 One who has not done any politics but understands that word very well, John Lipsky, he has made most of his career as a chief economist in the banking industry and at the IMF. The word crisis, sorry, the word crisis more than rings a bell to him. During his last tenure at the IMF where he was deputy director, he held the interim for Dominique Strauss-Kahn and at that time he had to tackle the consequences of the 2008 financial crisis, the European and especially the Greek debt crisis including the one his own institution was going through. He has been looking ever since for those black swans, these unpredictable events that can topple the world economy and his past of observation is now at John Hopkins University at a very famous school of advanced international studies. Mario Monti is with us today also, he is one of the better known political figures in Europe. He has had the courage to accept the responsibility of leading Italy's government at the heart of the debt crisis and attempted difficult reforms. A true European builder, he has been twice commissioner, once in charge of internal affairs and the other one of competition. He's famously known for imposing a $500 million fine to Microsoft and at the time it was a first and for that he earned the nickname Super Mario. And trained at the famous Boccoli University as well as Yale, he has also presided the Milanese University for several years. Mr. Mosoto, I'm going to try to say that right, Motogishi Ito is a Japanese academic who has been involved as a top counselor to various government committees and is also an advisor to the Bank of Japan. He is the president of the National Institute for Research Advancement and a professor at the Graduate School of Economics at the University of Tokyo. It is fair to say that he has the ear of Prime Minister Shinzo Abe. Abe nomics have no mystery for him and he has written extensively, even published a book about what the economic crisis had brought to the world. And finally, Mr. Sakon is also an economist who as Mario Monti has had his hands on economic policy within the government. As famously he was the minister of finance from 1983 to 1987. He has been involved with many, many multilateral institutions such as the IMF and the G20. He has done a lot to improve South Korea's competitivity with clearly some success, is a great scholar on international finance and trade policy issues. So the topic of this round table is very fitting. These years after the financial crisis that started on Wall Street were still painfully emerging from its aftermath. We understand that we are getting now into new paradigms, but the uncertainty is so high on so many levels that it is hard at this crossroad to find the right direction. World growth has almost never been that slow, a little or under 3% this year. Worldwide trade is actually very weak. The Chinese economy's slowdown has an impact on everyone else. There is a fear, a very real fear, that as soon as the Fed will tighten its monetary policy, most of the emerging countries will go under. Even the Fed in a recent statement said it was important for her to monitor the international situation as sudden dangerous events can sidetrack the American economy doing for now notably better. Europe is indeed facing a huge crisis with about 1.5 million refugees crossing over its borders, terrorism is striking hard, and the Syrian conflict is very much unresolved. At the same time, we see new organizations coming to light. China is successful in setting up new banks to rival with older institutions such as the IMF or the World Bank. Some major trade agreements are signed or are in discussion, sometimes painfully. OECD countries unite to fight against fiscal optimization and state believe that economies can be rejuvenated while fighting against climate change. So yes, indeed, we are at a crossroad and one of the question is that in the light of the new dangers facing our world is our global government adequate? So economics are going to be a big part of this conference. As you know, as he explained earlier that he's a strong promoter of geo-economics. You will also be able to attend sessions on how the job of a central banker has changed and I'm sure there's a lot to say for that. What is the significance of trade agreements to medium powers or what nationality means today to an enterprise? The format of this roundtable is going to be the following. I'm going to ask a question to each of our panelists and he'll have about five to seven minutes to answer back. Then we'll have about a quarter of an hour to discuss some topics. Well, they will have time to discuss among themselves. And after that, we'll have 20 to 25 minutes to open to the floor. So back to our topic, the economic order at crossroads. We see how striking it has been to see how international governments has evolved over the last year. And I'd like to start with you, Mr. Lipsky. We all of us remember September 2008 when the world was really on the brink of financial collapsing. And can you remind us how much this has changed governance? And can you assess where we are today and how efficient our system and trustworthy it is? Thank you very much. And thank the organizers for inviting me to participate in this wonderful panel. Your question's, I think, a very pertinent one. I would say my main point in response would be that following the global financial crisis, one unexpected result has been the diminished focus on and a reduced role of the multilateral and treaty-based institutions that formed the foundation of the post-World War II economic and financial architecture. And instead, there's been a rising role of what I would call ad hoc voluntary and regional initiatives. And to my mind, this has added to the sense of unease, uncertainty, and unpredictability of policies that has, I think, made the recovery more difficult. I suspect that this period of uncertainty about policy direction and policy organization won't be resolved quickly. And certainly not until there's a greater sense of shared economic progress and diminished sense of frustration with weak economic performance, especially in the EU and in Japan. And a greater sense of regional rebalancing that will be taking place over the next few years in Asia. More broadly, if I could, to expand on this, just to remind that since the collapse of the Soviet Union, there was a filling out of the multilateral institutions that were the basic architecture of the post-World War II era on trade. That's the GATT and subsequently the WTO on global financial issues, the IMF. And of course, one of the ambiguities of that system was there was no formal role for any institution with regards to global capital flows, which the IMF was not empowered to oversee. Now, despite the sense of looking back of great moderation of the period of the 80s and 90s and early 2000s, in fact, there were repeated crises, 94, 95, Mexico, 97, 98, Asia, Russia, Brazil, et cetera. And in response, or in the wake of the Asian crisis, there was a new institution created, the Financial Stability Forum, that was designed exactly to take many of these financial regulatory issues out of the IMF and in a smaller voluntary body. 2000, we had the dot-com crisis. And of course, then, the global financial crisis. The principal institutional response to the global financial crisis was the formation of the G20 at a leader's level. And they adopted four principal agenda items at their initial meeting. One, to restore global growth. Two, to repair and reform the financial system. Three, to avoid protection and promote new trade liberalization. And four, to reform the international financial institutions, specifically the IMF. And they assigned specific institutions or organizations where either formed or assigned these responsibilities. In the case of growth, it was a so-called framework for strong, sustainable, and balanced growth. Now, all of these had good intentions. But the institutional ambiguity was that they are all voluntary. The G20 is not a universal institution. It's self-appointed. And it's not treaty-based. And therefore, its pronouncements, although very powerful, don't have the same standing as a decision of a multilateral institution. Surprising, well, no, no, it's surprising. But when we look back, we realize that from these four agenda items, not one of them could be considered to have been accomplished despite the time that has passed since 2008. Not necessarily a criticism, but just a statement of fact. But I do think that this operation of this ad hoc G20-led system has tended to undermine the effectiveness and legitimacy of the post-World War II organizations. The G20 summit just passed only a few days ago. And I suspect hardly anyone noticed that any discussions outside of the political discussions around Syria. In fact, the framework produced something called the Anatalia Action Plan. I'll bet hardly anyone has taken a look at that. The Financial Stability Board that was created as a successor to the Financial Stability Forum has been promoting reform that was intended to create a level playing field. But in fact, I suspect that it has, I think most people would conclude that compared to before the crisis, financial markets are more nationalized, the playing field, if anything, is less even than it was previously. With regard to trade, the initial commitment to adopt Doha or to finalize the Doha arrangements have been instead replaced by regional trade initiatives. And with regard to IFI reforms, the reforms agreed for the IMF in Seoul remain still to be adopted by the US Congress. And it looks like that it's quite likely will not happen under this Congress. As a result, for the IMF, we may have to renegotiate the Seoul reforms under a new US presidency. And trade, there's still great uncertainty about exactly how this is going to happen. Big point, the old system is being superseded without a completely clear vision of what's happening next. The course, a test for the possibility of broad multilateral action is going to be the COP 21 discussions in Paris. We'll be watching closely. But I think there's a real challenge here that was not clearly anticipated in the wake of the financial crisis. It's really interesting. I hope you hear me. But I wonder, we understand that the G20 took power because it was in the heat of the action. The crisis was so bad, all governments decided to join together and did take some decisions and affirm some principles, as you say. But do you think they're actually lacking legitimacy today? Is that the problem? Or is that that they're not effective enough by themselves? I mean, the G20 is not powerful enough. The G20, as it's constituted, is potentially extremely powerful as the expression of a consensus. What it has trouble dealing with because of its lack of an internal structure, and to a certain degree because lack of legitimacy sounds sort of loaded, but that it's a voluntary, partial group, even though hugely, hugely important. Remember, the initial idea was to bolster both cooperation and the effectiveness of the preexisting institutions. And I would say that part of the problem, you want to go into more detail, is in part that there's a disjunction between the membership of the G20 and the leadership of the multilateral institutions in the sense that their executive boards are not the same as the G20 membership. So it's tended to confuse the system. And when there's lack of consensus among the G20, especially among the principal members of the G20, then the G20 finds it very hard to make progress. Whereas the multilateral institutions have a voting rule and a legitimacy through its universal nature. That allows them to reach decisions that have legitimacy and legal standing, even when there's not full consensus. At the same time, I mean, they have not lost credibility, but they've been very much criticized. I mean, I think of the IMF, the World Bank. The Greek crisis, for instance, has been, you know, I mean, to show that very clearly. There was really a lot of angst and anger against the Troika, for instance. So it's, I mean, I understand that they probably have the structures to make things more abiding, but their message is maybe less accepted too. Well, I don't know. You know, if you take on tough situations, criticism is going to be inevitable. Not everyone is going to like everything you do. But that's part of the usefulness of these institutions, that their very structure means that they can take action in context in which there is not complete consensus. So we should wish for a comeback of those multilateral institutions for them to come back and take more preeminence. It strikes me that there are grounds for a rethinking of the current structure to try to line up better the ad hoc and voluntary organizations with the underlying architecture. And certainly, there is some important questions that we'll be dealing with as things develop. It's not inappropriate that there is filling out of regional institutions, but they need to be consistent with the actions at a global level. I'd like to turn now to you, Mr. Sakong, because you've been one of the sherpas of the G20. Did you feel that there is that need of reform of better alignment, as Mr. Lipsky was just mentioning? Well, I think this issue should be put in a wider historical perspective in terms of global carbon system. As we all know, the post-World War II, World Economic Order, was based on the institutional setup of the GATT, WTO now, and Britain was institutions. And US played the key role, the leading role in establishing these institutions and keeping the World Order. An important thing is that US has had both economic affordability and incentives, both economic and security-related incentives. Sometimes US was willing to pay what is called, economies called side payments to member countries to abide by these international rules. Marshall Plan and Dutch Plan are examples. And then came the 1970s and 1980s, when US domestic economic situation and the global economic power constellation changed. So the world changed from unipolar world to multipolar or now, it's a no-polar world, okay? So a decision-making for the global community as always is very difficult. Previously, as there was Ed Huck, and then John mentioned Ed Huck arrangements, Plaza Court, Lubu Record in 1985 and 1987, which is five in G7. But now, after 27, 28 global crisis, the G7 leaders included, global leaders thought that it's not legitimate enough, credit enough, representative enough. So they decided to have G20. G20 is not meant to be formal institutions for global. It was informal, so to speak, steering committee for the world because unlike under the unipolar world, there's no leadership force coming. So the leaders thought that it's a collective leadership is necessary and so G20 became the forum for the collective leadership. And then as John just pointed out, in my view, and I agree with John, it's not living up to the original task. But in any case, G20 is not to replace formalities. It is an informal steering committee because today, look at the Bretton Woods institutions. Look at the quarter distribution and the voice distribution. Does not reflect the current constellation of global economic power. So to make these institutions more legitimate and credible, legitimate and credible, you have to reflect current world economic power. So the G20 leaders in Seoul, 2010, they agreed to substantially reform the Bretton Woods institutions, particularly IMF, by shifting, which is historical, 6% of quota from overrepresented to underrepresented countries, but now is stalled by the U.S. Congress, the disapproval of the U.S. administration's proposal. So this is where we are now. And I think what we need is that we have to make G20 as a collective leadership forum that workable. Otherwise, you just know the leadership force coming. The world needs public goods, global public goods, financial stability and the free trade regime. But the leadership is not force coming. That's why I think this G20's role is very, very important. And I've been attending this forum from the initial meeting in Evian. I've been keep saying that this is the task, the challenge that the global community has. And it's not happening. And so important thing is that G20 should work closely with IMF and existing Bretton Woods institutions by making Bretton Woods institutions more credible and less. In fact, I worked very closely with John Lipsky and actually I wasn't sure, but I was really leading the whole Korean G20 endeavor. At the time as a President of Special Economic Advisor. But in any case, I think this is the key. And the global economic order is in flux. And we do need this global order which will be more favorable to continue the global growth and prosperity. But as you mentioned very well, it's quasi impossible for political reasons in the States to reform the IMF right now. So when we see China setting up new banks with the BRICS or more lately with the AIIB, do you see it as rival institutions to the Bretton Woods institutions? Well personally, I don't think AIIB is a rival institution, so Bretton Woods institution. What is it then? And also, I hope it will turn out to be rival. And it can be, actually that's what I mean saying in public, or in China as well, look at the infrastructure, yeah. And also the AIIB is for infrastructure investment. It's a role, IMF is completed, there's no role for monetary policies, macroeconomic policies. Now, look at the necessity of infrastructure investment for the global community. According to McKinsey, there are the 57 trillion dollars necessity of investment infrastructure. AIIB you're talking about what? 500 billion dollars at capitalization. ADB and World Bank still very, very small. And so the initiation AIIB from this country is a really welcome thing for the global community. As long as this institution become complimentary to the World Bank and ADB, I hope it should. Because McKinsey said that 57 trillion dollars, which amount to almost four to five trillion dollars a year, but this is just a necessity. It's not based on feasibility studies and all the profitability studies. So actually effective demand is much lower. And therefore the establishment of AIIB or contribution AIIB, not just funding, but the feasibility studies, all the project identification and so forth. So on that ground, ADB and World Bank has accumulated knowledge. So I think they should work together to make the AIIB work. And so AIIB cannot succeed immediately without having this collaboration. That's why I don't see it as a rival, particularly I don't see it as a rival institution to Bretton Woods institution because it doesn't have the functional way. IMF and the monetary macro policies there. And that's a very positive view because some have said that it's a way also for the Chinese to exist in new organizations where they didn't have enough space before. And maybe they can grow while ours go down. I think Chinese in their intention, I think they have the ambition global, the strategic ambition there too. But I see that. But look at the IMF current quota distribution. Although China based on normal exchange rate today, China is about 15% of global economy. US about 24, 25. Look at the IMF quota. China is only 4% and US over nearly 18%. So what needs to be done is to make China's voice more heard in the institutions so that China can work with the global community better. That's the way I say it. Mr. Ito, I'd be curious to know if you share Mr. Sakong's point of view on those new institutions coming out of financial institutions led by the Chinese in Asia. Do you agree with him that it's mainly for infrastructure and it can be worth for global growth and global economy? Yeah, before I just respond to your question, let me just make a brief comment on the other end. Then I can go over to the challenges. I think the IMF and the World Bank and GATT, that with you is still very important. But we have to admit just the world economy become much more sophisticated now than when it was established. So when GATT, for example, it's only mostly among the industrial nations for the cutting of tariff or mostly on manufacturability. When we are just the restricting that area of the discussion, just the business, much easier. Now IMF, when it was established, was supported by the money from developed countries for the stability of the currency or developed countries. So everything changed in 1973 when the developed country is changing to the flexible exchange rate. Now we're usually using the money from developed countries more on the stability of developing countries. And so I think that this role is changing. So all of the international institutions is very important. We have to, some more, in order to just cope with just very immediate issues. So I think, for example, the regional trade negotiation maybe necessary. Someone said just negotiation itself is very important to just promote the movement in the domestic politics. So when the WTO negotiation is in stalemate, we have to find something else to just agitate the year. And that's what's happening. And about the AIIB, I'm not very sure, but we have to remember, we also have a huge number of the unilateral contribution of infrastructures by each countries. Now China is very big, and you have to remember quite a large portion of money is coming from China. So it's partially the Chinese unilateral action, but China is very skillful to just invite their country to just participate in it. So we have to just work very carefully. And everybody wants to be there. I mean, a lot of occidental countries have decided to put money in the AIIB. And if AIIB is very successful to just introduce very good governance system to check the project and so on for us, then naturally it can grow more the business of international institution. And if it can, then it naturally becomes just unilateral. But it's supposed to be venues for the Bank of Asian Development, right? Which is pretty much managed by the Japanese. Well, it's not only Japanese, American, and other Asian countries. I think it's just kind of competition is very important anyway, because you already have to keep changing in just in the face of the stability. But the Asian Development Bank has a long tradition of just doing business in a very sophisticated way. So I think just the experience with a DBI as a development bank can be used for AIIB and so on and so forth. But let me just talk a little bit about more of the economic aspect. Yeah, because we had a terrorist attack. And it just reminded me of just September 11th terrorist attacks in 2001. And you may remember this as a kind of spreading of a very pessimistic perspective about the world economy after September 11th. Now, then came the concept of BRICS. I think Mr. O'Neill of Golden Stacks who just coined the concept, just once told me, he just think the emerging countries' growth is much bigger than the pessimistic picture given by terrorist attack. So that was correct actually. So we had a very tremendous growth in 2008. Now comparing with that period, now unfortunately BRICS is now become rather risk rather than just the problem. You're taking Brazil out and Russia out, so it doesn't leave much. So we have to just think very seriously about this condition, not about terrorist itself, but more of the global environment changing a lot. Now China maybe will become very important topic in this conference, is maybe one of the most important player in BRICS because of its size and because of its tremendous growth, but at the same time very importantly because of the very ultra Key Engine policy after the human crisis. So they spend a lot of money to make investment infrastructures and heavy industries. And that actually causes the problem much more complicated. The huge amount of the over investment on infrastructures and bubbles in real estate market and over lending to state-owned companies or the local government. So China is now correctly changing their direction to so-called new normal. I'm shifting from manufacturing to service sector, shifting from the investment lead to consumption lead and going to more modest growth rate. The direct-estate cost, but the problem is, I'm not sure whether we can just have a soft funding into that new normal. And in order to just achieve a new normal growth, China is a very dramatic liberalization and privatization of the services. But what is your bet? Is it a soft landing or are we all gonna soft for the earth? I think market is still watching. I think Rudy Dome should just answer a very interesting comment. Everybody's talking about crisis and it never happened. But when crisis happened, it just come very quickly. So maybe 90, maybe 5%, it's just keeping in a good equilibrium. But once there's some kind of a very bad coincidence. So we have to watch very carefully, but not very pessimistically at this moment. But staying on the topic of economics, so we noticed that Chinese slowed down. You say that the jury's still out, we don't know if it's gonna be a soft or a heart landing. If you look at Japan, your country, it's been really three interesting years because since Mr. Abe has been elected, he really tried to impose a lot of new policies and the success has not been great. And today Japan is technically into recession again. So can you explain to us why it hasn't taken off? I think the Japanese experience is not just for Japan. It's a very good case for us to consider about so-called the secular stimulation which was originally discussed by the Larry Summers. So I think the European country is facing a very similar problem and also United States under some degree. I think what we learned from the 10 years deflation is it's very difficult to get out deflation and we need some very dramatic measures. So I think Mr. Kuroda, the governor of Japan was very successful. I probably remember just after very dramatic measure of monetary policy, the stock price increased 50% or 150%. Corporate profit increased more than 30%. And exchange rate moved a lot and unemployment rate just become lower to the point was 3.3%. But the problem is the main body of the economy, such as consumption, investment, or maybe production, is very slow to respond because this is much more deep-rooted deflation in mind. So what we are now watching in Japan at this moment is a kind of very important transformation from the original first phase of monetary expansion to more of the transmission of the heat to the real economy. I think two things is very important. One is labor market. We are now kind of an increasing demand on labor. So if it triggers the increasing wage, that may provide a very good perspective because increasing wage just promote consumption and also increasing wage is very important to have a continuing process of the mild inflation. And the other is the investment. Corporate sector just accumulated a huge amount of cash because they are now earning a lot, but probably they are not using money. So I think the again inflation is very important because then Japan may get into the so-called negative real interest range. First time in the last 40 years, which may be very important to promote that kind of action by the corporate sectors. You say that getting higher wages is important. Of course, getting women in the workforce is another thing that Mr. Abe has been striving for. There again, it's very, very slow. Well, I think that's the more the very complicated social problem. So the important thing first is very strong political commitment. But we have to also must be very patient to change the mindset of mail for the participation in the family business. And also we have to change the tax system and everything. But the important thing is Japan, I hope, start moving in that direction. Thank you. I'd like to turn to you, Mr. Monti now and talk about Europe. In the late, in regard of the latest crisis Europe is facing, it seems that some European states are at odds and that the march toward a more integrated union is kind of fading away. And with the refugee crisis and the terrorist attacks, it seemed that the stability pact is gonna be hindered once again. So is it good to think to have that kind of flexibility or regarding at least the pact of stability or the Europeans incurable sinners? I believe Europeans are believed by many to be sinners through an excess of virtue. Really? Particularly by the Americans and others. At any rate, let me touch briefly on the stability pact and then I'd like if you allow me to resume the discussion on the global economic order or disorder. I think the stability pact is there because it was important to reassure all of the European public opinion that even though there was going to be a single currency, the price stability would be very solid. And we have here the man Jean-Claude Richer who ensured once the single currency was there that indeed that was the case. Now I like some flexibility but some limited flexibility to the stability pact. For example, the stability pact is not an instrument for moral support. So I believe for all the drama that terrorist attacks do imply, for all the enormous responses that that requires from the United European Union, I think it's a bit improper to say, okay, now you are allowed to use more money for external and internal security. Which is of course an imperative but the real imperative would be in the end to achieve that through European integrated defense, intelligence, et cetera. And in the meantime, if that is to be pursued through flexibility in the stability pact, what does that mean? That individual member states are allowed slash encouraged to finance those greater expenditures in deficit because that is the authorization given by the stability pact. But who said that war finance necessarily requires that? Maybe one could consider is this the moment to behave as the grandchildren of Ronald Reagan in some European countries and try to reduce taxes across the board? Or maybe because we are going to need more public goods. Like for security, we should give a bit of stop to decline in taxes and provide through taxpayers money to enhancing citizens, i.e. taxpayers security. So, but I am convinced that through the imaginative and painstaking work of the European Union, we may seize this opportunity to revise and to revamp the stability and growth pact by introducing improvements that have nevertheless to do with economics, not with the state of the world globally. And for example, I think this is a good moment to give a more proper and encouraged role to investments, including public investments in the stability and growth pact rather than denaturing it to cover non-economic needs that need to be tackled as such by the European Union. But if I may, the discussion was on the decline of multilateral institutions. And I think this begs the question, what about globalization? Where is it going? My personal view is that globalization is going on as regards technological and business aspects. But globalization has indeed seized to advance and indeed started to regress as regards the policy and the institutional aspects. We see that at the global level, just think of the WTO and what has been said by my colleagues on the panel. And at the European level, we have seen clear symptoms of integration fatigue well before the economic crisis. So this is not just a side effect of the crisis that people want to integrate less. Just think of the syndrome about the Polish plumbers in France and the Netherlands in 2005. The economies were booming, but there was a willingness to close. Just think even before of the reluctance of the corporate community leadership in Europe not to have too much of a bold takeover directive that could open up the market for corporate control in Europe. So will the march of integration resume when growth is back? I'm not sure at all. And I think the more fundamental question is, I like all, I believe we are proud of our democracies, but there is a gradual degeneration of our national political systems into populism. And let's be frank, into turning the concept of political leadership into political followership. We don't have political leaders. Now I'm abstracting from China, which is not normally considered to be a democratic country, but it's a bit of a pity if democratic countries leave the exclusivity of be willing and be able to take care of the long term only to one country in the world, which is not conventionally considered to be democratic. We specialize in what? Our political leaders specializing in becoming leaders again by winning elections or by doing well in the polls tomorrow. But this transforms them into very skilled followers, not leaders. Now the short term is that this introduces in political decision making is both as regards the time horizon of decisions. Who cares about what will happen in five or 10 years? I was in China the other day, they have two points in time on which they construct plans. 2021, the 100th anniversary of the foundation of the Chinese Communist Party. And 2049, that they will probably consider the medium term, which is the 100th anniversary of the successful revolution in China. Now, we have the short term is as the time horizon of decision but also as the timeframe of the debate in our political systems to win the case in debates and eventually to win the elections, you have to present arguments that can be made in 10 seconds. The nationalist, the populist, the protectionist can make these arguments. The country is not growing enough to much use unemployment. Let's close borders to foreign goods. But to explain the virtues of integration which is just the opposite of that, if you're very good, you need one to two minutes. So you are out. That is why I believe that integration being the opposite to populism as to the inevitable complexity is going to lose out. And I would not be surprised if Europe, which is so good under certain emergencies and it has, I think, dispelled the concerns about Brexit will probably I'm convinced dispelled the concerns about Brexit may well succumb vis-à-vis the disintegration coming not from one country which wants or may be forced to leave, but from within because the public opinion led, or I should say followed, by leaders turned populist followers. I'm not ready to proceed with integration. That's something I really feel, you know, hearing this from you because we would hope that you would be one of our great optimists and actually you're not. So it's a kind of fun little sad today. Well, if one understands the reason of certain negative phenomena, I think it's a bit of progress, but maybe I'm wrong in the analysis. But then again, if Europe crumbles from the inside, as you say, because of populism mainly, where does that lead us? What kind of world are we facing then? And sorry, I mentioned Europe because I'm the only European panel besides the leader of the panel and we are followers. But with all due respect, maybe the US beats Europe as to domestic populism, except that their own political and institutional integration is a bit older than ours. So it is not put under discussion every day. Would you like to react to Mr. Monti's statement? This disintegration from within in Europe and populism rising everywhere, including maybe in the States, we'll see the outcome of the race next year if something good or not comes out of it. Mr. Lipski? Well, I'm certainly not the subtle observer of European trends that Mr. Monti is, but I hope that those like himself who have confidence in the initial vision of integrating Europe will carry the day. It strikes me that the counterfactual is so unconvincing, namely that Europe would prosper more as a set of more separate, less integrated economies is simply not credible. And one would hope that even in a world of sound bites that in the end reason will win out. Nonetheless, his remark was broader and about the US as well. I can't help but saying I find the current status of US political discussion puzzling in the same way. And then it seems that, at least for the moment, arguments that seem very hard to defend or seem ascendant in the polls is a very puzzling one. But at the very least, I'm confident that that will not carry the day and I hope that I'm right. But I would also say that the US has hardly provided a leadership role in the area that I discussed, namely of the reform of the international systems and a defense of the multilateral institutions. I have been personally disappointed by that and hope that at least it's a temporary phenomenon that will ultimately be reversed and that the US will take a leadership role once again in helping to fortify the multilateral institutional system. Just to come back to your first second because I was thinking about that while you were speaking. When the Junker Commission was elected and President Junker took over, his message was much more political and he said I want a political commission and his first message I think was on investment and the need for investment and that was very loud and it carried out pretty well until the crisis that we're now going through with the refugees and terrorism. But it seemed that, I mean there was hope at the beginning of that commission. It seemed that there was an eagerness to look forward and to look more midterm than maybe we used to. Do you think he can find again that voice despite the actual events and try to pull out a vision for a longer term? I think President Junker and the Junker Commission have behaved very well so far. Not so much because they've been more political and I will come to that in a second but because in my view they have been having the right vision, they have articulated it well and they are on the road of implementing what they say. Should we have and be content with a much more political Europe because the average head of government or minister in European countries will tell you especially when he or she is under enforcement of some European rules or the stability pact we need a much more political Europe. Now I agree that Europe should not be just subjected to rules and automatic mechanisms because that is a bad substitute for political decision making. But what politics do we need to see more vigorous at the EU level? We have a European Parliament which has a political vision of Europe. We have the European Commission that as I just said is behaving well in my view now. But what is the place for politics in Europe? That is the European Council, the table of the 28 heads of governments. Now on average those meetings are a collection of highly respectable, sometimes even respected national leaders who participate in decision making about Europe having what in mind? Their next election and if their next election is a bit too far, two years, three years it's not that they exploit that space for wise decisions. No, they will think of how the decision to which they contribute in Brussels that night will impact next week's poll on them and therefore their domestic political situation. So do we want a Europe, in my view the political crisis in Europe resides at the level of the national capitals. So I like political leaders who say I want a more political Europe but provide that there is a strong dose of self-examination and coherence. That's very well put. Coming back to governments and the financial institution I've been struck about the growing importance of the Federal Reserve in the world. I mean since the crisis it seems to be really the la revit, I forgot how to say that but the one who decides what's happening or not and the fact that the QE now is gonna probably fade away, a quantitative easing program. What are we to expect? There are a lot of fears about what's gonna happen to emerging countries and I know you're all economists. Can you tell us about what do you think of that influence the Fed has now on worldwide policies not only just the United States, it really goes beyond and what do you expect of this transition that it will have to make some more very soon to a tightening of its policy. Mr. Ito maybe? I think we have to just look at not only the United States but also world market. As I just mentioned just before there's a very tremendous shifting of the money to developing countries in 2000 and everybody is investing on the emerging countries resources and maybe real estate. So I think the ribbon crisis just provided some kind of turning point to just reversing the process and we're still in this kind of processing process. We have to be very careful. Now about the action of the Federal Reserve, yes, it's very influential but at the same time we have to remember everybody knows that Federal Reserve is going to increase interest eventually so market is already absorbing some kind of expectation in increasing interest rates. So also just timing is very important but we don't have to just overreact to the reaction of the Federal Reserve. Markets are absorbing it but it can be very brutal nonetheless you know you can have a lot of capital flows just flying away from emerging countries. Mr. Sakong, about this topic. Yeah. Well I think this U.S., the imminent crisis the U.S. Fed's interest rate concerns particularly emerging world because it comes at the time when the Chinese economic slowdown has been more visible now because Chinese economic slowdown, China has the largest importer of the resources, energy and the commodities. So those commodity export countries hit by this real economic flow which is through their export rate. And then with Fed interest rate adjustment they will hit again through financial channel and the capital outflows will be again even accelerated. So all together goes the real economic flow, the channel, and then the financial channel these countries will suffer greatly. Of course so far, U.S. all expected. Chinese what is called new normal is really not surprising thing. It just cannot, China's across cannot be sustained. So it's adjusting, so it is already expected. And also U.S. Fed's interest rate, the hike is also expected even then I think it will hit hard. So again on this point again I saw the global economic cooperation is very necessary and John mentioned that the G20s MAP program, mutual assessment process, these things can be brought in there and could have discussed at least share information and at least suggest the necessity of policy cooperation and so forth. And there is a means but it's not utilized maybe and so I think I thought this time and of course because of this terror and everything but distracted the attention but I thought the G20 should have more on this because there will have the volatile emerging market, the capital market adjustment. Okay, now maybe it's a good time to open two questions to the floor. I think we have a mic somewhere, hopefully. Yeah, we just need somebody to come over to you with a microphone, but I think it's happening. Yes, there are people in the front please. Oh, she didn't see, okay. Yes, just a moment. So please make your questions short and introduce yourself. Thank you, I'm Mershi Treet from Israel. My question is to Mr. Lipsky, in 2009 you were suggesting in the IMF that maybe we should change the coin for Federal Reserve and from a dollar to something else. Do you think it's still, again? Yeah, say it again. Okay, in 2009 you were quoted in the IMF that you suggested a possibility to change the coin for the reserve reservoir of countries from a dollar to a different coin which supposed to be the ability to draw money from the Federal Reserve. Is it still relevant? This kind of thinking about changing the dollar as a reservoir for countries. Use a different money, is that what you're saying? Not use the dollar anymore? No, no. Today 70% of the reservoir of countries are holding dollars, okay? Yeah, yeah, yeah, yeah. Ah, Bruno Girard is there to help us. I don't know, yeah. Yeah. Okay? And he suggested to change the dollar. Okay, so how, what would you expect? You'd like what, to see what? Instead of 75, you'd like much less or? He suggested at 2009 to replace the dollar as the coin which used by countries to hold a reserve. Is it still relevant? Is it still relevant to have your reserves in stock? I'm not completely sure that I understand the, they're... We, we, we, yes, sure. But I could give a, we can start with a formal answer. There is an agreement within the IMF that ultimately the international system will be based on the SDR as the principal reserve currency. Ah, yes. This doesn't seem to be pursued with any great alacrity. Nonetheless, certainly as you've all seen, and if the reference was to the suggestion by Governor Joe of the People's Bank of China that ultimately that the RMB, that the Chinese currency become an international reserve currency, that has certainly progressed substantially and will take a leap forward if you will with if the membership of the IMF carried through the recommendation of the IMF staff that was issued last week to include the Chinese currency in the currency basket of the special drawing writer SDR or the reserve asset created by the IMF. The practical implications, immediate practical implications of such a decision are relatively limited, but they do open the way in light of the measures that have been taken by the Chinese authorities and our plan for the future to continue opening their capital account and modernizing and strengthening their domestic financial system. Certainly the use of the Chinese currency in the international system is likely to grow. Whether that supplants the dollar is another, and how soon is another question. Broad rule of thumb for reserve currencies is that a country should maintain its reserve balance more or less in order, on the same order, of the percentage of their international trade denominated in that currency plus their international debt denominated in that currency. And in those terms, today the dollar is not overused. It's a role in reserves is essentially in line with that broad rule of thumb. Whether that changes in the future is going to be another question, and certainly the creation of a viable alternative in the Chinese currency could influence that over time. Ultimately, what makes the system work is the confidence in the coherence and consistency of economic and monetary policy of the principal authorities, and not just the Fed. And that is certainly one of the goals of the G20 process to enhance both the reality and the perception that policies are being adopted in a coherent and consistent way. And I think that is a goal that is yet to be achieved. Thank you, thank you very much. Somebody behind you needed the, do you have the microphone? Monsieur Laichoubi, Ancien ministre Algérien et académicien. Je développais pour ma part un certain nombre de questions et de craintes qui ne sont pas du tout levés à travers les différents intervenants. La remarque, c'est que les grandes questions mondial ont l'air d'être manager et gérés de façon parallèle. C'est-à-dire, avec quelques étanchéités, quand on prend la question du climat, la problématique, la dynamique au sein des spécialistes est totalement différente de la prise en charge par les politiques et encore plus par les opinions. Sur le plan de l'économie, c'est la même chose. Le marché se gère en parallèle, en totale différence de rythme et d'appréhension. Les grands groupes industriels, c'est la même chose. Les finances, les institutions multilatérales, on les dit dans le déclin, c'est-à-dire incapable d'influencer le cours politique des choses et on peut continuer avec l'autonomie des banques centrales, les visions, etc. Et donc la première conclusion, est-ce qu'il n'y aurait pas une sorte d'incapacité des politiques qui a été fabriquée par un modèle, par une machinerie qui a développé sans arrêt des étanchéités? Et du coup, la question qui se pose, est-ce qu'il n'y aurait pas ce lien politique entre l'opinion, entre le décideur politique et le gestionnaire et le spécialiste qui le liant, c'est-à-dire la pensée politique, qui a l'habitude d'organiser tout ça, d'éviter que le système agisse et évolue en rupture totale et en incompréhension majeure? Et donc ma question, est-ce que les opinions, est-ce que les politiques ne sont pas au fur et à mesure désarmées conceptuellement? On arrive de moins en moins à lire le monde, à lire l'autre. Et ma dernière question, est-ce que vous n'avez pas le sentiment que les économistes technicistes, et je le dis sans vision négative, n'ont-ils pas supplanté le politique avec un élément, je veux dire, négatif sur les impacts? Est-ce que le profil du politique lui-même n'a pas changé? Merci. It seems that Mr. Moti, you did address this. Do you want to come back to this question? Well, thank you for this privilege. I thought that a negative conflict of competence might arise on who was the member of the panel explicitly addressed by this question. What I did was take note of the different sides of this fascinating prism that you presented to us, incapacité des politiques, les politiques désarmées, les économistes n'ont-ils pas supplanté les politiques? Je crois que l'aspect le plus important de votre question complex est qu'il faudrait une synergie qui peut-être aujourd'hui n'est pas tellement là. Et si les politiques sont désarmées, je vous suggère en retour de considérer aussi le auto désarmement qu'ils sont en train de s'infliger dans cette course au court terme dans la tonalité de gestion de leur pouvoir. Et je ne suis pas convaincu que les économistes aient beaucoup amplifié et a grandi leur rôle, mais ici je suis entouré par des véritables économistes auquel, à ce point, si je me permets, je veux permettre à madame de passer la parole. Maybe Mr. Sakong, because he's an economist, I mean you're an economist and you were a politician too. The fact that there is less and less political will express that you can't integrate all the different pieces together. By the way, I wasn't a politician. You were a minister of finance. Yes, I was more technocrat, yes. So you were one of those, yeah. I think we live in a very, very complicated, interdependent world, and therefore you do need technocrats and the economists who can put things in and more the macroeconomic framework. And so economists are trained to do that. And then the decision is up to the politicians to make decisions. But the options should be presented to the decision makers. And I think, for example, in China, in my view, there are so many so-called China pessimists. They're saying that they're imminent to have the hard lending instead of soft lending of around 6% or so. But based on my view, it's based on my conversations with senior policy makers and the technocrats there. I'm more on the optimistic side than pessimistic side because they seem to know what they are doing and their problems, they do know the problem. And so I think they communicate with the party leaders and the politicians. So you do need these good advices provided by the economists. So I think there is a usefulness of economists, the role of economists. But of course, it's again, they have to be persuasive enough to persuade the politicians. But politicians do need economists. That's the way I would respond to that. Thank you. Can I ask you a question? Yes, Renaud Girard. Is that okay? Yes. I'm the international connoisseur of Figuero. We talked about money. I would like to talk a little bit about international trade, about exchanges, which is a session that will be a little bit of a subject. Do you think that exchanges, and this question is asked to you four, can world economic exchanges continue, exchanges of good and service, while the conditions of production, and of course, social conditions, for example, are not harmonized at all. They are not even harmonized in Europe. They are not harmonized in the world. Do you think that we will continue to have more and more free trade with huge social differences between countries? Or do you think that we are getting closer to a situation where protectionism will be restored, for example within the European space, in order to be competitive in relation to the continent, if we talk about Europe, which has not the same criteria for production and the same social protection as Europe? Would you like to take this one first? Would you like Mr. Ito? I'm just talking about just our experience in Asia, which may be very different from what happened in Europe. In economics, we have a kind of concept of gravity model where the shorter the distance, there's going to be more trade between the two countries, and the size of the two countries is so important to increase the trade. Now, in the case of Europe, you have already many big countries with short distance, so you have a tremendous amount of intra-European trade. But in Asia, because of recent growth of the income in Asian countries, we are now trying to just capture the opportunity of increasing trade among us, which actually provides a lot of opportunity for our neighboring countries to just upgrade their working conditions and just upgrade their living standards. And also, I think the population aging in developed nations, especially in the case of Asia, like Japan, is very, very important issues to just reflect in the type of trade we are going to have in the future. So there's a lot of complementarity among the countries in this region to just get benefit from this kind of trade. And of course, we have to do a lot of the political and educational adjustment to just get rid of some kind of friction we may have. But generally, I think we want to have more opportunity of increasing number of trade and investment in the region. And I don't know about the European case, but at least in Asia, yes. Mr. Monti? Yes, I believe what you are imagining is not a path to non-coordinated and fast protectionism. Perhaps what you have in mind is the need for a greater homogeneity between social and environmental conditions, etc. It's a bit of a French position that has been there for some time. And I would like to sum it up in the expression that in Europe, you have to walk only, of course, open, but not disarmed. So Europe needs to have a capacity of reaction so as not to be the conquest territory of the other countries' producers that produce non-comparable conditions. We can discuss this view for a long time, but what I believe may be that today there is a risk of protectionism inside the European Union, between European Union countries, and in a non-coordinated way, which seems to be a real risk if we see the instinctive and primordial reactions that many parties have movement, nationalist and populist, almost every one of us is a manifest member. And it's in this category of instinctive reactions, I believe, this phenomenon that shocked me more recently than in the country that has been the most demanding in Europe of the creation of the United Nations, so France, because we must not think that it was Germany who asked for the United Nations. We know that it was just the opposite. And so before the European elections in 2014, we attended a debate in France in which we seemed to have completely forgotten that it was France who had asked for the United Nations. And so there was, in many French media, a feeling of alienation, lack of ownership, and the desire to flee from this unique monetary space as we could, as we could have heard at Lisbon or Athens. It's a bit of a perspective not so rationalist and instinctive reaction. Now I'm referring to the Salamone Unicoup appartement that I believe that protectionist impulses cannot even occur within the European Union. Mr. Lipski, and then I saw two more questions. We're really finishing up now, so let's do this quickly. Three very quick points. First, in response, I recall a few years ago, Nobel laureate Michael Spence headed something called the Commission on Growth and Development that, without going into greater detail, concluded, I thought, definitively, there is no case of a country successfully developing their economy without linkage to global markets. And if Europe were to engage in a process of closing itself off, I would become much more pessimistic about the outlook. To the contrary, there is a large challenge before Europe and an opportunity, and that is the so-called TTIP negotiations with the United States that holds out the prospect of changing a unifying standards in broad areas of the economy that would produce mutual efficiency gains that would demonstrate international leadership and that ultimately would benefit the process of global integration and global development. I worry that on both sides of the Atlantic, so far there has been, at the political level, lack of sufficient engagement to make people aware of what's at stake and to sell what is potentially an extremely powerful and positive development. Thank you. I know we're over time. There were one, two questions. I don't know if we can still make it. No, you're okay. Okay. So just this gentleman, and then we'll wrap up. Thank you. Thank you. My name is Manafel Hadri. I'm from Kuwait from the private sector. My question goes to Mr. Lipsky and Mr. Monty, both. I'd like to address the issue of institutional excellence or reforming institutions. Whether it's the G20 or the IMF, one feels that institutions can, of course, be public sector or private sector. There is a disproportionate effort in terms of addressing the governance of private sector as opposed to the public sector, nevertheless, in the Middle East, for instance, the public apparatus is disproportionately more important. It is the largest employer. It is a tremendous way of introducing social justice and it is the largest employer. What we're seeing now is that none of the G20 or the IMF are effective enough. The IMF, unfortunately, in many cases, has been reduced to giving advice, competing with private sector consultants and unwittingly giving certain legitimacy for the wrong agendas. Going to the G20, at the mission statement level, we hear great things in terms of institutional excellence. However, when we go to the individual country levels, I'm talking about European countries. There is a sense of competition between the different countries because we feel that the private market forces prevail. Most of the visitations that we see in the Middle East by ministers, most of the agendas of the ambassadors are pure commerce driven. They are more geared to promoting experts and never do we or rarely do we hear things about the things that have to do with institutional excellence that we hear about at the G20 level. So the lack of coherence? The other global man. I guess. Look, the challenge of institutional excellence is one that transcends public and private institutions and there's no easy and magic answer. Two things about the IMF. First of all, I think it's not so recognized. It has a unique governance structure in that the Constitution, the Articles of Agreement, say that voting shares, i.e. weight in governance, should be governed by economic weight and that that economic weight should be reassessed at a minimum every five years. Think of the long-term goal. The long-term goal is the equalization of per capita incomes around the world. If that happens, if that goal were to be achieved, then by definition over time the IMF's governance would become perfectly democratic if in the extreme per capita incomes were equalized around the world. So it's a very interesting institution. It's a unique international institution that the internal mechanism would point to increasing democratization over time if it succeeds in its goals. But also, the fund has something called the Internal Evaluation Office, if you mean internal, the IEO, which is a body that reports to the membership, the executive board, that attempts exactly to do what you want them to do, which is to look back, to look at the processes of the fund and help provide an ongoing commentary driving toward institutional excellence. The G20, of course, is a very complex challenge. How to make a voluntary intergovernmental organization become effective. Here political leadership is absolutely crucial. And now I defer to Mario Monti. I entirely agree with John. Political leadership becomes crucial in the G20, like in the G7 or G8, but then what I think we have observed concerning these more voluntary, informal, and yet useful fora, such as the G8 or the G20, is that their effectiveness depends, A, on political leadership, but also very much on B, the degree of emergency which is existing. And I think we can say that the first G20s in the US and then in London, just after the crisis, were taken more seriously in terms of subsequent implementation, then was the case a bit later when the crisis was not so visible. This is a normal human reaction that is there. And because I've been rather critical of the European Union this morning, I'd like to close with a fairly positive comment in this respect of the European Union. Unlike the G20, the European Union has a set of rules of institutional arrangements, et cetera, et cetera, which introduce more slowness in decision-making, but also have the advantage of introducing a bit more of permanence so that decisions taken under the pressure of emergency, once they become directives, regulations, or whatever of the European Union, they are there. There will be an enforcement process, so there are the advantages there of being an institution with a supranational enforcement power that I'm afraid is not there with the G20. Okay. Well, thank you very much. So more linkage and more long-term political vision will seem to be necessary to have more effective governance. Thank you very much. And I think it's time for the coffee break.