Speaker 1: Pascal Dona, Who, President of euro Group in Irelands, Minister
Speaker 1: of Public Expenditure, thank you for joining us. We've had
Speaker 1: a couple of days of huge market volatility, partly due
Speaker 1: to fears about a slowing economy in the US. How
Speaker 1: much of a concern is that to you and your
Speaker 1: colleagues and the Eurogroup.
Speaker 2: So will continue to monitor developments that are taking place
Speaker 2: in America from Afar and this side of the Atlantic.
Speaker 2: It looks to us that we've seen in the American
Speaker 2: economy that has grown so strongly in the aftermath of
Speaker 2: the pandemic. It's had rates of growth, rates of employment
Speaker 2: growth that have been so impressive. It appears to me
Speaker 2: the outlook for the American economy will continue to be
Speaker 2: strong and continue to be positive. But I know markets
Speaker 2: react very strongly to changes nuance and tone from policymakers.
Speaker 2: But certainly from our point of view, if we look
Speaker 2: at the recent performance of the American economy in terms
Speaker 2: of employment and outputs, it continues to look very positive
Speaker 2: and we think this ample opportunity for further trade and
Speaker 2: further positive economic engagement with the US if the politics
Speaker 2: continue to allow us.
Speaker 1: Is there a risk from the strength of the US
Speaker 1: economy being detrimental to the Euro Area.
Speaker 2: Well, there's always risks when we see really important trading
Speaker 2: partners have a change in their economic outlook. So whether
Speaker 2: it be America, whether the other parts of the global economy,
Speaker 2: if their economic outlook begins to change, of course that
Speaker 2: can have an effect, particularly on such an important trading
Speaker 2: partner as Europe as in America. But again I would
Speaker 2: just go back to the medium term outlook for the
Speaker 2: American economy. It continues to look really positive. Their performance
Speaker 2: in the aftermath of the pandemic has been so strong
Speaker 2: in terms of employment growth and economic growth itself, and
Speaker 2: despite the volatility in markets in recent days, my own
Speaker 2: sense is that performance and that outlook continues to be there.
Speaker 1: Part of the effect of the market termol, though, has
Speaker 1: been markets pricing in more rate cuts from the European
Speaker 1: Central Bank. Would further rate cuts be welcome in your viewer?
Speaker 1: Are they a signal of weakness in the Euro Area economy.
Speaker 2: Well, that's the decision very much for the European Central
Speaker 2: Bank to make, and we always respect as Finance Minister
Speaker 2: as their independence in decisions they make. But I think
Speaker 2: their indication is that they believe we are going in
Speaker 2: broadly in the right direction with regard to inflation. That'll
Speaker 2: continue to monitor us and if that journey with inflation continues,
Speaker 2: that will have positive consequences then for decisions they make.
Speaker 2: I think that can only help where we are in
Speaker 2: our ability to increase growth within Europe. And if I
Speaker 2: look at the project that we need to deliver here
Speaker 2: in Europe, it's about how we can improve our growth
Speaker 2: performance as we have been successful in getting inflation down
Speaker 2: and regardless of what happens in other parts of the world, Stephen,
Speaker 2: that's the journey that we need to continue on.
Speaker 1: Well, one of the issues that you raised after the
Speaker 1: last YUR Group meeting in July was the issue of
Speaker 1: sustainable fiscal consolidation. Gradual and sustained was the language that
Speaker 1: you used. What was needed in the euro Area. What
Speaker 1: does that look like in practical terms.
Speaker 2: What it looks like practically is the very big energy
Speaker 2: support measures that were in place in different national economies
Speaker 2: when inflation was so high that they need to be
Speaker 2: phased out and entirely removed. In twenty twenty five, we
Speaker 2: have across so many economies at the moment fiscal measures
Speaker 2: that were but in place true taxation and true expenditure
Speaker 2: with the aim of offsetting the impact of high energy pricing.
Speaker 2: As we have seen inflation come down and as we
Speaker 2: have seen the cost of energy come down. Practically with
Speaker 2: that now means is those support measures that were in
Speaker 2: place that were meant to be temporary come to an
Speaker 2: end next year. And if they come to an end,
Speaker 2: that in turn will create the opportunity for deficits across
Speaker 2: the Euro Area in twenty twenty five to come down again.
Speaker 2: So that's the big practical next step that we need
Speaker 2: to deliver.
Speaker 1: There's the political realities of that as well, though, and
Speaker 1: in countries like France, for example, where we're in sort
Speaker 1: of political stasis. Is it going to be possible for
Speaker 1: countries like France to achieve that aim? Are you worried
Speaker 1: about the French public finances?
Speaker 2: So my view is if you look at the Euro
Speaker 2: Area budget outlook, and even if you look at the
Speaker 2: outlook of economies such as the French economy, I'm very
Speaker 2: confident in the stability of their public finances and the
Speaker 2: stability of the Euro Area overall. Of course, in order
Speaker 2: for a budget to be passed within the French Parliament,
Speaker 2: there needs to be a government in place, and there
Speaker 2: needs to be the policy consensus to implement that budget.
Speaker 2: And look, that work is underway, and I'm sure we'll
Speaker 2: only intensify in the aftermath of the Olympics. But overall,
Speaker 2: I am very confident in the outlook of the euro
Speaker 2: Area deficits and our ability to manage that. And I
Speaker 2: also believe that in our bigger economy, such as the
Speaker 2: French economy, over time we will have the ability to
Speaker 2: see those levels of borrowing go back to a more
Speaker 2: normal place.
Speaker 1: Do you see a risk though, that markets might not
Speaker 1: be as optimistic as you are in seeing that situation improving.
Speaker 2: I accept that risk is there. We all understand that
Speaker 2: the financial markets monitor these developments very very closely. But
Speaker 2: we are in the early phase of the implementation of
Speaker 2: a new budget framework within the European Union that we've
Speaker 2: all signed up to deliver. I believe the commitment is
Speaker 2: there to deliver that, and as that is delivered, that
Speaker 2: will lead to a gradual reduction in borrowing. But also
Speaker 2: we all appreciate this as something the financial markets do
Speaker 2: monitor and do respond back to in terms of the
Speaker 2: cost of borrowing. Because all finance ministers do recognize that
Speaker 2: that of itself will create a dynamic that allows borrowing
Speaker 2: across next year, in particular to come down gradually and
Speaker 2: to come down credibly.
Speaker 1: One of the other European projects that we've spoken about
Speaker 1: before is the Capital Markets Union. The last time we spoke,
Speaker 1: he says, you weren't concerned about the results of the
Speaker 1: European elections delaying or hindering that process. What's your best
Speaker 1: hope now on a timetable for progress there as we're
Speaker 1: waiting for confirmation of the new European Commission that we.
Speaker 2: See in new European Commission appointed, I hope shortly after
Speaker 2: the summer, and that what will then allow to happen
Speaker 2: is we will have a commissioner in place with particular
Speaker 2: responsibility for capital markets, and that new Commissioner in the
Speaker 2: early part of next year outlines a strengthened action plan
Speaker 2: regarding how we can accelerate progress on the development of
Speaker 2: capital markets. So I believe a majority is there within
Speaker 2: the European Parliament to make that happen, and I'm very
Speaker 2: confident that when the new Commission is but in place
Speaker 2: within a matter of months, we'll see signs of ambition
Speaker 2: to make that happen.
Speaker 1: Would Michael McGuire or former counterpart in the Department of
Speaker 1: Finance be a good candidate for that job.
Speaker 2: Michael would be a great candidate for a job like that,
Speaker 2: and would be a great candidate for any senior role
Speaker 2: within the Commission. Michael has been an excellent minister here
Speaker 2: in Ireland, has made a really strong difference to the
Speaker 2: economy and has done so now in two different senior
Speaker 2: roles within the Government of Ireland. And I'm very confident
Speaker 2: that in that portfolio or any other senior one, that
Speaker 2: Michael would have a very positive impact on the performance
Speaker 2: of the European Union. And I of course, on a
Speaker 2: personal and national level, would love to see that happen.
Speaker 1: Just another international issue that's facing the Euro Area economy
Speaker 1: or could potentially if there's another Donald Trump presidency, if
Speaker 1: that were to materialize after November's election, Do you see
Speaker 1: that as a being risk to the Euro Area economy
Speaker 1: in terms of tariffs.
Speaker 2: That risk is there. It's up to, obviously to the
Speaker 2: American people to decide who they want as their next president.
Speaker 2: But Donald Trump has outlined a very different agenda with
Speaker 2: regard to tariff levels and with regard to trade. But
Speaker 2: as America is deciding what they want to do with
Speaker 2: regard to that, it's why it's so important that we
Speaker 2: here in Europe take our steps to look at how
Speaker 2: we can deepen our own economic foundations to deal with
Speaker 2: that kind of change where it to happen in the US.
Speaker 2: I believe the relationship between Europe and the US is
Speaker 2: one that is important on so many different levels for
Speaker 2: both sides of the Atlantic. But I also believe that
Speaker 2: here in Europe we need to continue to deepen our
Speaker 2: own economic autonomy, to deepen the performance of our economy
Speaker 2: and the strength of our economy here in Europe, so
Speaker 2: that we're in a stronger position to deal with the
Speaker 2: kind of changes that make them out of America. So,
Speaker 2: of course it's a really serious issue that could develop
Speaker 2: across next year, but we here in Europe, I'm confident,
Speaker 2: will be well positioned to be able to continue to
Speaker 2: develop the relationship with the US, but to do with
Speaker 2: in a way that from a European perspective is stronger.
Speaker 1: In your role as a minister in the Irish government,
Speaker 1: is it a particular concern for Ireland given the number
Speaker 1: of US multinationals based in the country.
Speaker 2: Of course, it's something we need to monitor here in Ireland,
Speaker 2: and of course it's an issue that we are aware
Speaker 2: of in terms of changes that could happen from an
Speaker 2: American trade perspective and a differing view they may develop
Speaker 2: regarding foreign direct investment in the years ahead. But all
Speaker 2: I would say, Stephen is the companies that we've had
Speaker 2: located here in Ireland, and in particular American companies have
Speaker 2: been here for many, many decades, and we've developed very
Speaker 2: strong relationships with them, and I'd certainly be very confident
Speaker 2: that we're able to maintain those relationships and maintain their
Speaker 2: strength in the years ahead.