Focus on EU single market to boost competitiveness, says Kristalina Georgieva - video Dailymotion

euronews (in English)

Three things are holding Europe back: the absence of a capital markets union, investments not going to the most productive firms and energy costs, the managing director of the IMF told Euronews.

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00:00The European Commission President promised to put economy at the core of her second term

00:13as she addressed the WEF delegates in Davos.

00:16Now, how is this plan viable and what are the three factors holding Europe back?

00:22I sat down with Kristalina Georgieva, the IMF Managing Director, to talk economy, Europe's

00:29competitiveness and Donald Trump.

00:32Kristalina Georgieva, the Managing Director of the International Monetary Fund, thank

00:37you for being here.

00:38My great pleasure.

00:39It is great to meet you here at Davos at the World Economic Forum as we are beginning the

00:44year.

00:45Now, what is your take and the IMF take when it comes to the main challenges the global

00:48economy is facing this year?

00:50Let me start with the good news.

00:53The world economy is growing steadily.

00:56We project 3.3% growth this year, 3.3% growth next year.

01:02Inflation is going down, not yet to target, but close.

01:06And that has been done with interest rates going up and yet the economy not falling into

01:13recession.

01:15Remember last year here in Davos?

01:17That was the big worry.

01:18Would interest rates suffocate growth?

01:21That didn't happen.

01:24When you scratch under the surface of this 3.3%, what we see is tremendous divergence

01:31in economic fortunes.

01:32The US is doing very well.

01:35We actually upgraded US projections by half a percentage point, very rare, whereas Europe

01:43is stalling.

01:45We actually downgraded European growth a little bit and most of the emerging markets are not

01:51in the best of shapes.

01:54What is hurting?

01:56Strong dollar and prospects for interest rates to stay a bit higher for longer.

02:05And secondly, when we look at longer term growth prospects, they're meager.

02:12They are way below the average from before the pandemic, which means that countries everywhere

02:22ought to focus on how to lift up their growth prospects.

02:26And above all, they have to focus on productivity.

02:29Why?

02:31Because the US is going up, driven by high productivity.

02:37Everywhere else productivity is like the sleeping beauty.

02:41Nowhere to be seen.

02:43Is it a sleeping beauty as well in Europe?

02:46A bit, yes.

02:48Europe is not doing well in terms of productivity growth.

02:52In fact, when we look at Europe, we see so much potential for Europe to do better if

03:00the single market is to become a reality.

03:06What is holding Europe back are three things.

03:10One, capital markets.

03:14In the US, they're deep, highly functional.

03:17In Europe, we still don't have the capital markets union.

03:21Two, investments do not go to the most productive firms for a variety of reasons, including

03:29red tape to entrepreneurs.

03:32Three, energy costs.

03:33This is something that Europe has done really well to pull itself from dependency on Russia.

03:40But it doesn't fix the problem of energy in Europe being much more expensive.

03:46Some of these things are long term.

03:47They cannot be solved easily.

03:50But getting the unity of the union, that should be a top priority.

03:55You've probably heard here at Davos, the president of the European Commission, Ursula von der

04:00Leyen, commenting exactly on some of those aspects, on the red tape that is existing

04:05in Europe.

04:06But also, the whole message was so strongly about making Europe competitive in the new

04:11global order, with Donald Trump being back in the office and the competition Europe is

04:16facing with the United States on the one hand and China on the other hand.

04:22I'm as European, I'm a strong believer that Europe has the capacity to be more competitive.

04:31It is a matter of implementing what we know needs to be done.

04:37We had the Draghi report in Europe.

04:40Many focused on the 800 billion.

04:43Yes, important.

04:44I actually think that the focus has to be on the single market.

04:48It has to be on completing the banking union, the capital markets union, because as long

04:54as your savings, the savings of the European people, fly to the United States because they're

05:01more profitable there and more profitable by a big margin, as long as domestically savings

05:09do not get allocated to the most dynamic firms, it will be really hard for Europe to achieve

05:15that objective of high competitiveness.

05:17It is possible, it demands focus.

05:19I was thrilled to listen to the President of the Commission, to Ursula, talking about

05:26competitiveness being top of mind priority.

05:29It has to be.

05:30How concerned the International Monetary Fund is when it comes to the global growth and

05:35making sure that this momentum is preserved, when we are also facing possibly new huge

05:40tariffs being imposed by the new US administration, because that will harm the whole trade all

05:48around and will also hurt the economic growth at the end of the day?

05:52When we look at the first days of the new administration, what we see there is President

05:59Trump implementing his election promises.

06:03And we should be careful not to zero in on only one aspect of it.

06:09What we look at are four big blocks in policy reforms that are oriented towards competitiveness

06:16and national security, trade, tax and public spending, deregulation, immigration.

06:24We will see the impact of all those measures in their totality once they become available.

06:30And we will see how the rest of the world adopts some of them or reacts to some of them.

06:37And then we would know the total impact on the global economy.

06:41Right now, what I can tell you is that in the short term, we expect a positive impact

06:47on the US economy.

06:49When the US does well, that actually benefits the rest of the world, but also more difficulties

06:55for the rest of the world for the issue you mentioned, because of tariffs, also because

07:00of the strong dollar.

07:02And I think that has to zero attention of policymakers on what can they do for their

07:08own competitiveness?

07:10What can they do to lift up their prospects for growth?

07:14Do you think, though, in this case, we might be facing some situation of, you know, tit

07:19for tat tariffs introduced from all the sides as repercussions?

07:24Is that something that you're envisioning happening?

07:26This is very possible.

07:27We look back in history.

07:30And what we know from experience is that there is almost 75% probability within one

07:38year when a protectionist measure is imposed from one country on another, this other country

07:45to reciprocate.

07:47So it is likely to see that kind of response.

07:52What we are hoping to see is more attention to domestic policies and also collaboration

08:02and trade that may open up because of this new situation.

08:08I look at the ASEAN countries, they are now much more aware that they have to figure out

08:13how to trade among themselves more.

08:16I look at the European opportunities for Europe to look at other markets.

08:24What else can be done?

08:25And I think we will see over time that trade is like a river.

08:31It is unstoppable.

08:32You know, when there is an obstacle, it would go around it.

08:36Are we going to be experiencing reciprocity?

08:41We will see.

08:42It is perhaps not the wisest thing, race to the bottom.

08:49But let's see how the reaction of countries would be.

08:54And again, I want to stress that sometimes when one door closes, another one opens up.

09:02And stress that again and again, that there is so much countries can do to unleash productivity,

09:10risk-taking and growth that is not yet done.

09:14Do it.

09:15But when they start doing that, if we look at Europe, for example, if we are, I'm a bit

09:20speculating here, but if we are talking about the new global order where we do have more

09:25tariffs imposed and so on, and when Europe tries now to look inside and to increase its

09:30own competitiveness to everything, to work on yourself, in this case, is there a possibility

09:37of some sort of risk also, then there we would look more of some kind of economic nationalism.

09:42Because I'm asking this among the global risks report by WEF this year, we've seen that one

09:48of the top five is actually geoeconomic confrontation.

09:52I'm trying to see whether this is something we might be seeing this year.

09:56That is certainly a risk.

09:58Let's remember that domestically, not among the politicians, among ordinary citizens,

10:06concerns about national security have gone up, not surprisingly.

10:10We have a war on European territory, one military power invading its neighbor.

10:18That was unthinkable.

10:20We had the big conflict in Gaza, hopefully it would now die down.

10:26We have conflicts all over the world, more than ever, unquestionably, that makes national

10:33security a higher priority in the minds of people, and then a higher priority for politicians.

10:41My point is that these two objectives, national security and economic competitiveness, they

10:49need to go hand in hand.

10:51If Europe is economically stronger, it is also in a better position to have strong defense,

11:00protected citizens, and I can say that Europe can look at U.S. for some lessons as to why

11:09productivity in U.S. is growing, whereas in Europe it has been stagnating.

11:15That can change, and again, good to hear European political leaders saying, we are going to

11:23change that.

11:25Every year we are fighting to have more women being represented at Davos.

11:30Every year there is progress, but I think we are still not there.

11:33What do you think?

11:34I think we have a way to go, but what is amazing is that more and more I see young women in

11:42executive positions present in Davos.

11:45So that is a generational change that is likely to shift us to a better place.

11:54Thank you very much.

Focus on EU single market to boost competitiveness, says Kristalina Georgieva

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