10.760 on productivity and thus on the economy, growth and well being. 0:09:11.960 --> 0:09:14.880 As far as the impact of US tariffics is concerned, 0:09:15.040 --> 0:09:17.720 we have tried to estimate that. It's a bit difficult, 0:09:17.960 --> 0:09:21.080 as policy making is fairly volatile, so it depends on 0:09:21.120 --> 0:09:25.839 the day or the week when you take the cutoff data. 0:09:26.040 --> 0:09:29.160 You know that perhaps, But our estimate, which is roughly 0:09:29.200 --> 0:09:32.199 done on the basis of the current US study PHRASEM, 0:09:32.720 --> 0:09:37.040 is that it will hit growth in the Eurozone roughly 0:09:37.720 --> 0:09:40.920 by half a percent its point next year. But the 0:09:40.960 --> 0:09:45.679 good news is that the European economy is actually demonstrating resilience. 0:09:46.320 --> 0:09:49.400 We are still growing this year, probably around one person 0:09:49.559 --> 0:09:53.720 or so one point two percent, and we are projective 0:09:53.800 --> 0:09:57.200 to grow by one point three percent in the next 0:09:57.200 --> 0:10:02.240 two years despite the headwinds of geopolitical tensions and thirty 0:10:02.320 --> 0:10:03.160 for wars. 0:10:03.440 --> 0:10:06.080 So you wrote something for Vox a few months ago 0:10:06.160 --> 0:10:10.560 called Europe must not Waste its currency moment, and you know, 0:10:11.400 --> 0:10:14.520 reading it, it sounds very much like there's perhaps an 0:10:14.520 --> 0:10:18.920 ambition to maybe replace some of the influencer, some of 0:10:18.920 --> 0:10:22.040 the global role of currently fulfilled by the US and 0:10:22.080 --> 0:10:25.360 the dollar with the Euro. Is that how we should 0:10:25.400 --> 0:10:29.280 be reading it? Is there like a conscious effort underway 0:10:29.320 --> 0:10:32.319 currently to expand the Euro's influence in the world. 0:10:34.240 --> 0:10:39.679 There is a deliberate, conscious effort to enhance the Euro's 0:10:41.000 --> 0:10:46.920 global role in the currently changing international monetary system. And 0:10:47.080 --> 0:10:49.760 if I put the background first, I think you're seeing 0:10:50.040 --> 0:10:52.960 the interestional monetary system or the global financial system in 0:10:53.440 --> 0:10:58.520 transformation for the moment, and you have two main drivers 0:10:58.559 --> 0:11:02.280 in broad sense. On one hand, the geopolitical confrontation and 0:11:02.480 --> 0:11:05.640 on the other hand, we have a technological disruption thanks 0:11:05.640 --> 0:11:11.200 to digital assets, stable coins, central bank digital currencies. How 0:11:11.240 --> 0:11:14.000 this will play out will be quite crucial as to 0:11:14.120 --> 0:11:18.000 the evolution of the monetary system. Concerning the geopolitical competition, 0:11:18.280 --> 0:11:22.400 we see China's efforts to strengthen the role of remimbiod 0:11:22.480 --> 0:11:26.080 or the yuan, for instance, with the rodent built initiative 0:11:26.640 --> 0:11:31.080 and linking trade agreements to an enhanced roll of the yuan. 0:11:32.720 --> 0:11:35.920 And there is a major but there are still capital 0:11:35.960 --> 0:11:39.719 controls in China, and there is no legal certainty in 0:11:39.840 --> 0:11:44.520 China in the western sense, so that creates quite significant 0:11:44.520 --> 0:11:49.120 limitations for the Remember, in the technological site, we've seen 0:11:49.200 --> 0:11:54.000 the growth of stable coins. More recently, we've seen certain 0:11:54.080 --> 0:11:58.080 volatility of cryptos last week, classified days just a little yes, 0:11:58.120 --> 0:12:02.560 And for instance stable coins, they are clearly intended to 0:12:02.679 --> 0:12:06.520 increase demand for US treasuries to feel the federal deficit 0:12:06.640 --> 0:12:10.440 of the United States of America and thus to enhance 0:12:10.720 --> 0:12:13.720 the roll of US dollar and US dollar dominance. I 0:12:13.800 --> 0:12:17.680 believe that on the basis of historical experience, let's say, 0:12:18.559 --> 0:12:21.400 for instance, by the writings of Professor Barry ahen Green 0:12:21.480 --> 0:12:25.120 of the Berkeley that historical shifts in the international monitary 0:12:25.160 --> 0:12:28.000 system take place slowly and on the basis of the 0:12:28.040 --> 0:12:32.320 structural chances in the economy and security structures. That's why 0:12:32.360 --> 0:12:35.600 I believe that US dollar dominance will prevail for quite long, 0:12:36.280 --> 0:12:42.600 perhaps less as a single unipolar hegemon in the monetary 0:12:42.600 --> 0:12:47.400 system than before, and we may move towards a more 0:12:47.720 --> 0:12:52.360 multipolar monetary system and their Europe can have a significant 0:12:52.400 --> 0:12:57.199 reserve on the condition that we can strengthen the foundations 0:12:57.200 --> 0:13:02.120 of the European economy in security, in terms of economic dynamic. 0:13:02.640 --> 0:13:03.240 In terms of. 0:13:05.559 --> 0:13:09.240 When it comes to economic dynamism, people are pretty pessimistic 0:13:09.400 --> 0:13:13.160 about Europe these days. They look at an industrial sector 0:13:13.960 --> 0:13:18.400 that is maybe being hobbled by a competition with China. 0:13:18.640 --> 0:13:22.840 They see the country, the various countries is not being 0:13:23.000 --> 0:13:27.640 at the forefront of the AI investments with tech in general, 0:13:27.720 --> 0:13:31.800 there's a perception that the economies are still overregulated, it's 0:13:31.800 --> 0:13:34.720 not a great place to have a startup and so forth. 0:13:35.040 --> 0:13:38.200 What is the sort of the Bowld case or maybe 0:13:38.240 --> 0:13:41.840 the sales pitch for sort of the euro inc the 0:13:41.880 --> 0:13:45.800 European economy, where does growth come from in the dynamic 0:13:46.160 --> 0:13:46.960 durable manner. 0:13:47.920 --> 0:13:51.439 There is a Wybrant stop community for instance in Finland. 0:13:51.840 --> 0:13:54.480 Finland is actually Finland's probably the exception you do hear 0:13:54.520 --> 0:13:56.559 about finished startups speed credit. 0:13:56.320 --> 0:14:00.440 In France, many other We actually we have a vibrant 0:14:00.520 --> 0:14:05.720 startup community in Europe. By the way, welcome to Slush, 0:14:06.080 --> 0:14:08.280 even though I'm not the organizer, but Slush is the 0:14:09.360 --> 0:14:12.520 well known major conference in inheriting Ky. 0:14:12.640 --> 0:14:15.640 We love to come to November. Introduce us next the 0:14:15.720 --> 0:14:17.320 major we love to come. 0:14:17.440 --> 0:14:20.720 That's the major startup that found great global startup even 0:14:20.840 --> 0:14:24.160 since early twenty tens. Okay, it's good to know the 0:14:24.240 --> 0:14:27.240 name Slush comes from November because you have so much 0:14:27.480 --> 0:14:31.440 slash in November. So that's why it's for slush. But 0:14:31.720 --> 0:14:34.360 it's a very bright event in the darkest. 0:14:34.400 --> 0:14:36.520 Why it goes into the saunas the rest of the 0:14:36.720 --> 0:14:38.000 time to get out of the slush. 0:14:38.320 --> 0:14:40.520 Yeah, well I do it twelve months per year, a 0:14:40.640 --> 0:14:41.560 few times per week. 0:14:41.840 --> 0:14:44.840 Sounds great, not bad, not bad. 0:14:45.320 --> 0:14:48.280 But even more seriously so, we have startups, We have 0:14:48.800 --> 0:14:52.120 some unicorns. But the general challenge in Europe is that 0:14:52.360 --> 0:14:55.760 in the scale up phase, many companies choose the US 0:14:55.800 --> 0:14:58.280 a Silicon Valley or or New York Stock Exchange or 0:14:58.400 --> 0:15:01.640 combination of both, because it's easier to get winsor capital. 0:15:01.960 --> 0:15:06.000 You have a large market which is culturally fairly similar, 0:15:06.040 --> 0:15:10.680 even though there are certain differences between California and think 0:15:10.880 --> 0:15:15.840 California and yeah, say South Carolina, right, yes, Okay, So 0:15:16.200 --> 0:15:20.760 in any case, it's the scale of phase and internationalization 0:15:20.880 --> 0:15:23.240 phase where we have to do better. And that's why, 0:15:23.280 --> 0:15:27.080 for instance, our government's efforts to enhance growth in Finland 0:15:27.160 --> 0:15:31.480 are films focused on funding of scale ups and growth companies. 0:15:47.400 --> 0:15:51.640 So when I think about a business being competitive, especially 0:15:51.640 --> 0:15:53.840 in the areas that people seem to be very excited 0:15:53.880 --> 0:15:58.400 about nowadays, things like AI data centers, I guess defense nowadays, 0:15:59.000 --> 0:16:03.440 I think about one aspect of competitiveness is price right, 0:16:03.480 --> 0:16:06.440 and if your input costs are higher than a lot 0:16:06.440 --> 0:16:09.080 of other people, then you're going to struggle to provide 0:16:09.120 --> 0:16:11.800 these things at a low cost. And in Europe the 0:16:11.840 --> 0:16:15.920 big input cost that people seem to struggle with is energy. Right, 0:16:16.880 --> 0:16:20.640 How in the world does Europe start to compete in 0:16:20.720 --> 0:16:24.920 terms of global competitiveness with energy prices so high? And 0:16:25.000 --> 0:16:26.160 what can you do about it? 0:16:27.360 --> 0:16:29.480 We have to go back. I have to go back 0:16:29.520 --> 0:16:33.880 to Finland metaphysically, mentally now again because we have an 0:16:34.000 --> 0:16:38.400 x number of data center investments coming in Finland, mostly 0:16:38.480 --> 0:16:42.320 with foreign direct investment thanks to the combination of relatively 0:16:42.800 --> 0:16:48.880 inexpensive electricity and relatively cool climate, which is conducive for 0:16:49.680 --> 0:16:54.680 data centers. So in that sense, there are differences within 0:16:54.760 --> 0:16:58.960 Europe as well. The key is very much to continue 0:16:59.040 --> 0:17:05.160 the green transition with consistency. For the moment, still, countries 0:17:05.240 --> 0:17:09.399 like Germany are suffering from higher electricity and energy costs. 0:17:09.600 --> 0:17:13.359 That is true largely because Germany was so dependent on 0:17:13.720 --> 0:17:18.679 Russian fossil fuel, especially because its energy intensive chemical and 0:17:18.800 --> 0:17:23.120 other industries who have been so dependent. But the green 0:17:23.160 --> 0:17:27.560 transition is moving forward. We lean much more on renewable 0:17:27.640 --> 0:17:33.040 energy than before. Of course, energy efficiency and smart electricity 0:17:33.040 --> 0:17:36.640 systems play also a key role here, and I would 0:17:36.680 --> 0:17:41.200 expect that this green transition will be I mean not concluded, 0:17:41.280 --> 0:17:44.440 but will be very far by the end of this decade, 0:17:44.600 --> 0:17:47.880 so that we have a much more competitive condition in Europe. 0:17:48.119 --> 0:17:52.919 In this card, I had one thing. Often, when you 0:17:53.000 --> 0:17:56.680 compare fossil energy and you compare you compare fossil energy 0:17:56.720 --> 0:18:02.959 to say, renewable energy. The capital costs in renewables are 0:18:03.040 --> 0:18:09.040 often higher, like say investing in wind parks or solo energy, 0:18:09.520 --> 0:18:13.240 but the running costs are quite low. Meanwhile, in fossil 0:18:13.280 --> 0:18:15.720 fuels it's often let's say the reverse, or that the 0:18:15.720 --> 0:18:18.239 capital costs sign not that's huge, but you have very 0:18:18.240 --> 0:18:22.320 significant running costs. So once you are far enough in 0:18:22.520 --> 0:18:26.680 the green transistion preferably supplemented by nuclear enocy in my view, 0:18:26.920 --> 0:18:31.280 than our cost competitiveness in terms of energy will also 0:18:31.359 --> 0:18:32.240 be what's better. 0:18:32.640 --> 0:18:35.560 It sounds like the solution to some of what l's 0:18:35.560 --> 0:18:37.560 Europe is that everyone needs to be more like Finland. 0:18:37.720 --> 0:18:41.160 Sounds like you guys haven't figured out and everyone else 0:18:41.320 --> 0:18:43.239 in Europe needs to be more like that. 0:18:43.320 --> 0:18:43.399 No. 0:18:43.800 --> 0:18:47.280 For really, when it comes to broad like like industrial pressure, 0:18:47.800 --> 0:18:50.399 can you like attribute and maybe this is more of 0:18:50.400 --> 0:18:53.040 a German specific question, but I think it probably applies 0:18:53.400 --> 0:18:57.760 more broadly. Is it possible to decompose the degree to 0:18:57.800 --> 0:19:02.879 which competition with China, especially things like chemicals. China's very 0:19:02.880 --> 0:19:07.119 competitive chemicals, though it doesn't get much attention obviously, cars 0:19:07.160 --> 0:19:09.600 globally is just a huge story when you look at 0:19:09.640 --> 0:19:12.040 like sort of the sputtering out of industrial production in 0:19:12.119 --> 0:19:15.640 Germany or just you'ree More broadly, it's possible to decompose 0:19:15.680 --> 0:19:18.919 how much of it is undercutting on price from China 0:19:19.080 --> 0:19:23.280 versus the higher costs that have surged particularly since early 0:19:23.320 --> 0:19:24.040 twenty twenty two. 0:19:24.760 --> 0:19:27.520 Wells, it is possible, but I don't have the figures 0:19:28.640 --> 0:19:32.040 of the cuff. But I recall that in twenty twenty two, 0:19:32.280 --> 0:19:36.080 which was the high point of energy costs in Europe, 0:19:36.080 --> 0:19:37.959 So we calculated with a friend of mine, and then 0:19:38.000 --> 0:19:41.919 we verified that by our economists that year Europe paid 0:19:41.960 --> 0:19:47.439 eight hundred billion euros for fossil fuels instead of the 0:19:47.520 --> 0:19:51.120 long term average of three hundred So we paid five 0:19:51.240 --> 0:19:56.480 hundred six hundred billion euros more that year, which then 0:19:57.040 --> 0:20:01.920 was roughly three percent of CDP. So in twenty two 0:20:02.280 --> 0:20:05.159 we had you can say that it was kind of 0:20:05.240 --> 0:20:10.760 an extra tax over every European of three percent of 0:20:10.800 --> 0:20:14.680 the income on average, which of course created quite a 0:20:14.720 --> 0:20:19.320 lot of popular opposition and criticism. Fortunately we have been 0:20:19.800 --> 0:20:23.560 it's not actually about fortunate, it's about political will and action. 0:20:24.400 --> 0:20:29.280 We have been able to broadly adds to the end 0:20:29.320 --> 0:20:33.919 of Russian gas in Europe, but we still have some 0:20:34.040 --> 0:20:37.560 work to do in many countries. You mentioned Germany. Germany 0:20:37.680 --> 0:20:39.760 still has a work to do in order to reduce 0:20:39.800 --> 0:20:43.120 its en itsy costs in its industrial production. 0:20:44.160 --> 0:20:46.880 If you could waive a magic wand and do one 0:20:47.040 --> 0:20:54.160 thing to boost European either productiveness, productivity or competitiveness. Basically 0:20:54.200 --> 0:20:57.480 make all of Europe more like Finland. What would it 0:20:57.520 --> 0:21:01.280 be other than installing saunas and everyone's house that's a 0:21:01.320 --> 0:21:04.760 good idea actually even though fairly electricity. 0:21:04.840 --> 0:21:06.720 Let's not hope it would be energy. 0:21:06.640 --> 0:21:11.280 Depending depending if you use electricity or would in heating. 0:21:11.320 --> 0:21:13.720 I have both in the summer credits. Its would by 0:21:13.720 --> 0:21:20.040 the way, most seriously, most seriously, if I could do 0:21:20.160 --> 0:21:23.119 one thing, I would complete the single market without the 0:21:23.200 --> 0:21:28.760 delay and also create a genuine savings and Investment Union 0:21:29.640 --> 0:21:32.920 with a deep and liquid capital market, because this would 0:21:32.920 --> 0:21:36.240 help address the challenge of venture capital and financing of 0:21:36.440 --> 0:21:39.080 European startups and growth companies. 0:21:39.720 --> 0:21:42.440 What would it do? What would that sort of cohesive 0:21:42.880 --> 0:21:45.240 market do that you can't do right now at a 0:21:45.320 --> 0:21:50.040 national level? Would it just lower capital costs for everyone? 0:21:50.160 --> 0:21:54.639 Or for instance, concerning the Savings and Investment Union, you 0:21:54.680 --> 0:21:57.119 have actually a long list of concrete decisions that it 0:21:57.160 --> 0:22:00.600 will require. But the key things are in many ways, 0:22:00.600 --> 0:22:06.240 to have a safe asset, a European safe asset, which 0:22:06.240 --> 0:22:11.520 would facilitate the creation of genuine European capital market. And 0:22:11.560 --> 0:22:16.119 then in addition to that, there are quite reasonable proposals 0:22:16.359 --> 0:22:22.600 of creating either tax incentives or other decisions that encourage 0:22:22.640 --> 0:22:27.600 people to invest, people meaning individual citizens and households. Sweden 0:22:27.640 --> 0:22:30.040 actually is a very good example of this, so that 0:22:30.119 --> 0:22:33.000 in Sweden, for instance, you have a certain portion of 0:22:33.280 --> 0:22:38.600 your retirement payments that you have to invest to the 0:22:38.600 --> 0:22:42.280 stock market or funds oh I see yeh, which has 0:22:42.320 --> 0:22:46.480 helped to create a culture of investment in Sweden. And 0:22:46.600 --> 0:22:49.639 we are actually even though Finland was mentioned as a 0:22:49.720 --> 0:22:52.919 role model, but we are benchmarking in Sweden in basic 0:22:52.920 --> 0:22:55.639 card because they have the most vibrant to answer capital market. 0:22:55.680 --> 0:22:59.600 Also thanks to this quite well functioning capital market. 0:22:59.560 --> 0:23:02.000 It makes total sense that you know, I think of 0:23:02.880 --> 0:23:06.480 the Euro Area of the whatever version of it we 0:23:06.520 --> 0:23:09.280 want to talk about, is it's an ongoing project. It's 0:23:09.320 --> 0:23:11.840 always a work in progress. It will probably never be 0:23:12.200 --> 0:23:16.760 completely finished. There's always more to do. But this to 0:23:16.880 --> 0:23:19.639 my mind gets to the sort of like the challenge 0:23:19.680 --> 0:23:22.560 of domestic politics, right and like we also see what's 0:23:22.560 --> 0:23:26.440 happening here. We're October sixteenth, our government is shut down. 0:23:26.480 --> 0:23:30.320 But it feels like various versions of this stress are 0:23:30.560 --> 0:23:35.440 replicating themselves across the sort of rich developed Western countries. France, 0:23:35.520 --> 0:23:38.320 their government always seems to be like two weeks away 0:23:38.320 --> 0:23:40.960 from collapsing. Who knows if they'll have a government. I 0:23:40.960 --> 0:23:43.399 don't know if Belgium has a government these days. I 0:23:43.400 --> 0:23:45.520 think the Dutch have an election coming up. Who knows 0:23:45.520 --> 0:23:49.120 what's happening there. If you look at polls in Germany, 0:23:49.240 --> 0:23:51.639 we all know that parties like the AfD, which are 0:23:51.680 --> 0:23:55.119 in a very different trajectory, are doing very well in 0:23:55.160 --> 0:23:58.560 the polls there, etc. Like how much of the Yeah, 0:23:58.560 --> 0:24:01.520 it's great to say, like people here in d C 0:24:01.800 --> 0:24:04.800 these conferences and here Bloomberg, I love the idea of 0:24:04.840 --> 0:24:08.399 like integrated market, but how much is the roadblock that 0:24:08.520 --> 0:24:11.439 you foresee to get to where you want? Essentially the 0:24:11.440 --> 0:24:15.280 reality of domestic electoral politics in each of the member countries. 0:24:16.800 --> 0:24:19.520 It's a continuous silence. And you're right. So when you 0:24:19.560 --> 0:24:22.679 said that Europe or the European Union or Eurozone is 0:24:22.760 --> 0:24:27.479 a community or community of states that is in constant movement, 0:24:27.680 --> 0:24:29.840 I would wish that it would be in a more 0:24:30.200 --> 0:24:33.800 rapid movement, but it is indeed an unfinished business and 0:24:33.840 --> 0:24:36.199 will continue to be. So that's why it is actually 0:24:36.240 --> 0:24:39.560 so so fascinating and meaningful to work for Europe on 0:24:39.680 --> 0:24:43.960 these two brief points. First, the political battles or the 0:24:43.960 --> 0:24:48.600 political competition of the souls of the people are done 0:24:49.280 --> 0:24:52.639 in Europe in the member states. Yeah, national politics are 0:24:52.720 --> 0:24:55.200