Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane
Speaker 1: jay Ley. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Now
Speaker 1: joining us, I'm gonna just say this flat out the
Speaker 1: Auto interview of our Davos and that is because I'm
Speaker 1: sure I can speak for those in early morning America.
Speaker 1: Volkswagen is not the Volkswagon that we know. Far more
Speaker 1: than that, it is the auto company of the world,
Speaker 1: path breaking and so many things, including this regulatory mess
Speaker 1: and that regulatory mess called into strained out Herbert's Volkswagen
Speaker 1: chief executive officer and a mechanical engineer from Munich says, uh,
Speaker 1: this morning, I am driving around the World Economic Forum
Speaker 1: in these gorgeous v W eight share vans and busses
Speaker 1: on terrofs to the United States. The United States wants
Speaker 1: to keep your product, your vans, your trucks out of America.
Speaker 1: How are we going to get the advantage of what
Speaker 1: I'm driving around in davoson get more of those trucks
Speaker 1: into America. No, you all, you have all those advantages
Speaker 1: we are exporting. We don't exploit those trucks because the
Speaker 1: market was small. But the next generation electric we call
Speaker 1: it bus I d bus. It goes back to the microbus,
Speaker 1: which was very successful in the sixties, and so we
Speaker 1: were bringing that product coming two thousand, twenty two, twenty three,
Speaker 1: and then you will have a much nicer car than
Speaker 1: than the cars. What do you need from the United
Speaker 1: States on terror relief to get some of your products
Speaker 1: more into the United States. We're still optimistic today. We
Speaker 1: have we have very very low tariffs for for import
Speaker 1: to the United States. We have a manufacturing base in
Speaker 1: the United States, and we are increasing that manufacturing case,
Speaker 1: and we are doing everything to avoid tariffs for importing
Speaker 1: our cars to the US. Even as if we're making progress,
Speaker 1: which has announced a eight hundred million dollar investment in
Speaker 1: our Chattanooga factory. We received a positive tweet from the President,
Speaker 1: so we think we are in the right way. And
Speaker 1: you're one of the very few European chief executives that
Speaker 1: has actually met with President face to face. Do you
Speaker 1: think we'll see more political friction between countries and twenty
Speaker 1: nineteen or less, You know, I don't hope, you know.
Speaker 1: And I'm still optimistic because there is always a lot
Speaker 1: to lose on both sides. And I think the President
Speaker 1: is well. On the other hand, I understand his case,
Speaker 1: you know. And my background is manufacturing, and the United States,
Speaker 1: probably forty fifty years ago was really a strong manufacturing
Speaker 1: base of the world. This machine to linn the streets,
Speaker 1: and a lot of of of this industry came down
Speaker 1: and and and lost ground. So I understand this case
Speaker 1: and building up manufacturing again it is probably a valuable
Speaker 1: approject for every society. So I understand the case, but
Speaker 1: it takes time, and but we want to contribute. We
Speaker 1: see the US as a big market chance. We have
Speaker 1: a small market share with our brands. Still we want
Speaker 1: to grow. We think we can provide the right product
Speaker 1: for the customer. We have a nice heritage in the
Speaker 1: in the United States. Most of the of our potential
Speaker 1: customers know us, know many many have written, have learned
Speaker 1: driving on the folks bag and so Mr He'll talk,
Speaker 1: He'll talk to you about the heritage in a second.
Speaker 1: But I want to ask about China. This is a huge,
Speaker 1: huge market for you, and we saw demand in general
Speaker 1: for cars under pressure also because of the US China
Speaker 1: trade tensions. How do you see China performing this year. No,
Speaker 1: China is for sure is under sread as a market,
Speaker 1: we play a very important role there. We have eighteen
Speaker 1: percent market share with all our brands. We are we
Speaker 1: early to China, so we have perceived kind in the
Speaker 1: country like like a Chinese company grows. We had twenty
Speaker 1: seven years of continuous growth in China. It's also a
Speaker 1: big source of income for US. We're financing a lot
Speaker 1: of investment in future technologies out of China, so it's
Speaker 1: really important. Last year, already, the second half of last
Speaker 1: year was already declining, which is hurting US. We could
Speaker 1: cope because we come with a lot of new products,
Speaker 1: so we could increase our market here. We had a
Speaker 1: slight growth still, but this year will be challenging. And
Speaker 1: I really hope and and trust in the governments that
Speaker 1: they come to arrangements because it's it's a lot, you know,
Speaker 1: economics is a lot about mood of the people, and
Speaker 1: and fegure and and in the right words, and the
Speaker 1: and the few agreements would would help a lot. The
Speaker 1: romance for me is I grew up on a VW Beetle,
Speaker 1: just like in the classic Madman episode, which is the
Speaker 1: first car I learned a drive on. You've moved technologically
Speaker 1: from an engineering standpoint a little bit forward, and you
Speaker 1: have what many in America feel is the Elon Musk killer.
Speaker 1: You've got a tortue automobile. I haven't seen when driving
Speaker 1: around here, is there a tan? Is it coming? Is
Speaker 1: it's coming? It's not up here yet, and it'll be
Speaker 1: here next year in the valley. How are you in
Speaker 1: electric vehicles can kill Ellen Musk and be a Tusla killer. Yeah,
Speaker 1: we really appreciate what what Ellen Musk has been achieving
Speaker 1: and doing and pushing the industry and really promoting electric costs.
Speaker 1: I take him very seriously. Not it's a it's a
Speaker 1: good team, very aggressive team. Uh. But we're seeing when
Speaker 1: it really comes to scaling to exactly to produce all
Speaker 1: over the world, we have a chance to compete. There's
Speaker 1: maybe five people like you have, even put Mary Barr
Speaker 1: in this category that really understand the importance and complexity
Speaker 1: of manufacturing processes. When you look at Tesla in a tent,
Speaker 1: how does a pro manufacturer like you respond, Can you
Speaker 1: get the kind of quality control you need manufacturing in
Speaker 1: a tent. You know, I think this is probably our
Speaker 1: advantage that we are used to scale up plants in
Speaker 1: every other region of the world. We are strong in
Speaker 1: lettin America, strong in China. We can do that. This
Speaker 1: is our advantage that makes us a little bit slower.
Speaker 1: But when we decide when it can become strongly this
Speaker 1: when you look at evaluations, the traditional car manufacturers are
Speaker 1: maybe not seen as the ones that will really deliver
Speaker 1: the electric cars of the future. So do you think
Speaker 1: the number of traditional car manufacturers need to shrink? I
Speaker 1: think all in all, our let's say our industry will
Speaker 1: change a lot in the next ten to twenty years,
Speaker 1: and yes, it will become much more of a let's say,
Speaker 1: it will become more of an Internet logic. No where
Speaker 1: you have let's say, the economies of scale are nearly
Speaker 1: everything because it's all about software computers. So economies of
Speaker 1: scale we play a mat sure all but that is
Speaker 1: that is also an advantage for us because we are
Speaker 1: already big. If we can converge fast into the new
Speaker 1: age of ours, we have a good chance to outperform
Speaker 1: the startups because the startups also have to grow a lot.
Speaker 1: Now they have to invest a lot, they have to
Speaker 1: scale up, and that's why I see that probably the
Speaker 1: startups and and and tech companies are a bit over evaluated,
Speaker 1: and we're probably been unevaluated when it comes to future mobility.
Speaker 1: But doesn't mean I mean how many carmakers are there
Speaker 1: now thirty in the world. Are we going to be
Speaker 1: left for five major ones probably in twenty years. My
Speaker 1: assumption would be that there would be a consolidation process
Speaker 1: because we become more of a let's say tech uh industry.
Speaker 1: Now the economies of scale are even more important than
Speaker 1: to day. In the smartphone world, you have probably four
Speaker 1: or five manufacturers. Now will there be more on the
Speaker 1: car sideeas but as many as today? Probably not. The
Speaker 1: French finance minister told us this morning a Bloomberg exclusive
Speaker 1: we had at first that was going to resigned last night.
Speaker 1: How does that change the automakers? You know how regard
Speaker 1: Carlos I just bought a car from him, uh and
Speaker 1: and he really was a pillar of the industry and
Speaker 1: shape the industry also worldwide, not only the European industry.
Speaker 1: So for sure he's a loss, But there are many
Speaker 1: talented managers which which will probably step in now to
Speaker 1: speak of the sensitivities that Mr Ghan is going under
Speaker 1: right now, the business plan here is the JV the
Speaker 1: relationship that we have between the French and the Japanese.
Speaker 1: What do you learn from this fractured relationship and how
Speaker 1: does it redound over to Volkswagens acquisitions, combinations and joint
Speaker 1: ventures with future companies. I think scale will be even
Speaker 1: more important in the future than it is today, that
Speaker 1: that you have to partner with and you're not only
Speaker 1: have to partner with competitor us, you also you have
Speaker 1: to partner with tech companies and managing such kind of
Speaker 1: network is one of the key skills we need in
Speaker 1: the industry. Are we going to see many more of
Speaker 1: these alliances? I think so? Between what is the truck maker,
Speaker 1: I mean, is it do you have to basically, you know,
Speaker 1: our alliances of two groups that actually you know, complement
Speaker 1: each other or that where you really have synergies. Let
Speaker 1: me just mention what we just agreed with Ford. Now
Speaker 1: we we be partner in the light commercial vehicles segment.
Speaker 1: Now both companies are relatively big. Now we are we
Speaker 1: have enough economies of scale in many segments, but in
Speaker 1: this small segment of commercial light commercial vehicles. We we
Speaker 1: we're not having the enough economies of scale each so
Speaker 1: combining we will be very competitive. And this uh you know,
Speaker 1: this is this is industry, how it works worldwide, a
Speaker 1: global industry, and so partnering makes sense. Where do you
Speaker 1: see that going? I mean, if you look at the
Speaker 1: partnership with Forward, what exactly is the end game? Yeah,
Speaker 1: we know we are we are together with Forward in
Speaker 1: that area to compete against other partnerships. This is an
Speaker 1: open game. Important is that you have, let's add business relation,
Speaker 1: which is a trustful one. Do you have a good
Speaker 1: track record? The advantage of Ford is that we already
Speaker 1: worked with Ford some two or three decades ago in
Speaker 1: Europe together and in Latin America out of Latino. So
Speaker 1: we have a good track record and it just made
Speaker 1: sense for us for Post company in America. When you
Speaker 1: grew up as a kid, you were a Ford family
Speaker 1: or a Chevy family. There was no other day about it.
Speaker 1: Mario Barbs, Marie Bars, trust me, the edgy families at
Speaker 1: a VW beet or with no heat in it for
Speaker 1: the first fifty miles, the romance of the moment and
Speaker 1: trust me, folks we didn't have one was the curming gear.
Speaker 1: It was the definitive design idea. Now now we're getting
Speaker 1: back to design. Now your Porsche product. I'm gonna do
Speaker 1: a shout out to Bentley. It's wonderful to drive down
Speaker 1: Fifth Avenue yesterday. But design is coming back. What are
Speaker 1: you going to do to develop a Volkswagen ethos aesthetic
Speaker 1: worldwide in design as you had with Carmen gear years ago.
Speaker 1: I think we we folks weng remained with an iconic design.
Speaker 1: Now we had that step change between the area of
Speaker 1: the times of people and microbus and then to the golf.
Speaker 1: Golf is is world by our most relevant product, but
Speaker 1: all the design language, all the technical technical package was
Speaker 1: driven by the golf. And now comes another step change,
Speaker 1: the electric change. A step change means that the entire
Speaker 1: design of the car is disrupted. Not from a people
Speaker 1: to a golf. There is a disruption you can see
Speaker 1: that's not evolutionary anymore. And the next disruption will come
Speaker 1: now next year, and of next year we see the
Speaker 1: idea to be launched. It will be similar to the
Speaker 1: disruption from golf, from people to golf. Now it's from
Speaker 1: golf to idea couldn't take it over like it, which
Speaker 1: is a small but highest quality brand of Germany. I
Speaker 1: mean you look at it like a camera, and the
Speaker 1: idea is there's an evolving aesthetic of like through the
Speaker 1: years they got the new fancy one which is all
Speaker 1: stripped down and that do you need to do that
Speaker 1: out of Germany? Do you need to run your global
Speaker 1: platform with the German aesthetic? You know we have Meanwhile,
Speaker 1: and we are a global company means while we're very
Speaker 1: strong in China, very strong Latin America, a bit weaker
Speaker 1: in the U S. Still, but we have design offices
Speaker 1: all over the world because we have to make customer
Speaker 1: happy on the world bad basis, but still it needs
Speaker 1: the ingredients of folks walking design, which has to be
Speaker 1: a bit clean, a bit timeless, not a bit class less, democratic,
Speaker 1: And we're trying to achieve the save in the next
Speaker 1: generation of cars. What are we going to fix Devil's traffic?
Speaker 1: What's the first driverless car coming to Devils. I'm a
Speaker 1: bit conservative on on this. Now I'm driving around with
Speaker 1: lots of prototypes worldwide. There's a lot of investment going
Speaker 1: in there, but really to see their cars then perform
Speaker 1: armbing on the road, not not just being kind of
Speaker 1: a hurdle and and standing around and take time. You
Speaker 1: were correct in that I'm metatoralizing here was a Volkswagen ceo.
Speaker 1: You yeah, I'm in the Volkswagen camp. Will take time.
Speaker 1: Particularly last night at two am outside the piano bar,
Speaker 1: joining us is Jason Board off of Columbia University, out
Speaker 1: of Brown University, long agoing far away. The cool people
Speaker 1: carried Daniel Jurgen's a Prize around campus. And as I've
Speaker 1: told Dr Jurgen, but three people read it at Brown
Speaker 1: University at that time. The only one that read it
Speaker 1: cover to cover was Jason. How big that book? You know,
Speaker 1: I've read it a few times coming. Well, you read
Speaker 1: it cover to cover and you move on from Urgans
Speaker 1: the prize to the Quest, and then you move on
Speaker 1: to the now what for big oil and for national
Speaker 1: and international energy policy? You've got to write the Prize,
Speaker 1: the Quest Volume three. Where are we right now as
Speaker 1: we look forward to the prize? Well that's the conversation
Speaker 1: here in Davos. I think you know, extreme weather, climate
Speaker 1: change top the list of concerns. There's a lot of
Speaker 1: discussion among corporate leaders and abroad recognition of realism in
Speaker 1: a sense that maybe is a little bit new this
Speaker 1: year about just how far away we are, despite the
Speaker 1: tremendous progress and renewable energy, tremendous growth and electric vehicles,
Speaker 1: how far away we are from taking global goals like
Speaker 1: the Paris Agreement to degree target. Seriously, how far away
Speaker 1: we are from achieved is x on here? I am
Speaker 1: sure I'm using many of the big oil here. Yeah,
Speaker 1: of course they're big oils here. But what is their
Speaker 1: future given all that we see? Are they like, yeah,
Speaker 1: climate change go or do it? Forget about it? Or
Speaker 1: are they really listening to corporate leaders and government officials.
Speaker 1: There's a lot of variants within the oil and gas industry,
Speaker 1: but I think at the same time that there's a
Speaker 1: broader recognition we need to move much faster towards clean
Speaker 1: energy transition. There's also a realistic recognition that we are
Speaker 1: going to be using oil and gas for a long time.
Speaker 1: People are paying close attention today to what's happening in
Speaker 1: oil markets, whether it's geopolitical risk like Venezuela or possible
Speaker 1: trade war with China that could slow down growth and
Speaker 1: put put pressure on prices. So companies are thinking about
Speaker 1: what it looks like to transition over time. And they're
Speaker 1: also investing in things like the Oil and Gas Climate Initiative,
Speaker 1: which is meeting here, trying to do things like lower
Speaker 1: the methane emissions profile of oil and gas to try
Speaker 1: to try to start moving it more in the right direction. Jason,
Speaker 1: let me know what you think of this argument. A
Speaker 1: number of years ago, maybe ten years ago, you could
Speaker 1: make an argument that America needs to shift away from
Speaker 1: fossil fuels because we were so dependent on fossil fuels
Speaker 1: from abroad. Ten years later, America becomes the biggest oil producer.
Speaker 1: Does it get harder to make the argument that you
Speaker 1: need to move away from something that you are the
Speaker 1: leader in producing. I think it's harder to build consensus
Speaker 1: towards that now. And so a good example of this
Speaker 1: is the fuel economy standards. When I was in the
Speaker 1: Obama White House, we doubled fuel economy standards. The Trump
Speaker 1: administration wants to roll that back. If you read their
Speaker 1: rationale for why they're doing it, it's because in the
Speaker 1: world where we import almost no oil, uh, there's less
Speaker 1: national security reason to reduce domestic weil consumption. Now there's
Speaker 1: still a huge reason to do it in terms of
Speaker 1: protecting consumers in terms of climate change in the environment,
Speaker 1: but we used to have the ability to build consensus
Speaker 1: across the aisle more that it was both for national
Speaker 1: security reasons and for climate reasons that we needed to
Speaker 1: do this. That breaks down a little bit in the
Speaker 1: world where the US is almost energy independent. When you
Speaker 1: were Brown, did you have to take biology and then
Speaker 1: onto chemistry and all that or do you avoid that pain?
Speaker 1: I took a pretty diverse set of courses, but Brown
Speaker 1: doesn't require the scientists. At one point you said, these
Speaker 1: guys are really smart. How does Davos and how does
Speaker 1: America deal with the president at a good part of
Speaker 1: America which has an a science outlook, they really don't
Speaker 1: want to look at the theoretical and applied constructs of
Speaker 1: modern climate science, do they. I think is certainly a
Speaker 1: piece of this administration and the segment of American society
Speaker 1: and not just American, other countries as well that has
Speaker 1: a challenge accepting what's what's what's broad scientific consensus? You
Speaker 1: consider that a permanence or will that change? I think
Speaker 1: it's going to change, and I think you see that
Speaker 1: already across the aisle and data with the next generation.
Speaker 1: Yale just came out with a study showing rising public
Speaker 1: opinion recognition that climate change is real, it's caused by
Speaker 1: human activity, and and that we need to do something
Speaker 1: John to bring us up because we're gonna do the
Speaker 1: radio remote next week from the western southwestern shore of Greenland.
Speaker 1: Didn't there anymore? Is that the Iceberg cup? We'd be
Speaker 1: on an iceberg, like they'd like us on an iceberthday,
Speaker 1: they would like Ampany from Jersey wants us on an iceberg.
Speaker 1: I mean, we're already seeing impacts of climate change, and
Speaker 1: when you look out ten twenty years the current status quo,
Speaker 1: the impacts of climate change are gonna be pretty unpleasant
Speaker 1: people to deal with. And I don't think a broad
Speaker 1: public is going to accept that. There will be a
Speaker 1: tipping point at some point where people turn around and say,
Speaker 1: we just can't keep functioning in this way. I'm gonna
Speaker 1: try to make this as simple as I possibly can.
Speaker 1: Do you think there are members of the public and
Speaker 1: areas of the public that still needs some form of
Speaker 1: educating to draw a distinction between weather and climates. Absolutely, Yeah,
Speaker 1: it's well, it's really cold here, and and and we
Speaker 1: have cold spells all the time. But but the climate
Speaker 1: is a system, and so what's important is the way
Speaker 1: that system is changing. Average temperatures are rising. We've had
Speaker 1: four of the five hottest years on record in the
Speaker 1: last few years. So people need to understand that this
Speaker 1: is important. There's a new liberal definition coming up in
Speaker 1: the next election. There are progressive there's forty seven presidential candidates.
Speaker 1: You worked within the Democratic Party. Theology of Barack Obama.
Speaker 1: Where is the liberal aesthetic, the liberal ethos moving on
Speaker 1: climate change and environment? Is it shifting or we're going
Speaker 1: to see the same debate in two thousand twenty. There's
Speaker 1: a huge amount of momentum on on the left and
Speaker 1: many people in the Democratic Party that came in with
Speaker 1: the Democratic takeover the House to push for stronger action
Speaker 1: on climate change, and that's great. There is not full
Speaker 1: agreement on what that looks like and how you implement
Speaker 1: it and web or we can achieve that with a
Speaker 1: hundred percent renewable energy, or whether we need a broader
Speaker 1: set of solutions, advanced nuclear power, putting a price on
Speaker 1: carbon and a recognition that there is going to be
Speaker 1: a role for oil and gas in the economy for
Speaker 1: decades to common. Thank you so much for colombiators to
Speaker 1: visit us in our New York studios. It's far away
Speaker 1: from anytime it's comfortable. I have been remiss on this.
Speaker 1: It's really been something one of my weaknesses here. If
Speaker 1: Bloomberg surveillance is to look at the machine of Europe
Speaker 1: and always devolves down to the Spanish economy. There's a vibrancy, there,
Speaker 1: a difference there within all of their domestic cultures as
Speaker 1: you see across all of Europe. Nadia Calvino as Spanish
Speaker 1: Economy Minister and she joins us today. The stereotypes of
Speaker 1: Spain in America and for that and so much of
Speaker 1: the Western world are so much unfounded. Give us an
Speaker 1: update and the cultural solidity of Spain. Right now we
Speaker 1: see this riot, that riot, Barcelona, this I don't even
Speaker 1: know half the places. Give us an update and the
Speaker 1: cultural solidity of Spain. Yeah, but thank you very much.
Speaker 1: First of all, it's a pleasure to be here in Bloomberg.
Speaker 1: I don't know if the prejudice is there or whether
Speaker 1: the opinions are unfounded. What I can tell you is
Speaker 1: that the Spanish economy after a very deep and long crisis,
Speaker 1: has been bouncing back, growing quite significantly in the last years.
Speaker 1: There is a quite stable society, very strong social fabric
Speaker 1: and political stability to so I'm gonna get you in
Speaker 1: hot water at home. What's the distinction between Spain in
Speaker 1: Italy and recovery of this crisis. Well, I mean the
Speaker 1: growth rate is not comparable. We've been having very high
Speaker 1: growth rate. We reached the maximum above three percent in
Speaker 1: twenty fifteen. Our expectation for twenty nine is two point
Speaker 1: two percent, so we will be growing more than the
Speaker 1: rest of the large European economies, significantly more than the
Speaker 1: EU average. Well, there's no comparison. I mean from the
Speaker 1: physical policy dimension. Also, we're really committed to fiscal consolidation,
Speaker 1: reducing the deficit, reducing the debt. Social stability is quite remarkable. Also,
Speaker 1: very open liberal economy, trying to in society, I would
Speaker 1: say welcoming. You know, we really encouraged for an investment.
Speaker 1: I think that there are a number of areas where
Speaker 1: you know, I wouldn't be like to be compared to anybody.
Speaker 1: Of course, a little bit earlier this morning in Dallas, Switten,
Speaker 1: the Dutch Prime minister made some waves he thinks that
Speaker 1: the Italians have been led off lightly for their approach
Speaker 1: towards where is every day of Boomberg surveillance. Do you
Speaker 1: think the Italians are being led off lightly by the EU?
Speaker 1: I'm a bit surprised that the Prime Minister would say that, frankly,
Speaker 1: because last Monday we had the Eurogroup meeting with the
Speaker 1: finance ministers, and the Dutch Finance minister actually asked the
Speaker 1: European Commission what their assessment was of the Italian situation.
Speaker 1: The commissioner explained it and there was no further question.
Speaker 1: So I'm a bit surprised that there's this assessment of
Speaker 1: the situation. I think other people are surprised as also.
Speaker 1: Some people, though, do think the Italians might be right.
Speaker 1: Maybe we do need a bit of fiscal stimulus onto
Speaker 1: the continent. You've done a lot of hard work in Spain,
Speaker 1: a lot of fiscal consolidation, a lot of structural reforms,
Speaker 1: and you're reaping the rewards of that. What's your message
Speaker 1: to the Italian government as they look over the next
Speaker 1: couple of years, potentially to loosen the strings a bit
Speaker 1: fiscally speaking. I think that the way forward and this
Speaker 1: is what our government is pushing for, is striking the
Speaker 1: right planlets between fiscal discipline and social policy. I think
Speaker 1: that we don't have to wait until the streets are
Speaker 1: really full of people complaining to act to try to
Speaker 1: address the imbalances and the inequalities in society. Let's talk
Speaker 1: about the imbalances. Minister, you still have a high unemployment
Speaker 1: rate in Spain. What can you do about it? You've
Speaker 1: had the growth, it doesn't seem to have taken a
Speaker 1: big bite out of it. Well know, I mean we
Speaker 1: we've moved down from twent which was bridgeously higher in
Speaker 1: the crisis, to around We hope to close a year
Speaker 1: around fourteen, so that's a very significant reduction. It's still
Speaker 1: unacceptably high. Fourteent to a lot of this audience that
Speaker 1: will sound a high Yeah. Well, you know, we have
Speaker 1: a structural unemployment situation in Spain and then very high
Speaker 1: cyclical variations. We want to address that. We want to
Speaker 1: actually in the coming weeks. And I was a number
Speaker 1: of structural reforms in order to try to address the
Speaker 1: duality that we see in the labor market in Spain.
Speaker 1: This was the color of those. That's important. Well, I
Speaker 1: have to, you know, keep the secretary we announced the reforms. Frankly,
Speaker 1: next you that your government can get a budget through
Speaker 1: anytime soon. Sorry, how confident argue that your government can
Speaker 1: get a budget through. I am quite confident because what
Speaker 1: we are trying to do with this budget proposal, which
Speaker 1: we put forward a couple of weeks ago, it's precisely
Speaker 1: this balance I was referring to. We want to be
Speaker 1: very ambitious on reducing the public deficit and public debt,
Speaker 1: very ambitious, but at the same time tried to focus
Speaker 1: on some policies which have been neglected in the last
Speaker 1: years and which are important for social cohesion. In the
Speaker 1: time that we got your minister, I want you to
Speaker 1: talk to our radio and television audience in America and
Speaker 1: across all of Europe. I want you to be Iberia
Speaker 1: Airlines right now. The Prado in Madrid is one of
Speaker 1: the great jewels of the world. I don't think it's
Speaker 1: talked about enough. What do you need to do to
Speaker 1: move tourism forward, to get more people in Madrid, more
Speaker 1: people in Spain. Well, last year we had eighty two
Speaker 1: million persons coming to Spain. Actually, we are the record
Speaker 1: in Europe in terms of welcoming tourists. What we're trying
Speaker 1: to do is move to a more quality tourism so
Speaker 1: that well, we are trying to go beyond the sun
Speaker 1: and beach kind of exactly to the po in Madrid.
Speaker 1: In the Madrid one of the great jewels of the
Speaker 1: Western world. Well, I would say, come to Spain, come
Speaker 1: to Madrid, because not only the city is very attractive
Speaker 1: and the Proto is outstanding jewel, but there are many
Speaker 1: very interesting sights and cities around that you can very
Speaker 1: easily in this I don't care about draggy. I just
Speaker 1: want to go to the Plato and get a private tour.
Speaker 1: So you need arn Sorens and a Marriott, Sir Sir
Speaker 1: Roko of Forte Hotels. You need better hotels in Madrid
Speaker 1: and in those areas. Away from what we've seen last year.
Speaker 1: Actually there is that there has been a move from
Speaker 1: the beach and some kind of truism going to the
Speaker 1: central of Spain and trying to visit these old cities,
Speaker 1: you know, traditional cities in April and in May with
Speaker 1: team services. I think it works all the minister that
Speaker 1: she's going to be paid for an all expensive trips. No,
Speaker 1: but I will buy you a lunch, that's for sure,
Speaker 1: very good. We wouldn't be able to accept. We would
Speaker 1: have to pay the Spanish economy. It is great to
Speaker 1: catch up with you. Thank you very much. Right now,
Speaker 1: an important guest for us at Bloomberg is Prime Minister
Speaker 1: of the Netherlands Mark Ruta. But far more than that,
Speaker 1: he's one of the few politicians not only here at
Speaker 1: Davos but worldwide who has actual business experience heres ago.
Speaker 1: You know Weaver as well, Prime Minister. Wonderful to have
Speaker 1: you with us, so much to talk about. I know
Speaker 1: John wants to go from the distance from say Amsterdam
Speaker 1: on down to Rome. Will cover that here? Uh? And
Speaker 1: what's coming now? Well, I do you know what's coming,
Speaker 1: but totally unexpected. There is a there's a distance from
Speaker 1: Amsterdam to Rome. I want to go to the distance
Speaker 1: right now from your Netherlands to Brexit. You know, I
Speaker 1: think of the TV show wolf Hall Henry the Tudor
Speaker 1: England Antwerp in the Netherlands was a nexus of capitalism.
Speaker 1: Right now, is capitalism in London at risk because of
Speaker 1: this arch United Kingdom debate? I don't believe so, but
Speaker 1: it is not good. I mean Brexit is not good
Speaker 1: for you. It's not good for you. Out of Kingdom.
Speaker 1: It will be a smaller, smaller economy and it will
Speaker 1: have less of an impact on the world stage after Brexit.
Speaker 1: So I'm very I'm very negative about it. But we
Speaker 1: don't know what Brexit looks like yet. That promise, that's
Speaker 1: an assessment. It means it will look like they leave
Speaker 1: the Upen Union and of course then the question is
Speaker 1: on the on which terms and will it be negotiated
Speaker 1: leaving or will it be a no deal brexit. But
Speaker 1: in any case, it seems like they will leave and
Speaker 1: that is not good news for the UK. So the
Speaker 1: City of London, I'm just wondering, from the European perspective,
Speaker 1: is there an acknowledgement that the City of London needs
Speaker 1: to flourish to provide the type of financing that the
Speaker 1: rest of Europe needs? Do you need the City of London?
Speaker 1: Does the EU need? We need strong financial centers like
Speaker 1: Hong Kong, New York, London, but we have others like Amsterdam, Frankfort, Paris.
Speaker 1: Can Amsterdam really step up? Yes, we are doing that.
Speaker 1: Frankfort stepping up, Paris are stepping up. We see other
Speaker 1: financial centers in Europe. Yeah, this is of course reaping
Speaker 1: some benefits from this very negative situation of over Brexit.
Speaker 1: We see many companies from the UK, particularly with the
Speaker 1: Japanese or Indian background and American beckons coming to the Netherlands.
Speaker 1: Do you have to shed up a setup shop now
Speaker 1: in Amsterdam? The Financial Times in editorial today had a
Speaker 1: lovely subhead about capitalism not being debated here in Davos
Speaker 1: described for us the new capitalism of the Netherlands. There
Speaker 1: are so many ato types of the Netherlands evolving from
Speaker 1: World War Two. There can be anything from Audrey Hepburn
Speaker 1: and under that experiment of the sixties and the seventies.
Speaker 1: What's the new capitalism of the new Netherlands. Well, I
Speaker 1: believe it is not new. I I don't see a
Speaker 1: new alance. But we have always agreed to think that
Speaker 1: people starting a business earn their own money hiring people,
Speaker 1: that that is the best way to have a strong
Speaker 1: working demarket sings story economy and that economy has to
Speaker 1: deliver for the people. And it means for me as
Speaker 1: a politicians that I have basically two tasks. I have
Speaker 1: to make sure the economy is doing well, that we
Speaker 1: have enough jobs and have to make sure that there
Speaker 1: is enough safety security in the country. You've made some
Speaker 1: wives in the last couple of hours in Devil Switzerland.
Speaker 1: I think you know you have um the comments about
Speaker 1: the Italians being let off the hook by the Europeans.
Speaker 1: I'm very angry about. Build on that a little bit more.
Speaker 1: What are you angry about. Well, you're facing some new,
Speaker 1: huge challenges. We can make progress on climate change, we
Speaker 1: can make progress on the internal market like digital and services.
Speaker 1: We can make progress on many issues. But there are
Speaker 1: two big problems. One is the East West divide, which
Speaker 1: has to do with migration, and the other is a
Speaker 1: North South divid and there is at this moment a
Speaker 1: lack of trust in Europe between the North and the South.
Speaker 1: And You'repean Commission had the task to force Italy to
Speaker 1: do more to bring its state finances in order, because
Speaker 1: it's a basic deal in your zone that all of
Speaker 1: us have to make sure our own house is cleaned up,
Speaker 1: is working well, and then collectively we can make sure
Speaker 1: we become more competitive. But the Commission has not done so,
Speaker 1: so they have not fulfilled on the task, which is
Speaker 1: to uphold the treaty. Some people watching this program and
Speaker 1: listening to this program on Blomberg CV and Bloomberg Radio
Speaker 1: might say, well, why is it okay for the French
Speaker 1: to lift their budget deficit and not for the Italians.
Speaker 1: It's not okay for the French. But at this moment
Speaker 1: we have to assess what the mccan proposals in December,
Speaker 1: his speech to the nation, what that will mean in
Speaker 1: terms of their microeconomic numbers. We have not seen that,
Speaker 1: whether that will mean that they will deviate or not
Speaker 1: from what they have promised to the European Commission, to
Speaker 1: our colleagues and their colleagues in the European Union. With Italy.
Speaker 1: We what the situation is. And given that situation, it
Speaker 1: is a debt to GDP of again, a budget deficit
Speaker 1: of more than two percent. It's not good, and we
Speaker 1: and Thelans have food in place changes, we forms, uh
Speaker 1: fiscal contraction. We are now growing at a fast space
Speaker 1: tries the pace of our competing economies because we made
Speaker 1: those great forms. Italy to Bloomer Surveillance, have tried to
Speaker 1: advocate this debate, this conversation for years. Yakham Fells, Morgan
Speaker 1: Stanley out PIMCO, Professor Martin Feldstein at Harvard and others
Speaker 1: have really tried to study the core of Europe and
Speaker 1: as you say, the troubles, the challenges in the South,
Speaker 1: are we going to revisit that in the next one
Speaker 1: two and five years, the idea of a core of
Speaker 1: Europe choosing to separate from the South. I don't think so.
Speaker 1: We have to your zone. It's it's it's working. If
Speaker 1: the Netlans would still have had the Guilder, the Dutch
Speaker 1: Guilder when the banking crisis erupted in two thousand and eight,
Speaker 1: we would have run the risk that the speculator food
Speaker 1: have killed us, being given the size of our banking
Speaker 1: sector compared to the size of our own currency. So
Speaker 1: we have been very fortunate to have the Euro. It
Speaker 1: has brought us many positives. Yeah, but the basic promise
Speaker 1: of the euro is that collectively we will aim for
Speaker 1: a higher level of convergence to competitiveness, whilst making sure
Speaker 1: that we deal with our own problems at home. You
Speaker 1: cannot explort those problems to the collective. The Eurozone has
Speaker 1: been very fortunate as well to have President Mario Draki
Speaker 1: over the e CP. The Eurozone will not have him
Speaker 1: at the end of this year. Have you endorsed the
Speaker 1: nation yet that could head the European Central Bank? Have
Speaker 1: you got any idea of who and what country you
Speaker 1: would like to see at the top of the e
Speaker 1: c B. I have some ideas, but the first these
Speaker 1: decisions have to be taken a little bit behind the scenes.
Speaker 1: I cannot comment. Let's get into some of the ideas
Speaker 1: because some people are worried that if it is someone
Speaker 1: from say Germany, that the decisions made won't be for
Speaker 1: the continent on aggregate. The decisions that will be made,
Speaker 1: as Tom points out, with that North South divide in mind,
Speaker 1: that we will have stricter title monetary policy. I don't
Speaker 1: mind the passport of the new ECP president. What we
Speaker 1: need again is a president who understands that he or
Speaker 1: she is there for the collective. Is there not to
Speaker 1: fill the gaps which the politicians have left. My Duckie
Speaker 1: was forced in two thousand and twelve to fill some
Speaker 1: of those gaps when he said I will never let
Speaker 1: the Euro down and I will do whatever it takes.
Speaker 1: Every remember that goes around to the London Olympics in
Speaker 1: two thousand twelve and he has done a marvelous job
Speaker 1: over the last seven years, six and a half years,
Speaker 1: and I would hope for his successor that the politicians, me,
Speaker 1: my colleagues, we will do what we need to do
Speaker 1: and don't leave it to the sp president. Don't you
Speaker 1: think we get a decision on all of this. It
Speaker 1: has to be somewhere this year, but I don't know
Speaker 1: exactly exact timing from Margreta cried the canuality the Netherlands
Speaker 1: here in damas one thousand, twenty two miles from Amsterdam
Speaker 1: to run. I'm joining us right now, an important voice
Speaker 1: for europe, an important voice for the trans Atlantic politics,
Speaker 1: going back to the Atlantic Charter of ages ago, the
Speaker 1: debris out of World War two and the development of
Speaker 1: the North Atlantic Treaty organization that leads to the Norwegian
Speaker 1: Yeah and Stoltenberg and among other things. I should say,
Speaker 1: absolutely remarkable. That's seven or eight years ago you wandered
Speaker 1: to the Self Pole in honor of your Amazon. What
Speaker 1: was it like going to the South Pole? And you know,
Speaker 1: not by helicopter? Now what I didn't go on skis
Speaker 1: to the South Pole. We went in by a plane.
Speaker 1: But we were there to to to celebrate the hundredth
Speaker 1: anniversary of the first man reaching this old South Pole,
Speaker 1: and that was actually Norwegian and at that time it
Speaker 1: was an owegn Prime Ministers. We had a big event
Speaker 1: there to to mark that expedition. The big event for
Speaker 1: NATO is it's survival. You have a challenge in President Trump,
Speaker 1: you have a challenge, and now you regroup and move forward.
Speaker 1: Give us the NATO philosophy three four two nine into
Speaker 1: the future. The NATO philosophy is that as long as
Speaker 1: Europe and North America stands together, then we are strong.
Speaker 1: And then we are fifty percent of the world's economic
Speaker 1: might and fifty of the world's military might. So therefore,
Speaker 1: my main task is to make sure that we stand together.
Speaker 1: Despite some differences on issues like trade or climate change.
Speaker 1: NATO has proven extremely capable of uniting around the court
Speaker 1: aask to defend each other. And the good thing now
Speaker 1: is that European allies are stepping up when it comes
Speaker 1: to defense spending since President Trump came into office in
Speaker 1: twenty six talk about that because the President's instinct there
Speaker 1: is correct. The various governments of NATO have not made
Speaker 1: their contributions in the way they promised to. Did you
Speaker 1: agree with him when he first started making those concerns
Speaker 1: and vocalizing them a whole lot more louder over the
Speaker 1: last year or so, so I agree with him. But
Speaker 1: even more importantly, all allies agree with him that we
Speaker 1: need fair burden sharing in their lines. And that's exactly
Speaker 1: why NATO allies in Europe and Canada now are investing
Speaker 1: more in defense. Since twenty sixteen, they have added in
Speaker 1: total forty one billion more for defense spending, and next year,
Speaker 1: by the end of they added hundred billion more for defense.
Speaker 1: This is a significant change. It helps to improve burden sharing.
Speaker 1: So we still have a long way to go, but
Speaker 1: we are really turned the corner and European allies are
Speaker 1: investing more. Getting those contributions up is really important where
Speaker 1: the money goes. It's also equally as important where does
Speaker 1: that spend need to be made on modernizing our capabilities,
Speaker 1: investing in modern planes, battle tanks, military infrastructure, but also
Speaker 1: training and and and and and allies working more closer together,
Speaker 1: and also on operations, for instance, fighting terrorists. A couple
Speaker 1: of weeks ago, JAMR. Scheimer Chicago gave a speech to
Speaker 1: the London School that comics his notoriety is that NATO
Speaker 1: in the Western world and particularly United States overreached and
Speaker 1: their enthusiasm to move towards Russia, to move towards the
Speaker 1: former Russian states, to expand NATO give us an update
Speaker 1: and your desire to keep NATO status or to expand
Speaker 1: NATO towards Russia is Mr Prutin fears. But first of all,
Speaker 1: this whole idea that NATO in the kind of aggressive
Speaker 1: way have moved east is wrong. What we speak about
Speaker 1: is that new countries who got their independence off to
Speaker 1: the end of the Cold War shows they wanted two
Speaker 1: democratic decisions to join a niance and it is for
Speaker 1: every independence of the nation to choose their own path.
Speaker 1: They wanted to join NATO, and we welcome them. You know,
Speaker 1: the idea that it's it's a provocation to Russia if
Speaker 1: a neighbor joins NATO, that's a very dangerous ideas Mr
Speaker 1: Prutin feel that though does he feel it's a provocation.
Speaker 1: But sometimes they speak as if stole now a lot
Speaker 1: we are joining NATO is a threat to them. No,
Speaker 1: it's a sovereign, democratic decision by independent nation to choose
Speaker 1: his own path. Nor where the country I come from
Speaker 1: is a neighbor of Russia. And if anyone has told
Speaker 1: us back in nineteen nine with the joint but that
Speaker 1: was a probably under the south, far away from the
Speaker 1: tradition of the Baltic Sea. This is a little more
Speaker 1: of a heated debate. I love that you favor, but
Speaker 1: I mean but but but but but but. NATO is
Speaker 1: an organization for Europe and and US and Canada. So
Speaker 1: we're not going to Africa or or art of Europe
Speaker 1: right now. We look at the two modern Turkey in
Speaker 1: the last twenty four months. How do we get Turkey
Speaker 1: back into the European sphere and dialogue. So Turkey is
Speaker 1: a very important ally. When we see all the progress
Speaker 1: we have made in the fight against dosh Isle. They
Speaker 1: controlled the territory as big as UK eight million people.
Speaker 1: They were threatening Baghdad and Damascus. We have been able
Speaker 1: to take away that territory for from them. Not is
Speaker 1: because Turkey, as a native ally has contributed to that
Speaker 1: fight against that told me about the landmark Iron f
Speaker 1: Nuclear Treaty and the risk of the United States leaves
Speaker 1: it and walks away. The challenge now, the threat now
Speaker 1: is that Russia is violating the treaty. This Ironate treaty
Speaker 1: banned the whole category of weapons. All intermediate range weapons
Speaker 1: are banned. Russia has over the last years developed and
Speaker 1: deployed new intermediate range missiles. These are mobile, these are
Speaker 1: hard to detect. The short warning times meaning that the
Speaker 1: decreased the level of any potential use on nuclear weapons
Speaker 1: in the conflict. So they are extremely dangerous. Therefore, we
Speaker 1: call a Russia to combat into compliance with this treaty.
Speaker 1: We will meet Russia tomorrow in the Native Russia Council
Speaker 1: in Brussels, and we will continue to call on them
Speaker 1: to come back into compliance. Mr Trump has chosen not
Speaker 1: to attend this year. If you were running the Mry
Speaker 1: Trump in the hallway of this Congress and her, what
Speaker 1: would be your message to the President and do his
Speaker 1: allies in the United States that want to reach back
Speaker 1: from NATO and reach back from our post World War
Speaker 1: two alliances, as in my message to him, will be
Speaker 1: two folded. One, Europeans are stepping up hundred billion more
Speaker 1: from twenty. Second, a strong NATAL is also good for
Speaker 1: the United States. To have friends and allies is good
Speaker 1: for them. Russia, China, don't they don't have eight allies
Speaker 1: and friends, and the only time we invoked article files
Speaker 1: often talking not the States eleven. Let's go granulars we
Speaker 1: can do. A good friend of Bloomberg surveillance is Admirals
Speaker 1: te Vedas with tough University, now the Carlisle Group, and
Speaker 1: with him, it always turns to submarines. How many different
Speaker 1: nations have submarines underwater right now in the Baltic Sea.
Speaker 1: Are they gonna all bump into each other? There's so
Speaker 1: much military activity there. There are several nations with submarines
Speaker 1: in many places. I will not give you precise figures
Speaker 1: because that's about keep it down to turn now ten
Speaker 1: submarines there are. There are several and many nations. So
Speaker 1: the challenge is that with more military presence under the water,
Speaker 1: on the surface, online, in air, there is a risk
Speaker 1: for incidence accidents, Yes, seriously, and that's one of the
Speaker 1: reasons why we need to strongly believe also in dialogue
Speaker 1: with Russia, because we need to have military lines of communications,
Speaker 1: we need to have a mechanisms to reduce risks, to
Speaker 1: agree on how to operate, to prevent those instance and
Speaker 1: accidents from happening, and if they happen, prevent them from
Speaker 1: spying out to control and that sounds like a Syrian
Speaker 1: discussion to take it down south where you're worried about
Speaker 1: military communication. So let's talk about that. What you see
Speaker 1: happening next in Syria and the United States is declared
Speaker 1: they want to pull out. I think the important day
Speaker 1: now is that we all focus on ISIS and NATO
Speaker 1: is part of the global collition to the feat ices.
Speaker 1: We have made enormous progress from the control the big territory.
Speaker 1: Now they hardly control any territory at all. We strongly
Speaker 1: believe in training local forces, so we are in Iraq
Speaker 1: training the Iraqi forces, enabling them to stay blast their
Speaker 1: own country. Nature is not present on the ground in
Speaker 1: Northern Studia, but we strongly believe that we need a
Speaker 1: political solution. We support the U and efforts for the
Speaker 1: polctical solution, and then we welcome the fact that Turkey
Speaker 1: and US present in Northern Studia talk together and try
Speaker 1: to coordinate the efforts there. NATI Sect General Yan Stelton
Speaker 1: book that you want to gets on day three every
Speaker 1: World Economic Forum in Dava, Switzerland. Thanks for listening to
Speaker 1: the Bloomberg Surveillance Podcast. Subscribe and listen to interviews on
Speaker 1: Apple Podcasts, sound Cloud, or whichever podcast platform you prefer.
Speaker 1: I'm on Twitter at Tom Keane before the podcast. You
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio