WEBVTT - Eurogroup President Paschal Donohoe On Economic Outlook, Risks of Trump Return

0:00:00.040 --> 0:00:02.320
<v Speaker 1>Pascal Dona, Who, President of euro Group in Irelands, Minister

0:00:02.360 --> 0:00:05.000
<v Speaker 1>of Public Expenditure, thank you for joining us. We've had

0:00:05.000 --> 0:00:08.240
<v Speaker 1>a couple of days of huge market volatility, partly due

0:00:08.280 --> 0:00:10.559
<v Speaker 1>to fears about a slowing economy in the US. How

0:00:10.640 --> 0:00:12.280
<v Speaker 1>much of a concern is that to you and your

0:00:12.280 --> 0:00:13.840
<v Speaker 1>colleagues and the Eurogroup.

0:00:13.560 --> 0:00:16.640
<v Speaker 2>So will continue to monitor developments that are taking place

0:00:16.680 --> 0:00:19.599
<v Speaker 2>in America from Afar and this side of the Atlantic.

0:00:19.880 --> 0:00:22.920
<v Speaker 2>It looks to us that we've seen in the American

0:00:22.960 --> 0:00:26.680
<v Speaker 2>economy that has grown so strongly in the aftermath of

0:00:26.840 --> 0:00:30.440
<v Speaker 2>the pandemic. It's had rates of growth, rates of employment

0:00:30.520 --> 0:00:34.199
<v Speaker 2>growth that have been so impressive. It appears to me

0:00:34.840 --> 0:00:37.800
<v Speaker 2>the outlook for the American economy will continue to be

0:00:37.840 --> 0:00:41.199
<v Speaker 2>strong and continue to be positive. But I know markets

0:00:41.320 --> 0:00:46.040
<v Speaker 2>react very strongly to changes nuance and tone from policymakers.

0:00:46.720 --> 0:00:49.400
<v Speaker 2>But certainly from our point of view, if we look

0:00:49.440 --> 0:00:52.760
<v Speaker 2>at the recent performance of the American economy in terms

0:00:52.840 --> 0:00:56.440
<v Speaker 2>of employment and outputs, it continues to look very positive

0:00:56.840 --> 0:01:00.360
<v Speaker 2>and we think this ample opportunity for further trade and

0:01:00.440 --> 0:01:04.720
<v Speaker 2>further positive economic engagement with the US if the politics

0:01:04.720 --> 0:01:05.759
<v Speaker 2>continue to allow us.

0:01:06.400 --> 0:01:08.960
<v Speaker 1>Is there a risk from the strength of the US

0:01:09.000 --> 0:01:11.640
<v Speaker 1>economy being detrimental to the Euro Area.

0:01:11.720 --> 0:01:16.240
<v Speaker 2>Well, there's always risks when we see really important trading

0:01:16.319 --> 0:01:20.520
<v Speaker 2>partners have a change in their economic outlook. So whether

0:01:20.560 --> 0:01:23.640
<v Speaker 2>it be America, whether the other parts of the global economy,

0:01:23.680 --> 0:01:27.640
<v Speaker 2>if their economic outlook begins to change, of course that

0:01:27.680 --> 0:01:31.480
<v Speaker 2>can have an effect, particularly on such an important trading

0:01:31.560 --> 0:01:36.600
<v Speaker 2>partner as Europe as in America. But again I would

0:01:36.640 --> 0:01:38.800
<v Speaker 2>just go back to the medium term outlook for the

0:01:38.800 --> 0:01:42.720
<v Speaker 2>American economy. It continues to look really positive. Their performance

0:01:42.760 --> 0:01:46.200
<v Speaker 2>in the aftermath of the pandemic has been so strong

0:01:46.520 --> 0:01:50.600
<v Speaker 2>in terms of employment growth and economic growth itself, and

0:01:50.640 --> 0:01:54.760
<v Speaker 2>despite the volatility in markets in recent days, my own

0:01:54.800 --> 0:01:58.640
<v Speaker 2>sense is that performance and that outlook continues to be there.

0:01:58.960 --> 0:02:01.440
<v Speaker 1>Part of the effect of the market termol, though, has

0:02:01.480 --> 0:02:04.560
<v Speaker 1>been markets pricing in more rate cuts from the European

0:02:04.640 --> 0:02:07.760
<v Speaker 1>Central Bank. Would further rate cuts be welcome in your viewer?

0:02:07.920 --> 0:02:11.000
<v Speaker 1>Are they a signal of weakness in the Euro Area economy.

0:02:11.480 --> 0:02:14.120
<v Speaker 2>Well, that's the decision very much for the European Central

0:02:14.120 --> 0:02:18.359
<v Speaker 2>Bank to make, and we always respect as Finance Minister

0:02:18.440 --> 0:02:22.359
<v Speaker 2>as their independence in decisions they make. But I think

0:02:22.440 --> 0:02:25.680
<v Speaker 2>their indication is that they believe we are going in

0:02:26.200 --> 0:02:29.399
<v Speaker 2>broadly in the right direction with regard to inflation. That'll

0:02:29.400 --> 0:02:33.440
<v Speaker 2>continue to monitor us and if that journey with inflation continues,

0:02:34.160 --> 0:02:38.000
<v Speaker 2>that will have positive consequences then for decisions they make.

0:02:38.480 --> 0:02:41.639
<v Speaker 2>I think that can only help where we are in

0:02:41.720 --> 0:02:45.960
<v Speaker 2>our ability to increase growth within Europe. And if I

0:02:46.040 --> 0:02:48.680
<v Speaker 2>look at the project that we need to deliver here

0:02:48.720 --> 0:02:52.600
<v Speaker 2>in Europe, it's about how we can improve our growth

0:02:52.680 --> 0:02:56.760
<v Speaker 2>performance as we have been successful in getting inflation down

0:02:57.400 --> 0:03:00.880
<v Speaker 2>and regardless of what happens in other parts of the world, Stephen,

0:03:01.160 --> 0:03:03.120
<v Speaker 2>that's the journey that we need to continue on.

0:03:03.440 --> 0:03:05.760
<v Speaker 1>Well, one of the issues that you raised after the

0:03:05.840 --> 0:03:08.799
<v Speaker 1>last YUR Group meeting in July was the issue of

0:03:09.120 --> 0:03:13.959
<v Speaker 1>sustainable fiscal consolidation. Gradual and sustained was the language that

0:03:14.040 --> 0:03:16.720
<v Speaker 1>you used. What was needed in the euro Area. What

0:03:16.760 --> 0:03:19.399
<v Speaker 1>does that look like in practical terms.

0:03:19.760 --> 0:03:23.040
<v Speaker 2>What it looks like practically is the very big energy

0:03:23.160 --> 0:03:29.160
<v Speaker 2>support measures that were in place in different national economies

0:03:29.200 --> 0:03:32.400
<v Speaker 2>when inflation was so high that they need to be

0:03:32.480 --> 0:03:37.640
<v Speaker 2>phased out and entirely removed. In twenty twenty five, we

0:03:37.880 --> 0:03:42.720
<v Speaker 2>have across so many economies at the moment fiscal measures

0:03:42.760 --> 0:03:46.560
<v Speaker 2>that were but in place true taxation and true expenditure

0:03:47.400 --> 0:03:51.920
<v Speaker 2>with the aim of offsetting the impact of high energy pricing.

0:03:52.840 --> 0:03:55.640
<v Speaker 2>As we have seen inflation come down and as we

0:03:55.760 --> 0:03:58.920
<v Speaker 2>have seen the cost of energy come down. Practically with

0:03:59.080 --> 0:04:02.400
<v Speaker 2>that now means is those support measures that were in

0:04:02.440 --> 0:04:05.160
<v Speaker 2>place that were meant to be temporary come to an

0:04:05.280 --> 0:04:07.720
<v Speaker 2>end next year. And if they come to an end,

0:04:08.160 --> 0:04:13.080
<v Speaker 2>that in turn will create the opportunity for deficits across

0:04:13.120 --> 0:04:15.960
<v Speaker 2>the Euro Area in twenty twenty five to come down again.

0:04:16.279 --> 0:04:18.480
<v Speaker 2>So that's the big practical next step that we need

0:04:18.520 --> 0:04:18.920
<v Speaker 2>to deliver.

0:04:19.240 --> 0:04:21.640
<v Speaker 1>There's the political realities of that as well, though, and

0:04:21.640 --> 0:04:24.480
<v Speaker 1>in countries like France, for example, where we're in sort

0:04:24.480 --> 0:04:27.520
<v Speaker 1>of political stasis. Is it going to be possible for

0:04:27.600 --> 0:04:30.560
<v Speaker 1>countries like France to achieve that aim? Are you worried

0:04:30.560 --> 0:04:32.560
<v Speaker 1>about the French public finances?

0:04:33.040 --> 0:04:36.520
<v Speaker 2>So my view is if you look at the Euro

0:04:36.640 --> 0:04:41.120
<v Speaker 2>Area budget outlook, and even if you look at the

0:04:41.160 --> 0:04:45.160
<v Speaker 2>outlook of economies such as the French economy, I'm very

0:04:45.200 --> 0:04:48.680
<v Speaker 2>confident in the stability of their public finances and the

0:04:48.680 --> 0:04:52.920
<v Speaker 2>stability of the Euro Area overall. Of course, in order

0:04:52.960 --> 0:04:56.360
<v Speaker 2>for a budget to be passed within the French Parliament,

0:04:56.400 --> 0:04:58.840
<v Speaker 2>there needs to be a government in place, and there

0:04:58.880 --> 0:05:02.359
<v Speaker 2>needs to be the policy consensus to implement that budget.

0:05:02.960 --> 0:05:05.200
<v Speaker 2>And look, that work is underway, and I'm sure we'll

0:05:05.240 --> 0:05:09.120
<v Speaker 2>only intensify in the aftermath of the Olympics. But overall,

0:05:09.279 --> 0:05:13.040
<v Speaker 2>I am very confident in the outlook of the euro

0:05:13.240 --> 0:05:17.920
<v Speaker 2>Area deficits and our ability to manage that. And I

0:05:17.960 --> 0:05:20.640
<v Speaker 2>also believe that in our bigger economy, such as the

0:05:20.640 --> 0:05:25.000
<v Speaker 2>French economy, over time we will have the ability to

0:05:25.040 --> 0:05:27.640
<v Speaker 2>see those levels of borrowing go back to a more

0:05:27.680 --> 0:05:28.359
<v Speaker 2>normal place.

0:05:28.720 --> 0:05:30.880
<v Speaker 1>Do you see a risk though, that markets might not

0:05:30.960 --> 0:05:35.040
<v Speaker 1>be as optimistic as you are in seeing that situation improving.

0:05:35.640 --> 0:05:39.320
<v Speaker 2>I accept that risk is there. We all understand that

0:05:39.360 --> 0:05:44.520
<v Speaker 2>the financial markets monitor these developments very very closely. But

0:05:44.880 --> 0:05:47.920
<v Speaker 2>we are in the early phase of the implementation of

0:05:48.000 --> 0:05:51.280
<v Speaker 2>a new budget framework within the European Union that we've

0:05:51.360 --> 0:05:54.159
<v Speaker 2>all signed up to deliver. I believe the commitment is

0:05:54.200 --> 0:05:57.480
<v Speaker 2>there to deliver that, and as that is delivered, that

0:05:57.560 --> 0:06:01.960
<v Speaker 2>will lead to a gradual reduction in borrowing. But also

0:06:02.080 --> 0:06:04.880
<v Speaker 2>we all appreciate this as something the financial markets do

0:06:05.000 --> 0:06:09.640
<v Speaker 2>monitor and do respond back to in terms of the

0:06:09.760 --> 0:06:14.760
<v Speaker 2>cost of borrowing. Because all finance ministers do recognize that

0:06:14.760 --> 0:06:20.000
<v Speaker 2>that of itself will create a dynamic that allows borrowing

0:06:20.120 --> 0:06:23.560
<v Speaker 2>across next year, in particular to come down gradually and

0:06:23.600 --> 0:06:24.560
<v Speaker 2>to come down credibly.

0:06:24.839 --> 0:06:27.279
<v Speaker 1>One of the other European projects that we've spoken about

0:06:27.279 --> 0:06:30.360
<v Speaker 1>before is the Capital Markets Union. The last time we spoke,

0:06:30.400 --> 0:06:32.160
<v Speaker 1>he says, you weren't concerned about the results of the

0:06:32.200 --> 0:06:36.200
<v Speaker 1>European elections delaying or hindering that process. What's your best

0:06:36.240 --> 0:06:38.880
<v Speaker 1>hope now on a timetable for progress there as we're

0:06:39.160 --> 0:06:42.440
<v Speaker 1>waiting for confirmation of the new European Commission that we.

0:06:42.520 --> 0:06:47.760
<v Speaker 2>See in new European Commission appointed, I hope shortly after

0:06:47.920 --> 0:06:52.360
<v Speaker 2>the summer, and that what will then allow to happen

0:06:52.640 --> 0:06:55.640
<v Speaker 2>is we will have a commissioner in place with particular

0:06:55.680 --> 0:07:01.359
<v Speaker 2>responsibility for capital markets, and that new Commissioner in the

0:07:01.440 --> 0:07:06.799
<v Speaker 2>early part of next year outlines a strengthened action plan

0:07:07.320 --> 0:07:10.680
<v Speaker 2>regarding how we can accelerate progress on the development of

0:07:10.720 --> 0:07:14.040
<v Speaker 2>capital markets. So I believe a majority is there within

0:07:14.080 --> 0:07:17.440
<v Speaker 2>the European Parliament to make that happen, and I'm very

0:07:17.480 --> 0:07:20.200
<v Speaker 2>confident that when the new Commission is but in place

0:07:20.640 --> 0:07:23.560
<v Speaker 2>within a matter of months, we'll see signs of ambition

0:07:23.640 --> 0:07:24.480
<v Speaker 2>to make that happen.

0:07:24.680 --> 0:07:27.280
<v Speaker 1>Would Michael McGuire or former counterpart in the Department of

0:07:27.280 --> 0:07:29.000
<v Speaker 1>Finance be a good candidate for that job.

0:07:30.080 --> 0:07:33.280
<v Speaker 2>Michael would be a great candidate for a job like that,

0:07:33.400 --> 0:07:35.840
<v Speaker 2>and would be a great candidate for any senior role

0:07:36.200 --> 0:07:41.000
<v Speaker 2>within the Commission. Michael has been an excellent minister here

0:07:41.000 --> 0:07:47.720
<v Speaker 2>in Ireland, has made a really strong difference to the

0:07:47.800 --> 0:07:52.280
<v Speaker 2>economy and has done so now in two different senior

0:07:52.360 --> 0:07:56.120
<v Speaker 2>roles within the Government of Ireland. And I'm very confident

0:07:56.240 --> 0:07:59.800
<v Speaker 2>that in that portfolio or any other senior one, that

0:08:00.000 --> 0:08:03.560
<v Speaker 2>Michael would have a very positive impact on the performance

0:08:03.600 --> 0:08:07.480
<v Speaker 2>of the European Union. And I of course, on a

0:08:07.520 --> 0:08:09.960
<v Speaker 2>personal and national level, would love to see that happen.

0:08:10.200 --> 0:08:13.160
<v Speaker 1>Just another international issue that's facing the Euro Area economy

0:08:13.240 --> 0:08:16.800
<v Speaker 1>or could potentially if there's another Donald Trump presidency, if

0:08:16.800 --> 0:08:19.600
<v Speaker 1>that were to materialize after November's election, Do you see

0:08:19.640 --> 0:08:21.920
<v Speaker 1>that as a being risk to the Euro Area economy

0:08:21.920 --> 0:08:24.000
<v Speaker 1>in terms of tariffs.

0:08:23.720 --> 0:08:26.680
<v Speaker 2>That risk is there. It's up to, obviously to the

0:08:26.720 --> 0:08:29.840
<v Speaker 2>American people to decide who they want as their next president.

0:08:30.480 --> 0:08:35.600
<v Speaker 2>But Donald Trump has outlined a very different agenda with

0:08:35.720 --> 0:08:39.000
<v Speaker 2>regard to tariff levels and with regard to trade. But

0:08:39.080 --> 0:08:41.320
<v Speaker 2>as America is deciding what they want to do with

0:08:41.440 --> 0:08:44.640
<v Speaker 2>regard to that, it's why it's so important that we

0:08:44.760 --> 0:08:47.839
<v Speaker 2>here in Europe take our steps to look at how

0:08:47.840 --> 0:08:50.960
<v Speaker 2>we can deepen our own economic foundations to deal with

0:08:51.040 --> 0:08:53.920
<v Speaker 2>that kind of change where it to happen in the US.

0:08:54.800 --> 0:08:58.600
<v Speaker 2>I believe the relationship between Europe and the US is

0:08:58.640 --> 0:09:02.560
<v Speaker 2>one that is important on so many different levels for

0:09:02.679 --> 0:09:05.400
<v Speaker 2>both sides of the Atlantic. But I also believe that

0:09:05.440 --> 0:09:08.840
<v Speaker 2>here in Europe we need to continue to deepen our

0:09:08.880 --> 0:09:13.600
<v Speaker 2>own economic autonomy, to deepen the performance of our economy

0:09:13.640 --> 0:09:16.600
<v Speaker 2>and the strength of our economy here in Europe, so

0:09:16.640 --> 0:09:19.800
<v Speaker 2>that we're in a stronger position to deal with the

0:09:19.880 --> 0:09:22.320
<v Speaker 2>kind of changes that make them out of America. So,

0:09:22.400 --> 0:09:26.240
<v Speaker 2>of course it's a really serious issue that could develop

0:09:26.280 --> 0:09:29.840
<v Speaker 2>across next year, but we here in Europe, I'm confident,

0:09:30.160 --> 0:09:33.480
<v Speaker 2>will be well positioned to be able to continue to

0:09:33.520 --> 0:09:36.199
<v Speaker 2>develop the relationship with the US, but to do with

0:09:36.280 --> 0:09:39.280
<v Speaker 2>in a way that from a European perspective is stronger.

0:09:39.480 --> 0:09:41.439
<v Speaker 1>In your role as a minister in the Irish government,

0:09:41.559 --> 0:09:44.240
<v Speaker 1>is it a particular concern for Ireland given the number

0:09:44.280 --> 0:09:46.280
<v Speaker 1>of US multinationals based in the country.

0:09:46.480 --> 0:09:49.000
<v Speaker 2>Of course, it's something we need to monitor here in Ireland,

0:09:49.000 --> 0:09:51.880
<v Speaker 2>and of course it's an issue that we are aware

0:09:51.920 --> 0:09:54.640
<v Speaker 2>of in terms of changes that could happen from an

0:09:54.640 --> 0:09:58.600
<v Speaker 2>American trade perspective and a differing view they may develop

0:09:59.120 --> 0:10:03.319
<v Speaker 2>regarding foreign direct investment in the years ahead. But all

0:10:03.360 --> 0:10:06.160
<v Speaker 2>I would say, Stephen is the companies that we've had

0:10:06.280 --> 0:10:10.120
<v Speaker 2>located here in Ireland, and in particular American companies have

0:10:10.200 --> 0:10:13.800
<v Speaker 2>been here for many, many decades, and we've developed very

0:10:13.840 --> 0:10:18.000
<v Speaker 2>strong relationships with them, and I'd certainly be very confident

0:10:18.400 --> 0:10:21.600
<v Speaker 2>that we're able to maintain those relationships and maintain their

0:10:21.600 --> 0:10:23.200
<v Speaker 2>strength in the years ahead.