Skip to main content

tv   Discussion on EU Economy During Coronavirus Pandemic  CSPAN  July 15, 2020 3:01pm-4:02pm EDT

3:01 pm
campaign of president trump and joe biden are adjusting plans for the political convention already reshaping the coronavirus pandemic. they will convene for a scaled-back convention in milwaukee starting august 17. the republicans meet the following week on tuesday august 25 in jacksonville, florida for their convention. the democratic and republican national convention, live on c-span beginning monday august 17 and watch anytime on or listen live with the free c-span radio app. c-span, your unfiltered view of politics. >> the american enterprise institute held the discussion on the impact of the coronavirus on the european union economy and here's a look at various policy measures. >> welcome everyone, thank you for joining us and welcome to the american enterprise
3:02 pm
institute, i am delighted to host a conversation today was the director general for economic and financial affairs at the european commission, he has been there since they were 2020. our conversation today will be about the economy of the european union and the european union with a response to the covid-19 crisis. we will also touch upon the european union and commissions broader economic policy agenda as we hopefully recover from the crisis, its evolving fiscal institutions and its management of the european macroeconomy. so it should be an interesting conversation and obviously particular important given the worldwide economic crisis we have found ourselves in. let me introduce i guess
3:03 pm
today, he is the director general for economic of financial affairs in the european commission, prior to his current job he was director general for structural reform support and will touch a little bit on while i imagine. and prior to that he was deputy director general for economic and financial affairs. he worked extensively on the funds which will talk about as well. anyway with that introduction out-of-the-way mark, i wanted to start out by talking about the way in which the crisis has unfolded over the past two months in europe and what actions have been taken to deal with the crisis on the public health side and especially on the economic policy side of things to deal with the crisis or sent to beginning of the year january, february up
3:04 pm
until now and then "after words" we can get into the response and the outlook for the european economy. please go ahead. >> thank you very much for having me. and i suppose it is a good afternoon -- no, what is it in new york. >> good morning it's 9:00 a.m. >> martin is in brussels. >> let me indeed start by saying a few words on the economy and the response to that you response to it like i would say almost every other part of the globe, the new has been hit hard by the crisis and i
3:05 pm
think we were a bit ahead in many ways of the u.s. and towards the end of february we had lockdowns from early march onwards and clearly it's had a major impact on the economy of that you and the economic outlook. so we have seen a major drop like elsewhere in production and services. and in particular in the end of the first quarter in the second quarter. and in early may we came
3:06 pm
out with a spring forecast for this year where we projected a decline of the new economy of about 7.5% which is far more severe than we have seen in the global financial crisis into be followed by relatively strong next year but even so we wouldn't his debate and incomplete recovery. already at the time of the spring forecast we know the number of key downwards risks and we said look at the risks tilted towards the downside. and as a matter of fact, some of the risks we have seen materializing since then.
3:07 pm
for starters the external environment turns out worse than i expected in spring and you can see notably the emerging economy is strongly hit by the pandemic then we anticipated at that point in time but also very important during the lockdown. it lasted in the in longer than we had anticipated. so now based on scenario we expected a lockdown. around six weeks which in reality was closer to eight weeks. now on the point of the side and that brings me to the policy response that we have seen a new policy response which is stronger than we actually had anticipated
3:08 pm
at the time of spring. let me say a few words on that. so compared to the global financial crisis, i think one can say the policy response and that you at all levels has been much faster and much fuller than we have seen before. and that started with the actions of the ecp but to be followed quickly and the bold actions of the level of the member states. by now we have seen a discretionary fiscal measures how about 4% of gdp at the level of the member states and they have also taken massive liquidity measures to the tune of more than
3:09 pm
20% of gdp and these measures were very rapidly, limited the number of quick reactions at the level, in a few weeks time we reflected on our existing eu budget which freed up around 60 billion and the resources which can be used instantly for the crisis, we reached relatively quickly in agreement on a different use in the mechanism facility. and also a guarantee fund managed by the ib. this was done quickly
3:10 pm
and then i should mention one instrument that we have proposed ourselves, it's a facility with member states and their short-term scheme, it was an instrument of the tune of 100 billion. we did relatively quickly and then i'm sure we will talk about that. that was before the commission put on the table the proposals for recovery plan for europe. so all in all -- >> before we go down that route, i wanted to go back to something that you said about fiscal policy which have been significant, not quite at large as here in the u.s. but the same order basically but they
3:11 pm
are normally of course member states of the european union are restrained them what they're allowed to do on fiscal policy side of things under the civilian throwback rules. can you talk a little bit about how those roles have been adjusted for the crisis because i think here in the u.s. a lot of states for example have budget requirements and they don't how much leeway with the crisis of all and they have mandated within the state and the states don't have the leeway at all and within the european union they normally in the extraordinary moments, the usual rules and as i mentioned on the physical policy but also the legality of state aid and restrictions on free movement that
3:12 pm
normally would not fly. can you talk about the outside of the policy response. which basically is a deregulation. >> thanks for bringing it up i'd be happy to do so. let me first before i go there to make one point with automatic stabilizers in the io are bigger. i think if you would add up the two the difference will be -- but you're absolutely right, under normal circumstances, members would not be allowed to support their enterprises in the state aid regime and given the severity of the situation in the
3:13 pm
emergency that we have very quickly on a temporary basis our state aid rules and we have increased the possibility for the states to provide and it has been very important and for an example to provide support in the form of the short-term scheme switching away has sold and see support to corporate and has a very mitigating impact unemployment numbers and allowed for liquidity facilities that i just mentioned. which helps corporate survival over the period. similarly we have in the rules in place that constrain members and
3:14 pm
their fiscal policy and on the state level but nevertheless there is a constraint. and we have triggered something that is a general escape clause which is actually meant for situations like thi this, if we are in a generalized economic and severe downturn than the council in the proposal and the commission can decide that there has been a part of these rules which means they are freed in terms of responding to the situation.
3:15 pm
>> that is where we have been over the past two months, you mentioned briefly your look for cdc shop tour in the% of what were seen around the world and i think another 2021 rebound, there will be some of that and that's more in certain thin issues development. i wanted to ask you if you can give us the macro economic situation as it is now, union wide, one big difference with the u.s. is on employment is significantly lower than it is in the u.s. because of labor market institutions that maybe european countries have that the u.s. does not really have, i think it
3:16 pm
really is a key difference between the two economies and i'm also wondering if you could go into a little more detail and it's still early to know where things are going to go and you can talk about the situation in spain and italy that were hit hard at first and tell us about the situation in sweden which received a lot of attention in the u.s. because exclusive approach to lockdowns and the public is great again maybe it's too early to issue a verdict on how that worked out but i was wondering, a little bit about labor markets and then about those three countries. >> , a few points on this, you are right that
3:17 pm
the impact so far on the labor market have been rather benign, it's only compared to the u.s. but more generally and if you consider the drop off of gdp or productio production, there are a number of explanations for that and one i alluded to was work schemes which existed already and quite a few number of states but in the crisis new ones have been created and now it's becoming a dominant model in the eu, also a number of statistical issues and regulatory issues that play into
3:18 pm
this. in order to be employed you need to be available for the labor market which is a problem in a lockdown situation so they have to put up a distortion probably coming from their and a number of countries i think have introduced a moratorium on the force job losses and so if you look at the number that is in the hours work, clearly you see a much bigger impact than if you look. >> the one and people
3:19 pm
unemployed in the u.s. are equal. in many cases they would not be an employee. >> you need to take that into account. clearly a policy choice that's been made here which i think in a different policy choice is being made in the u.s. is to maintain as much as possible between the people and their company or institution where they work. having said all of this, we would expect unemployment to go up as we go along and we would anticipate a bit of a delayed effect but not to the extent that we have seen unemployment in the u.s.
3:20 pm
also on the short-term we are coming out tomorrow with the new forecast, i cannot tell you what that will be in explaining the risks that it has materialized and you can deduct from that. and we will not be surprised with this forecast and as a matter of fact, most institutions that have come after with what wall street has been. >> turning to spain and italy, spain and italy, they have been
3:21 pm
particular hard-hit by the crisis and by the pandemic, this is partially by luck but also to a large extent something to do with the economy and with a large part of tourism which is clearly sectors by the pandemic and the spring forecast we anticipated a drop in gdp of bigger then 9% for both countries and again, i'm afraid that we will not be surprised, clearly with very big impact
3:22 pm
resulting in the big impact on the government of which we see across the board in the deo but given the size of the job of gdp in spain and italy, it is more pronounced their then elsewhere. that said, it is true for all countries and also for them and, in most of the measures that they have taken, they are one-off and we would expect with the return to growth that also we would expect the fiscal position to improve very quickly, which are left with is an increase in clearly
3:23 pm
which is considering the levels. and is clearly not good news paper. >> how does the transition back into its fiscal rules, how does that work, there is a shock. is there a timeline for when the strengths start to comply with their full force or is that unclear in the whole process. >> no timeline has been fixed for that and also for very good reason because at this point in time you will recognize that the situation in the u.s., there is an extremely high level of
3:24 pm
uncertainty and that is linked to the trajectory of the virus, so we seem to be on her way out which things look definitely much better today than six weeks ago. but sadly the virus is still around so one cannot rule out the reemergence of the virus which can lead to a re-imposition of lockdown majors or re-imposition, as long -- given the fact that this insurgency of the recovery is so big, it will also be very difficult for us to make recommendations on what will be the fiscal
3:25 pm
trajectory in the current circumstances. the commissioner has decided to wait a bit longer to see what the developments will look like, at the same time, what is also very clear, given the shock to the system and the fact that next year and spain and italy also, the years thereafter, we will still be below the 290 levels in that suggest it may not be the best time to cause disparity. so from the commission side we have seen a continued need for fiscal support in the
3:26 pm
time to come but in a way and taken into account clearly the outlook at that point in time. and last point i want to emphasize again, given the fact that most of the majors are actually temporary, we will have an away an automatic reversal of fiscal policy simply if members do not extend these temporary measures. >> how old are you. >> i had a brief interruption on my internet connection. as we go through on a conversation, perhaps we have time for a stimulus
3:27 pm
question for the district of columbia. it is worse every day. so before we go through the discussion about the recovery, did you talk about sweden? >> i did not. >> i missed a few seconds. let's go there and then to the recovery. >> what can i say, sweden chose a slightly different approach than some of the others states even though one should also state it is not black and white. i think also i would say the geographical circumstances, you cannot compare that to the geographical circumstances.
3:28 pm
you need to take the differences into account and in reality that has been different in the approach between all members pending in the severity of the pandemic but the overall impression is that sweden has followed the approach than some of the others and now, i think it would not be for me, one can see but i need to be a bit careful.
3:29 pm
and it looks very specifically at the numbers but the number seems to be higher in sweden than in the neighboring countries which has contracted the discussion. i think it is too soon to tell to see how that will play out in the end, some of the neighboring countries have been able to relax, they were more severe and able to relax a bit that it's a bit longer that has helped them in the initial economic impact which has been mild in sweden compared to other countries. and at the same time one can only pass judgment on that.
3:30 pm
at the end of the day it all cost are being counted and i think it's too early for that. >> you mentioned external risk in your assessment of the economic outlook for that you and obviously the u.s. is on a different trajectory in terms of the spread of the disease. is that something that feeds into your concern as well that the u.s. will not recover as fast as people were hoping three months ago? . . .
3:31 pm
we can see the us was falling behind so we have captured quite a bit of that already in our spring forecast. clearly if the us would follow a completely different trajectory than europe and china so far, then that would be bad news for the world economy. >> now let's go from the current situation really to the future. the first thing i want to talk about obviously is the proposed recovery fund that would be financed in some way or another through the issuance of debt at the union as a wholeis responsible for
3:32 pm
. it's been represented really as a watershed moment in some of the press coverage in the us but it's of course also encounter a lot of opposition within the european union from the so-called frugal four in which our shared homeland of the netherlands is one. can you talk about what the proposal is and give us a sense of the size and where you think that process is going and the understanding that obviously political needs can shift. >> what the commission had proposed and has asked for is essentially an authorization to blow off the b,750 billion and to use that for essentially two channel 500 billion of that to eu
3:33 pm
expenditure programs and to channel another 250 billion of that into the facility for member states. now, that is in many respects a novel proposal and just to make one thing clear, it's not the case that it's new for the eu tomorrow. we're doing that on a regular basis . but what is new is that we borrow to spend rid of that is something that has not been done before, normally if we borrow, then we lend it back to back to member states for some purpose. so i think this is the key, not so much the issuance itself but the channeling of these resources through
3:34 pm
expenditure programs. now, the bulk of this money ... >> so you're saying there are mechanisms. >> but even darling against the eu budget we have done before but what is new is the size. >> that is important, $750 billion is about five times theannual budget of the eu . >> yes, so it's, yes. so it is massive in terms of size. and so it's about five percent of pdp which is a lot nationally.
3:35 pm
and so it's this size and it's the fact that we incur debt at the union level to pay for expenditures and now, to be precise what we want to do with this money is mostly to use this to fund investments. and the central, it's not the only program but the central program in this is in resilience facilities which would provide 310 billion in investment grants and 250 billion in investment loans to member states to finance programs of reforms and investment and this is what you're trying to do. we are trying to four combinations of reports and investments that first of all help us to speed up the
3:36 pm
recovery. that's very important. but also to transform the structure of the economy and to make the economy greener. smarter as we say, to appear more digitalized and also resilient . now, why is this package, will this package go forward and i think one very important reason for this is that we saw that and in a way you touched on it by pointing to italy and spain. but even though this crisis is almost by definition of a symmetric nature, the implications are not symmetric at all. so some countries are hit harder than other countries. and the sad reality is
3:37 pm
actually that a number of the countries that are hit the hardest are also the countries are the least resilient to these shocks so we believe that we need something at the central level whether it be big, to make sure that these divergence are already there before the price that they will not widen and they will be reduced. and that is the last point that i would say that is also very important for the functioning of ourinternal markets . and also maybe two hours shared home country. i mean, a country that likes to do exports but clearly it's part of the single market and if there is more demand the problem is exports so we very much believe that we have a common interest to
3:38 pm
emerge together from this. >> so there's obviously a number of concerns that people express about this kind of development and i think the first one would be that it will be difficult to restrict this effort just to the crisis response. as you mentioned there divergence in growth across member states that predates the crisis and there's no reason why that would necessarily disappear after the crisis so if you start trying to massage that away with large money flows from the union, you're going to end up in a situation where those flows will become permanent and they will just be an additional layer on top of structural reform or structural funds or whatever. that they don't like about the disagreeable functions of
3:39 pm
the union, what would you, and i don't know. maybe the nations use there should be more of a eminent flow of investment funds for italy and spain and other countries. to the extent that countries are concerned, and member states are concerned what do you tell them? >> i know perfectly well and i've spent the best part of my career in the financial industry so i know better than anybody these concerns. what would i tell them? first of all the proposal that we have made for the borrowing is, it's a bit cold but it's a proposal to change the resource decision. and that is sort of the authorization to borrow comes from, the way it is proposed
3:40 pm
is it formulated and drafted it's crystal clear that the authorization we asked for is of a temporary nature and that will be assured by the ratification process. the decision will have to be ratified by all parliament in europe so that even if people in the commission were to think we want to extend this yonder this, it's simply not possible because parliament were hidden in the first ones to block are in the countries that you mentioned . they would not go along with an extension for no purpose so there is a very strong legal lock on the door that can in no way be broken by the commission against the
3:41 pm
will of all member states so it's a revised union image and it doesn't get any stronger than that. >> but the reason again that we have come forward and i think also the reason why germany this time around is supporting it is in recognition and a realization that this is really a unique situation and we have learned from previous crises that if you try, the problems don't go awayby themselves . and the approach during the global financial crisis between the euro crisis in europe has often been categorized by too little too late. i think it's bad luck that we are again in a crisis but i
3:42 pm
think the good luck is that there is still sufficient people around that actually remember very vividly the previous crisis. >> certainly here in the us the response i think has been really qualitatively different precisely because of that, people recognize what went wrong. >> exactly and i think we, i can see there's also here, i was around at the time of the global financial crisis and i did see the difference now and there's desire in the nation to act quickly and on top of that the entire external environment is much more negative than before so the idea that we can export our way out of this, it's not going to happen and i think
3:43 pm
this is also well understood by germany and i think that changes the whole balance in this discussion. >> 2 other things here and i think one said there's very openly, it's a significant amount of money, what's it going to be spent on and i think he said you don't want this to be used to implement the party platform. which obviously the conference should do what it wants with its money to some extent but i think it is because it exists so what are we going to do with all this money . and what is it going to be directed to national priorities versus priorities set by the member states as a group. then the second i think sentiment that you hear express is that this kind of
3:44 pm
support should come with a certain level of conditionality precisely because the goal should be to limit divergence after this crisis goes away and to make sure that different parts of the union can grow. what do you say to those two things? >> i think what, i think actually if you look at the proposal and i may be a bit biased that i recognize that, i think it's actually a very balanced, very balanced proposal. but let me just explain and i think again, this recovery and resilience facility since this is by far the biggest part of the package i think is a good indication as to the thinking of this.
3:45 pm
it's more than half so. >> half of the direct. 4 and a half spending, a little less than half. >> the loan facility and the grants are out of the 750. it's really the biggest part of it . so the way this is going to work is that member states will need to draw up their own recovery and resilience plans so that is let's say the country, they start of all this lies with the country and this is important because we have also learned that for reforms to stick, it's important to havecountry ownership . now that said, these plans, they need to be consistent
3:46 pm
with certain union priorities and that's where your points is in common. so they need to be consistent with the country's specific recommendations but the council, so sort of the ministers, all the ministers together give on an annual basis to the member states on what type of reforms, what type of investments to undertake for a specific country so this is exactly to make sure that the reforms and investments that are, that they also come to the shared view of what is important to do. for the union to function better so that's the
3:47 pm
perspective. and the second part is that in a very explicit way, these programs need to contribute to agreement on the one hand, the greeting of the economy and on the other hand, so on a digital utilization of theseeconomies so a modernization of these economies . so these are horizontal requirements that will be put on theseprograms . and only, so only programs that meet these various criteria which will be assessed by us. they will be available for finance. then how do member states in the end get the finance that they've asked for? we defined together with member states milestones,
3:48 pm
both in relation to the form and in relation to the investment and all these milestones are being achieved, then that unlocks a payment from unlimited recovery and resilience facilities so i think the my answer actually to those is would be if you look at the biggest expenditure program that's in there , you'll find actually this balance. it will have reforms. it will have the investments and it will not just be given for nothing. it will be provided if and only if member states actually dowhat they say they are going to do . >> have a little over 10 minutes left. i want to touch on a few topics that are a little less
3:49 pm
directly related to the covid-19 crisis. the first one i guess is somewhat related to the investment priorities. here in the us we now have for years and years a discussion about potential infrastructure package to be passed by the federal government that could include things from highways and rural broadband, hopefully district of columbia, refurbishing school buildings . a wide range of things and i was wondering if you could breathe briefly talk about your experience with the yuga plan and how the informed investment priorities that are now in play. >> maybe for those that are not aware what the plan is, i can imagine there are many.
3:50 pm
this was a plan drawn up and designed by a previous president of the commission. and this response to the crisis. this was composed of a number of pillars and one pillar was basically eliminated bottlenecks to investment. the other data can be in the regulatory planning environment. another was about building a pipeline of investable projects and then the third is the pillar, even though i think we've presented this,
3:51 pm
the first pillar in the wrong order. there was a financing facility which in a way, is what some would call a blending facility. so we from the community budget we provided a budgetary guarantee. to the eib so the european investment fund which allowed them to provide more risky finance to the type of projects that you mentioned. so by now, we have more or less coming to the end of the investment period of the you can plan. i have not had the exact number of projects but what i can say is i think we've reached basically last week
3:52 pm
if i remember correctly, the milestone of that around 500 billion in investment had been financed by this facility so it had pretty good impact and i think it has a help to finance the kind of projects that you mentioned. we're going to have a successful program of this called invest eu. of an even bigger size. we think this is important but we are trying to target it a bit more to a specific policy area. so we were just 30 when we started with the plan . the main goal was investment.
3:53 pm
it didn't really matter which investments. the way we've set up the invest eu program now is more related to specific target areas and also to avoid that work carving out too much private finance. the areas that immediately come to mind and which will be very important is again the green. but as you were joking, rural broadband. it is for the inner cities there's not much you have to do that will normally the marketwill take care of that . in rural areas, it may be more difficult so you may need different types of planning and i think what we have been experimenting with here is more and more these blending of different facilities that we can have the public, partially public
3:54 pm
financed by risk financed through the eib and partly pure private sector so that's what we're seeing. >> this is really a topic, the commission a few years ago propose a digital services tax that hasn't been implemented at the union level yet but a lot of the big old member states have either implemented or are in the process of implementing such a tax. obviously the united states i think were good reason has been unhappy with some of theseproposals . can you talk to us briefly on where these objectives stand on the eu wide level and what the commission foresees their
3:55 pm
. >> there were also discussions ongoing in the acd and if you mentioned, you know on the topic, let me be clear from on 2 important points. of all, we prefer by far a global approach and then we're working towards that in the context of the oecd. , now recently, the us pulled out of that discussion. clearly we hope that the us will come back to that. now, at the same time we had indicated that if it's not possible to come forward on
3:56 pm
the effort to agree on a global approach, then we , the commission will come forward but on initiatives, because we even though we support the member states that have introduced these taxes, we do not consider it optimal from the union perspective that it will come with their own different taxes so it is an area where we would like to move as well. >> i want to close out with one last question. the united kingdom has left the european union. negotiations are ongoing about the future relationship
3:57 pm
but perhaps more importantly, more important for you we've developed an ongoing budget without the uk as part of the union. how is that whole contribution being filled? is there a shift in priorities now that the uk is gone ? are these negotiations in a sense being delayed until the price war is over and how can we think about that? >> quite the contrary. okay, clearly with the uk leaving that leaves a hole in the budget being dealt with. but i have to say that the whole uk issue has been overtaken in a way. by the corona crisis. so what is now in the making is, it's a process , the
3:58 pm
crisis response in the negotiations of the budget, they have collapsed in one. they have collapsed. >> they folded into one. >> they are folded into one. and as a matter of fact so the recovery plan that i was talking about or the as we call it here the next generation eu. that is one part and the other part of negotiations is the negotiations on the multi-annual financial framework and they will be completed together. so we have now a plan for 17th, 18th of july.
3:59 pm
where both topics are on the table and where the president of the eu council will try to forge a compromise on both of those elements at the same time. and that sends i would say that the uk, it's close to us but it's a bit less in the forefront of our thoughts and it was some time. >> i think that's probably true for all of us . and with that, thank you very much for doing this. thanks to our audience for attending and thank you for questions, i'm sorry i didn't get to each one of them thank you very much and have a good rest of your day. >> thank you very much. >> tonight is the addition of
4:00 pm
book tv with a focus on history. starting at 8 pm, heavy troy, presidential historian and former aide to president george w. bush looks at internal flights that she several presidential administrations. and 60 minutes correspondent john dickerson talk about his book on the presidency, the hard job in the world. later university of elizabeth baron argues that during the civil war the north was motivated to liberate instead of conquer the south. enjoy book tv on c-span2. >> treasury secretary stephen mnuchin appears in the small business administration pandemic program. live coverage begins friday at 10:30 a.m. eastern on c-span and us attorney
4:01 pm
general william barr appears before the judiciary committee oversight hearing on the justice department . on tuesday, july 28 watch live coverage of the ring friday at 10:30 a.m. eastern on c-span read watch anytime on or listen on the go with the c-span radio app. >> a number of economists discussed the long-term effects of the coronavirus pandemic. this discussion posted bythe brookings institution was held by videoconference . >> good morning, good afternoon and good evening depending where you are you thank you for joining us for this virtual event on the post covid economic output. welcome to the vice president of the global economy and development program at brookings . the global economy is sharp, and it's unprecedented in its depth. a pandemic response is


info Stream Only

Uploaded by TV Archive on