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Speaker 1: All right, it's sim now for our daily Wall Street

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Speaker 1: Week conversation and the global economy. It's posed for a

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Speaker 1: year of steady growth, but the IMF warrants of headwinds

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Speaker 1: for Europe, partly because of two regional wars. Pascal Donahoe,

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Speaker 1: your Group President, joins us now from the IMF World

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Speaker 1: Bank meetings in Washington, along of course with Wall Street

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Speaker 1: Weeks David Weston. David, a great conversation to kick off

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Speaker 1: the IMF Spring meetings.

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Speaker 2: Absolutely, a lot of fiscal demands now in the United States,

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Speaker 2: but also over in Europe. So Pascal, thank you so

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Speaker 2: much for being with us. We just heard from the

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Speaker 2: IMF warning the United States you're borrowing an awful lot

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Speaker 2: of money. How much fiscal headroom does your Eurogroup collection

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Speaker 2: of countries have, because we have the demands that are

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Speaker 2: a parent in Ukraine to try to help Ukraine, we

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Speaker 2: also have the climate change. How much fiscal headroom is

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Speaker 2: there to borrow to address some of these issues.

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Speaker 3: So that's some, but the truth of it is there

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Speaker 3: needs to be more, and we as governments in the

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Speaker 3: European Union, face the many, many challenges of needing to

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Speaker 3: normalize budget policy. But at the same time, we need

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Speaker 3: to find funding to make our economies greener and our

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Speaker 3: country safer. And that is why does such work on

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Speaker 3: the Way Now within the European Union regarding the future

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Speaker 3: of capital markets. And as we speak, David, all of

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Speaker 3: the Prime ministers of the European Union are meeting each

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Speaker 3: other to find ways in which we can accelerate progress

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Speaker 3: on that project, to look at how we can make

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Speaker 3: better use of the private savings in Europe as we

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Speaker 3: begin to normalize budget policy, to invest in the different

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Speaker 3: priorities you've just identified.

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Speaker 1: And part of the conversation, of course, is large borrowing

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Speaker 1: when it comes to defense and when it comes to Ukraine.

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Speaker 1: And before we get to Ukraine, I do want to

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Speaker 1: talk a little bit about defense, because I'm curious what

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Speaker 1: you make of financing Europe's push to ramp up its

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Speaker 1: military capabilities with new common debt.

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Speaker 3: The debate on the Way Now would regard to us.

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Speaker 3: It's fair to say at the moment that consensus has

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Speaker 3: not yet been achieved regarding that discussion. But I don't

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Speaker 3: think we should lose sight of the progress that Europe

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Speaker 3: is already making and has made with regard to supporting

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Speaker 3: the people of Ukraine, the funding that has been made

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Speaker 3: available to them at the moment, the fifty billion euro

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Speaker 3: package that has been agreed within the European Union to

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Speaker 3: support Ukraine across the medium term, and even changes that

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Speaker 3: are underway now regarding the role and the potential role

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Speaker 3: of the European Investment Bank in the future led by

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Speaker 3: President Clavino, to look at what role they can play

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Speaker 3: in responding back to the defense and the investment needs

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Speaker 3: that are there. So the discussion is under way, but

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Speaker 3: much has already been achieved regarding how we can support

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Speaker 3: the people, the economy and the security of Ukraine.

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Speaker 2: So you talk about the need to try to tap

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Speaker 2: into the capital markets, do you have a price tag

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Speaker 2: or if not a price tag, sert of aarge for

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Speaker 2: the sorts of funds you think you're going to need

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Speaker 2: over the medium term for the two priorities you identified,

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Speaker 2: climate and security.

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Speaker 3: So there's a range of different price tags in relation

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Speaker 3: to a David and the only thing they have in

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Speaker 3: common is they're all measured in the many hundreds of

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Speaker 3: billions of euros per year. The progress that we have

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Speaker 3: made in trying to respond back to the needs that

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Speaker 3: we are discussing is the creation of the next generation

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Speaker 3: EU budgets, which for many of the larger economies within

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Speaker 3: the European Union is worth hundreds of billions of euros

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Speaker 3: over a number of years. That has been funded by

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Speaker 3: new forms of death that is looking to invest into

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Speaker 3: a greener and more digital future for the European Union.

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Speaker 3: But there is still a funding gap, and that is

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Speaker 3: why what we have done within the European Union is

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Speaker 3: try to agree a budget framework for the years ahead

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Speaker 3: that prioritizes capital investment and prioritize suspending in those areas,

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Speaker 3: so that year by year we can reduce that gap

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Speaker 3: and get our growth outlook up as we're getting inflation down.

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Speaker 1: I'd love to get a little bit more specific on

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Speaker 1: some of the countries within, of course the region. Let's

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Speaker 1: talk about Friends, and let's talk about Italy and their

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Speaker 1: fiscal situations. Are you concerned at all about their debt

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Speaker 1: and deficit levels.

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Speaker 3: I have absolute confidence in the ability of those countries

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Speaker 3: to manage their death, to manage their public finances. In

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Speaker 3: the COVID era, we had a need to run higher

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Speaker 3: levels of borrowing to tolerate a higher level of death

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Speaker 3: as a share of national income. But those economies led

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Speaker 3: by Minister Georgetti, led by Minister le Mayor, our buddy,

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Speaker 3: and are implementing the plans that are needed to now

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Speaker 3: reduce borrowing, stabilize public death as a share of national income,

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Speaker 3: and get it to a point that it will fall

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Speaker 3: gradually over time. So the euro Area and the members

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Speaker 3: of the euro Area have a public finance profile that

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Speaker 3: I'm very very confident that we can support and back

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Speaker 3: and manage carefully in the time ahead.

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Speaker 2: You mentioned growth, and you mentioned trying to make sure

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Speaker 2: we get our arms around inflation, keep our arms of inflation.

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Speaker 2: Right now, it's perceived at least that the Europe may

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Speaker 2: be lagging a little bit behind the US economy in

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Speaker 2: terms of competitiveness and in growth. What can the countries

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Speaker 2: over there do fiscally They could actually spur that growth

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Speaker 2: for the longer term.

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Speaker 3: So I think it is a fair critique, it's one

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Speaker 3: that we need to consider. While we have been successful

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Speaker 3: in getting inflation down, if you look at the growth

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Speaker 3: outlook that we have for this year, it's probably going

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Speaker 3: to be around zero point eight percent. It will be

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Speaker 3: ahead of one percent for next year. So much of that,

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Speaker 3: unfortunately is explained by the economic effects of the war

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Speaker 3: on the people of Ukraine, which Europe is right beside,

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Speaker 3: but we need to look at how we can approve

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Speaker 3: that growth outlook. So I would pick two particular priorities.

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Speaker 3: I would pick the implementation of the EU budget that

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Speaker 3: I refer to a moment ago, that is looking to

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Speaker 3: provide new forms of funding in return for structural change

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Speaker 3: within economies funded by new forms of debt, and the

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Speaker 3: implementation of that in a credible way in the years

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Speaker 3: ahead is a really big priority that we're all committed

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Speaker 3: to delivering. And then secondly, at a national level, David,

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Speaker 3: they'll be trying to get that balance right between reducing

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Speaker 3: current expenditure as the economic conditions allow us to do,

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Speaker 3: but prioritizing capital investment and investing in those projects that

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Speaker 3: can help Europe in the years ahead. And that's very

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Speaker 3: much a national balancing act that all my Finance minister

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Speaker 3: colleagues at the moment are working on for implementing in

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Speaker 3: twenty twenty four, but thinking ahead to twenty twenty five

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Speaker 3: regarding how he deals and let's talk.

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Speaker 1: About new forms of debt and what form that debt

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Speaker 1: might actually take. Because Steve and I were talking a

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Speaker 1: little bit before the segment about the concept of a

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Speaker 1: europe And forgive me if this is a silly question,

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Speaker 1: but of course there's a common currency. Is there something

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Speaker 1: in the debt market that is similar to the Euro?

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Speaker 1: Has that actually come to fruition yet? And if so,

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Speaker 1: if it has, I mean, why isn't it as ubiquitous

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Speaker 1: as the as the Euro.

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Speaker 3: So it's very much underway in terms of new forms

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Speaker 3: of debt. And again going back to the discussion that

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Speaker 3: we've had regarding the European Union budgets, we now have

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Speaker 3: the European Union as a issuer of debt to the

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Speaker 3: markets to fund many of these plans that are underway.

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Speaker 3: And what we need to continue to do with build

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Speaker 3: up confidence. In that build up confidence, and that is

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Speaker 3: a form of death. I think it's been really well

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Speaker 3: received by the markets already. And then in terms of

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Speaker 3: your point then regarding the gap between our currency and

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Speaker 3: these forms of death, I suppose really the key difference

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Speaker 3: is that we've had a Euro that's now been around

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Speaker 3: for a number of decades, that is very very well

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Speaker 3: established as a global reserve currency, whereas these new forms

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Speaker 3: of death have really only happened very very recently, and

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Speaker 3: the European Union wants to make the death that we've

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Speaker 3: already issued this success and as I said, there's a

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Speaker 3: big debate on the way but not yet agreement regarding

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Speaker 3: whether that could play a different role in the future.

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Speaker 1: Yeah, it's a good point to end on that. The

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Speaker 1: eurocurrency much more mature, of course than the eurobond. Pascal

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Speaker 1: really enjoyed this conversation.

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Speaker 3: Thanks, thank you very much.

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Speaker 1: Our thanks to your Group President, Pascal Donahoe