 Ladies and gentlemen, my name is Daniela Schwarzen. It is a particular pleasure for me to share this first panel in this conference in honor of Peter Pratt. Peter and I met for the first time in the mid-1990s. He was then the Sherpa to Etienne d'Avignon, and we were working at the Association for the Monetary Union of Europe. And if I look at the audience, there are actually a few other ancien combattants. Of that time, when business and policymakers got together to actually make the euro work and have its introduction secured in the year 1999. And it was both a time where technical questions were discussed, not only of eurozone architecture, but also of how the introduction practically can actually work. But it was also a time of political advocacy, because in some countries at that time, even after the ratification of the Maastricht Treaty, there were doubts. And there were ferocious political debates whether this was a good idea. However, what we knew at the time was that the eurozone would be an unfinished house at its start. And now we've moved many years on. The eurozone has gone through a very deep challenge, and President Draghi mentioned it. The ECB has evolved in that time in the way it conducts its monetary policy. And so has the architecture and the governance structures of the eurozone, because what happened at the time policymakers managed to handle crises and have the institutions and the rules, the regulatory framework evolve at the same time. However, at the moment, I think we are in a political situation where we might agree there are political risks. There is some sort of political stagnation. The genuine European Economic and Monetary Union, which is our subject on this panel today, has not been completed. And I'm honored to welcome distinguished panelists to a discussion which is both about the question, what do we still lack, but also about the discussion, about the question, how can we actually get there? And I would like to give the floor immediately to Elga Baj, who is our first speaker today. She is with Blackbrook Investment Institute, and she is the head of macro research there. Elga, why don't you kick us off with your remarks? Yes, thank you very much. So I very much hope and think that we are on the road to a genuine economic and monetary union. And as Peter stressed yesterday, this is even more essential now that we find ourselves in increasing the fragmented global environment. But I also fear that some potholes might still lie ahead on this road, because the euro crisis revealed some structural weaknesses in the architecture of the euro. And these weaknesses have important implications for the ECB's ability to conduct policy effectively. Of the many things that I could touch upon on the time that I have, I just want to focus on two aspects that I think promise the quickest wins. One is the financial union, so the combination of both a banking union and a capital market union. And the other one is the economic union or the single market. And it's not that I think that fiscal union or political union don't matter, but I do think that these two aspects are the ones where we could achieve the swiftest progress within the current constitutional setup in Europe. Because in my mind, the euro is unlikely to succeed if it doesn't deliver rising economic well-being for the citizens of Europe. And on the back of the economic divergences that we have seen and the perception of being left behind, we clearly are starting to see rising political discontent. And voter backlash is not unique to Europe or the euro area. But undoubtedly, Europe could do better in creating a stronger and also more inclusive growth for its citizens. And it's not just a matter of social consciousness of doing the right thing to achieve this. But for Europe, it might well be a matter of survival, because monetary union requires further reforms. And these reforms will require the political support of the electorate. So in my mind, the time to refocus on both the financial and the economic integration is now. The crisis is behind us. The recovery continues to advance. But it's likely about to enter the late stage of the cycle, the final stage. And the fact that we have an ongoing recovery should also not mask the structural challenges that Europe faces longer term. Brexit, as regrettable as it is, also offers an opportunity to review policies and to accelerate reforms within the European Union. So at this stage, we probably have a unique opportunity to make progress on the road to a genuine economic and monetary union. And I think we should really make a renewed effort to overcome eurosclerosis, which, funnily enough, was a term that was very much swirling the halls of my university when I started studying economics in the 1980s. So this is, I think, a renewed sort of call to action to overcome eurosclerosis. If we don't act now, I think there will be another policy scramble in the next downturn. And so the point to act is now. So looking at the reforms that are most needed and easiest to achieve, I think it becomes quickly obvious that economic reforms tie in very closely with the completion of the capital market union. And this is because the financial market union is essential for the efficient allocation of capital within the EU. So a reduction of non-performing loans, for instance, is not just relevant for financial stability. It is also key in terms of resource allocation. And because as long as a considerable amount of resources are tied up in non-viable economic activities, there will likely be a material drag on growth. And equally, we need a renewed effort through the capital market union to facilitate change, finance new technologies, tackling climate change, and also providing for old age. We saw during the crisis that countries with flexible labor markets and effective insolvency regimes navigate the crisis much better and recovered faster afterwards. Again, I think a quicker return to a better resource allocation. And so in the absence of the exchange rate as a shock absorber, other channels, prices, wages, need to facilitate the adjustment in relative prices. And as a result, flexible and contestable, as well as integrated markets, are even more crucial within monetary union than they are for countries that still have their own currency. Now, we know that well-designed supply-side reforms increase potential growth. They also bolster crisis resilience. But the enthusiasm at the moment for those structural reforms, as Mario Draghi also just alluded to, seems to level off again. And I think renewed effort on this area is important. Because Europe faces important challenges of low potential growth. And this, in many countries, growth is being held back by weak productivity growth and also subdued investment spending, both in the public and the private sector. For the ECB, this implies a declining equilibrium level of interest rates. And together with subdued and currently falling inflation expectations, this could erode the room for monetary policy stimulus in the future. And the market perception of an ECB that is running out of ammunition could become potentially a key concern in the next downturn. And I think these perceptions need to be counteracted now. The good news is that there is ample scope to bolster potential output growth and also economic resilience. And the biggest lever by far is the deepening of the single market. Because a true single market of the size of the European Union should stimulate growth and competition and will be a major asset to encourage innovation and increase productivity. But today, the single market still remains fragmented in a range of areas, from services to finance, digital, and energy. And all of these sectors are characterized by the importance of network effects, which means that scale economies really matter, which is why it is so essential to overcome and remove these barriers. Because already in the late 1990s, we saw that Europe didn't really lack business ideas with respect to the new economy. But innovative startups in Europe often lacked the access to finance that allowed them to grow as fast as their US counterparts. And they also found their expansion sometimes scuppered by a heap of red tape once they grew beyond a certain size. So compared to the US, Europe already back then lacked some cross-border integration, as governments remained very attached to national champions, especially in financial services. And as a result, the productivity spurred that the US enjoyed in the second half of the 1990s was not replicated in Europe. So as a result, I think we really need to look at these aspects again. And in my view, a genuine monetary, economic and monetary union really requires some of the reforms of the institutional architecture to enhance the euro's resilience in a downturn. And in this respect, the banking union is essential. A fiscal financial stabilization facility could also help. But as we know, it remains politically controversial, which is why I think a key buffer against asymmetric shocks could come from a capital market union. Because a functioning monetary union requires some cross-border risk sharing, both private and public, as Mario Draghi just said. But in the euro area, at the moment, risk sharing, defined as the share of GDP shocks that get smoothed out through cross-border channels, is much lower than in the United States, then in Canada, or even here in Germany. And it's really not just the risk sharing through a central fiscal mechanism, but also the private risk sharing through cross-border investment that matters here. And warringly, in the wake of the financial crisis, the private sector risk sharing channels have been weakened again. And an additional issue in my view is that the cross-border risk sharing is primarily through the debt channel, instead of the equity channel. So I think deeper capital market integration and policies that foster equity investments, maybe through a reduced tax privilege for debt financing in Europe, will facilitate more cross-border risk sharing. And this could reduce the need for a fiscal transfer mechanism and would be something that can be achieved quite quickly. So to conclude, as Peter reminded us recently, Europe would best be served by more integration, not by less. And the crucial moment to promote and defend Europe where it's working is now. And the crucial moment to fix it swiftly where it's not is also now. Thank you very much. Thank you very much, Aguil. So thank you very much for highlighting the need to both integrate the single market and move ahead with Capital Markets Union and for making so clear how to intersect. And also, for your reminder, what sense of political urgency we have given possible economic scenarios, which you pointed towards. Now, I would like to give the floor to Matthias de Vatripont, a fellow Belgian to Peter. He is a professor at the Solveil-Brussell School of Business and Management at the Université Libre de Bruxelles. You brought us a presentation. And you will be focusing on private risk sharing, which is a nice addition to what Aguil just said. Yes, thank you very much. First of all, thanks a lot. It's an honor to be here on this great panel and to honor especially Peter. Mario Draghi spoke beautifully about you. And of course, I'm sure we all agree with what you said. Now, talking about how far back we go, I think for us, it's 1985. So I met you at the Université Libre de Bruxelles. And then we kept in touch when you were at Générale-de-Banc at the National Bank of Belgium and even here. Indeed, everything I think was said. Peter is super smart, intellectually curious, loyal, very friendly. And I would add, always ready if you're willing to wake up early enough to have a breakfast with him. And it's always great. As you know, he may have several breakfasts a day, so if you want to. I recommend the experience. Anyway, so indeed, I think I decided to focus on private risk sharing. It's very much in line with what Mario Draghi said and what you said, Elga. I was planning to speak a little bit about Capital Market Union, but I will do very little because you said everything, I think. So indeed, there are a number of complementary things to do in order to achieve a better private risk sharing and therefore limit required public risk sharing. I will talk briefly about bail-in. There is a Capital Market Union. And then I will talk more about cross-border banks, which is a topic you hear about in the newspapers these days. So I think it's now all these things are complementary. Now, bail-in, I think the good news about bail-in is that finally, Europe is getting a bit serious about trying to implement it. It's amazing that this 8% rule was in place since the beginning of 2016. It's only now that there is an improvement in terms of stricter subordinated rules about MREL. So now every bank above 100 billion balance sheet need to have that in place. And I think it's very important, also important, the ability for national resolution authorities to go below that number. And I think it's super crucial to have that, to avoid, because it's not just the mechanical contamination of a bank failing. It's also the international, the informational contamination. If you see a small bank failing, you say, oops, maybe the problem of bad loans is worse than I thought. And the National Bank of Belgium is doing it. And I think everybody should follow. By the way, then, if all that is in place and given the super seniority that has been given in BRD for the deposit insurance fund, I think the whole debate about eddies is a bit symbolic. And I'm not sure this is the key thing to do now. But we can talk about that. Capital market union, super important. Indeed, we need less debt and more equity, more non-bank financing. Just one point, why are we always complaining about excessive leverage and subsidizing it in the tax system? When are we going to tackle that problem? Then cross-border banks. You know, there is an increased push for cross-border mergers in the eurozone. The SSM is in favor. DCB is in favor. Not to mention, of course, big banks themselves, or some of them. Clearly, it could help reduce the overcapacity in the market, which we do have. Accelerate restructuring, in particular, on non-performing loans. This should help monitoring transmission. However, are we sure it will lead to more risk diversification and not exacerbate the too big to fail syndrome? And so I will talk a little bit about that. Just first of all, to say that, indeed, we have very few cross-border mergers. The top five eurozone countries by banking assets have more than 90% of their assets in domestic banks. So not in subsidiaries or branches of non-domestic banks. Belgium, the six countries, an exception, because we have 50%. But basically, the market is not integrated, indeed, from that point of view. The among the various advantages, one thing was about the home buyers. As we know, we still have a sovereign bias, which is a problem. We all know where it comes from. It's called the original sin of Basel, that zero risk weights, no concentration limit. And so you don't have to, this is the bargain. You banks don't have to have capital to lend to us governments, and therefore it will lend to us. So it is a problem in a banking union. I think Basel, everybody agrees that zero risk is not reasonable, but nothing will be done, I think. So it's up to the eurozone to do something if they want. I think concentration risk weights might be a good idea, not easy to do, but maybe has part of a package. The point I would like to stress is that this is something that would have an additional advantage if you go through it through cross-border banks. So first of all, indeed, the sovereign bias will be country by country, but there is also this other problem, which is the home economy bias. Given that we don't have an integrated banking market, I think when a bank, even if a bank doesn't own too much of its own sovereign, if it's only national and the sovereign defaults, well, the whole economy will tank and the bank will go under anyway. Which, by the way, is why it makes sense for them to buy the sovereign because when the sovereign will be in trouble, they will be in trouble anyway and so they don't care so much. So this re-concentration crisis time will happen even without a moral situation. So with cross-border banking, you solve a bit the two problems, the sovereign concentration and the home economy concentration. And one way, if we were to go to concentration risk weights, putting it only at the consolidated level and not insisting on it subsidiary by subsidiary would be a way to incentivize cross-border banking, which I think is an idea worth thinking about. So this is an additional advantage of cross-border banking. Now, as you know, economists on the one hand on the other hand, I think we should be worried a bit about the current idea we should go for cross-border banking. Let's face it, our banks are not that capitalized. Of course, they will say otherwise, but they are meant to say that. Let's face it, the G-SIP surcharges and we have eight G-SIPs in the Eurozone. The G-SIP surcharge is reasonably limited, is in fact lower than the advantage that big banks have through their internal models. As you know, the Basel compromise is that internal models cannot give you more than 27.5% capital relative to the standardized approach because the floor is at 72.5%. In 2027, it can be 50% in 2022. So much, much, much bigger than any G-SIP surcharge. So let's face it, our banks are not that well capitalized. And so if they start making acquisition and by acquisition it can mean takeover battles, then I think it's dangerous because you know, takeover battles, you have testosterone field adolescents trying to win, it can be dangerous. Academic evidence shows that around 100% of the efficiency gains, and that's an average, 100% on average of the efficiency gains are obtained by the shareholders of the target. So you know, you start your job of improving the efficiency of the bank, you've already given all the benefit to the shareholders of the target. Okay, so I think a good example of that or a bad example of that was the hostile takeover of ABN Amro by Royal Bank of Scotland sometime there in 40s. This on top of that happened at a long time, the market was about to go down. There was of course excessive optimism by the bidders and so on, but this happens all the time. Basel III and the Banking Union would have helped, but because more capital, more liquidity, but still I think we should not forget these kinds of things when we start a takeover battle on one of the banks you hear in the newspapers. So conclusion, as I try to argue, there are pros and cons of cross-border mergers. There are indeed right now regulatory impediments for in particular subsidiary and so on. Now, maybe a way which is not that difficult for a bank is to go through branches, then you don't have the problem. I know there's still the view that President Draghi talked about ring fencing and all that. So there are indeed regulatory impediments, frankly, and of course Belgium as I said is a special country because 50% of all banking assets are subsidiaries of foreign groups. I think the lack of comfort about waivers by whole supervisors is understandable in a world where big banks are not that capitalized and where the market is not truly European. I think it was striking that one idea when there was a talk about ING taking over a commerce bank to make it acceptable, the view was maybe let's move the headquarters to Germany. Well, is it Germany, is it Netherlands, is it Europe? Why is it so important? So I think that these things are relevant and we should, in terms of consistency, we should make sure that all the instruments are in place so that cross-border banks can work for everybody. So thank you. Thank you very much. Thank you very much, Matthias, for deepening the discussion on private risk sharing with that deep dive into the European banking sector and what needs to be done. Now I'm turning to three panelists who have all held political office, distinguished political office in EU member states and on the EU level. And I start with Gerald Deisselblum from a Dutch finance minister and chairman of the president of the Eurogroup. And I hope that we will move into the discussion also on feasibility and priorities, but also how do we get things moving? What are the priorities from your perspective? Thanks very much. I won't perhaps put so much emphasis on the substance because I think it's been very well covered by the previous two speakers. If you want to know what I think should be done, we were talking about it with Mario. There is still a good report out there somewhere. It's called the Five Presence Report. It started as the Four Presence Report, but someone else jumped on the wagon. So it became the Five Presence Report. And in substance, I think there's all the elements are still in there. And it was also phased quite cleverly, but it was never executed. So that's still available. But the political circumstances have become more and more difficult. So I think the most dominant change is, of course, that we are out of a crisis, which in itself is a good thing. But if you want to make progress in policy reform, a crisis is always the best time to do it. And the sense of urgency in capitals to really engage into tough reforms and also unpopular economic policy reforms, the appetite is very little. That's the first one. The second is that the political landscape is becoming more and more difficult in all of our countries. The political landscape is scattered and getting more scattered as we speak. So building compromises, building coalitions gets more and more complex. Third thing is that a lot of politicians seem to be paralyzed by populism. So either they become slight populists themselves and are getting more Euro-skeptic or finding it attractive to become anti-European, or they literally get paralyzed. They don't dare to take measures that are necessary, economic policy, social reforms, et cetera, simply because they are scared of what the effect will be in the next election and I can testify about that effect. Finally, there is also a very strange effect that we are losing a huge amount of experience. I already experienced this in the Eurogroup where the average term of the finance ministers in the Eurogroup was two years. Of course, some, like Louise and Wolfgang Scheuble, stayed for a much longer period, luckily, but on average it was two years. The members of parliament that I negotiated the banking union with, one of whom is sitting here next to me, they're all gone. It was Sylvie Goulart, it was Corine Mortman, Elisa Ferreira. They're still somewhere in the finance sector and doing good things, but at a political level that experience is gone. And this is very important because the people that experience the crisis that remember what happened, the kind of debates we had then, those people are still very necessary now to find new deals and pass forward. Anyway, if you look at the monetary union now, I would say it's still about competitiveness and stability. Those are still the two key issues, even though a lot of progress, of course, has been made. And I think some of the ways to deal with both those issues have been mentioned by the previous two speakers. So, personally, my top priority would still be completing the banking union. I would argue that EDIS is a crucial element in it, perhaps for a different reason that if you really want those cross-border mergers of banks, EDIS could be very helpful because many constraints are still at the national border, liquidity constraints, et cetera, national supervisors are still very protective. And I think that EDIS, if we could strike a deal on that, would be helpful for national supervisors and perhaps even national politicians to relax about cross-border mergers and takeovers. By the way, ING headquarters to Frankfurt, of course, will be very sensitive in the Netherlands, no doubt, but there are also a couple of serious reasons about that. The Dutch central bank is more strict on the large banks in terms of buffers and additional capital requirements than the Germans. So, ING moving to Germany would actually lead to less capital in this new company. And this is just another example of the incompletion of the banking union. You know, complete the single rule book, make sure that these standards are all the same and I would not be worried about ING moving to Frankfurt. Or, of course, the German supervisor could today say, I think the Dutch are right, let's use the Dutch standards and increase that and then we could relax. It's just an example of the practical but real issues that are going on when you talk about cross-border mergers. I do think that we need to look at this one big political issue and that's the relation with the future of our social model in Europe. Because during the crisis, not just in the minds of people, but also in the reality, and as a minister of finance, I can testify about that, a very clear link was created between financial stability and austerity and the future of the social model. And to a lot of people, Europe from then on has become a threat to the social model which people cherish. The pension system, public health care, our schools suddenly were threatened by austerity, which, and this for a part it's true and for a part it's not, was caused by financial instability, having to save banks, creating huge sovereign depths to put money in banks. That link makes politicians very hesitant to further integrate the monetary union because their electorates are worried that it is a risk to the social model and we really need to think about that. So we need to reframe the debate because we need to design the monetary union and further deepen it in a way that protects the social model, in the way that protects the public budgets in the next crisis. Anyway, I could talk about it for hours, but I won't. Finally, the politicians are still key in this. In the last couple of years, little progress has been made, far too little in next steps, banking union, capital markets union, which is so important. And partly it's because you really need to have clever people designing the deals. But it starts with politicians that are able and willing to engage in talks. So if politicians in The Hague or Berlin say, we simply don't want to talk about edis, that just isn't good enough. I can understand that they are worried about some transfer mechanisms or perverse effects, but then engage in the design of how to do edis, engage in a debate about the kind of conditions that you would want to see to make it a solid system. That kind of engagement, getting into the details, really negotiating the design and the conditions under which you could accept it, I think is missing. And there are many examples of this. Of course, I'm just giving the example of what Dutch and German politicians should do differently, but there are other examples as well. If politicians are not prepared to engage with each other on the key issues, they don't have to agree at the start, but engage on, and sometimes it gets very technical, the more technical, actually, the better, because then the real experts are needed and that usually improves the process. But if politicians don't have the guts to engage in proper design discussions about how to do it and how could it work instead of just saying, I don't want to talk about it, then we are in deep trouble. So it's time for the art of the deal, European style. Thank you very much. And let me, before you applaud him, let me put one question to you, because strikingly, moving from that side of the panel to the middle now, the focus has been on capital markets union, banking union, no one so far mentioned fiscal union, and you quoted the five presidents report, and that is a big chapter in it. How do you look at that? If we follow all those suggestions which have been put on the table, don't we need it anymore? Or do you see a case? And we just don't want to talk about it because it's politically so difficult. Well, if we don't have a proper fiscal capacity, a eurozone budget, then even more important is the capital markets union, because we still need mechanisms to absorb shocks. I would prefer for major economic shocks in the eurozone to be, first of all, absorbed by markets. Simply because I want to protect the public budgets, I want to protect the social model, getting damaged again by risks that are taken in the private economy. So to me, that would be a priority. But on top of that, I think we need both, and that was also the approach in the five presidents report, we need both. And I'm totally fed up with this debate about what comes first, risk sharing or whatever. This is totally nonsense. We need both, but I guess politically, the capital market union should be easier. I remember at the start of the debate with the banking union, there was a political agreement in 2012, but immediately it got stuck in, who's going to pay the bill? So roughly it was, is the North going to pay the bill for the banks in the South? And that was completely stuck until we changed the whole debate by saying, look, it's not about whether the public means of the North should be used or the public means of Europe should be used. It's about what are these risks in fact? And in fact, first of all, they are private risks. And we should make sure that private players, investors, banks themselves are better financed, better equipped to deal with shocks. So yes, I would prefer getting a much bigger role in Europe from capital markets. We are still very bank dependent. I mean, 80% of our economy is still bank financed, which is very different to the US. And it makes that if shocks happen in Europe, it still goes to the banks, which are better capitalized, but never good enough, I very much agree. And then of course, the politicians have to act to save the banks because if they don't, the economy depends for 80% on these banks. That is still far too vulnerable. So we need much better developed capital markets. They need to be integrated. They need one supervisor. I mean, this whole whitewash scandals that we've had the last couple of years, by the way, which have all been discovered by American authorities, not European authorities. That in itself is an embarrassment. But I think those scandals have proven that we need really one strong authority on these matters and that we need one capital markets supervisor in Europe. The differences between the supervisors at national level are still far too great and extremely vulnerable. Some of them have simply not seriously done their work. Look at the whitewash scandals. So those are major steps. If you really want integrated capital markets, you need to have one supervision, one fully harmonized set of rules. Thank you. Now we're moving on to Sylvie Boulard, who is the vice president of the Bonc de France and is very well known for her work in the European Parliament as part of the ACRON Committee as well. That was already mentioned, so Sylvie, your observations. Thank you, Daniela. Thank you, Peter, for giving me the floor today. You know what, and you make us a fantastic gift because you make us feel younger. Because seven years ago, we were exactly discussing the same issue. And one of the reports produced by Hermann von Rompuy, it was before the great June 2012 European Council, was exactly entitled report toward the European and Monetary Union. And as you said, there is also the four-present report, the five-present report. So I'm not going to give all the details on that. I would like to take a perspective which is a global one. And there, I don't want to contradict you, Jérôme. There is, of course, no crisis feeling, but urgency is there. If you look at the figures of investment in R&D, for example, in Europe, and you compare it with the US and with China, we have good reasons to act in an urgent way. If you look at technological change in general, IA, et cetera, we have to act urgently. If you look at climate change and central banks are doing a lot, we try to do our part in the Bong de France, we don't have time. So the idea that, well, we can wait is something I personally really disagree with. But I never said that. I hope you didn't understand me that way. That's not what you said, but many people say, well, as we are not in a financial crisis, there is no urgency. So where are we? Very rapidly, because Peter is a sunny person, Belgium and Frankfurt are sunny places. Let's try to be positive. The first thing I want to say from a global perspective is that the euro is still there. When you have so many years of bad advertisement, I must say that it is something very remarkable. We are there, and we have the support of the population, even in increasing support in Germany, for example, a little bit less in Italy than when it was introduced, but majority nevertheless, and in average above 70%, which is not something we should forget, even if all the political situation as you described, as it was said before, is there. But I wanted to make another point. I have not seen worldwide any innovation on governance. The only place on earth where something was invented, with all the flows, all the limits of the community method is here in Europe. We are facing more and more international challenges, global challenges, climate change, terrorism, migrants, whatever you can pick, the ones you prefer. They are all huge, difficult to face, and the only alternative that is proposed is just America first or nationalism. And if you want to have an excellent speech on that, you can read Mario Draghi's speech in Bologna. By the way, it's good when you talk as a lawyer and not only as an economist. So what are the problems we are facing now? For me, the first one is a self-inflicted one. It's what I would call the Lampeduzin syndrome, not the island, the author. So the fact that many politicians in Europe and many actors, and I include myself, I mean, we do something, we pretend that we want things to change, but actually we don't change so much. So, well, it's difficult to see a headquarter move elsewhere even if we spend our days talking about a single market. It's difficult to not to think in terms of passports for nomination. It's difficult, so we pretend we have a common institution, a eurozone, a single market, and then we think very small. And we have statistics on trade that don't talk about the car industry in Europe, but the car industry in Germany, the car industry in Italy, the car industry in France. And for the banking union, it was said we have a lot of fragmentation, and of course we have to take into consideration some of the concerns of the host countries. We have to make sure that capital is there, that trust is there, but are we serious in doing banking union or not? If we are, then we have to draw the consequences. And we can sometimes be creative within the framework we have. Not everything is requiring big treaty changes or new legislation. And I will take one example, which is really striking. It is the democratic accountability of this institution. If you look at the treaty, there is nothing in the treaty on the democratic accountability. And Jean-Claude Trichet first and Mario Draghi went every three months to the European Parliament for the monetary dialogue. The only basis for that is a report of Mrs. Ranzio Platt years ago. And nevertheless, it is taken seriously and when you create habits, when you give the opportunity for things to be repeated, then it can work. I've never convinced you to, when you were the Eurogroup, entirely about the accountability of the Eurogroup. But this is another issue. But as far as the ECB... I went to the Parliament all the time, at least. Yes, but you... In my experience, I do. Yes, but you refused to admit that there was a need of accountability. But nevertheless, let's go back to the ECB. And I want to pay tribute to Peter because Peter also took very seriously the role. I'm not saying that for the parliamentarians, but for the citizens, for the sake of transparency, for having a place where people from all countries discuss and where at the difference... There is a difference with the Council, is that for each country, you have the people in charge and the opposition. So this is a unique place where you can discuss not only with the ones in charge, but also with the ones that might be in charge one day. So these are... We inflict ourselves many wounds or we are so many flows because on the one hand, we ignore what we are doing ourselves. We don't go entirely into the logic of the banking union, of the single market, et cetera. And sometimes because we are not creative enough and we don't create the tools we need, we always ask for big treaty changes. And it was said by Mario Draghi, some people always invent obstacles and are extremists in legal terms or in other terms in order to avoid what they pretend that they would be launching. My very last point, and it was said before, is on the... I mean, if we don't have the citizens on board, we go nowhere. If we don't have the states on board, we go nowhere. It's a voluntary system. The key element of the community method is to make peoples and state working together on a purely voluntary basis. And for that, we have a concept in the treaty, which is the social market economy, which is, in my opinion, not enough exploited and I asked the Germans to make more export on this. Because I'm always impressed when I go to Germany, people understand what it means and they know that there is part of the politics which is independence of the central bank. You don't play with the money. That's the reason why you don't bail out states. There is a logic. Many people outside Germany and maybe Austria don't really understand. So it's not just that you put some market economy and some social and everything is fine because the left and the right and the left are happy. This is the interpretation in many countries. Social market economy is much more than that. It's that the states also provide social goods like a good education training, a vocational training for the youth and also rights for the trade unions and the combination of a market-based economy, which is something we really need. And to this extent, Brexit is not going to help a lot because the input of the UK was remarkable. But also the fact that we need to give, as it was said before to the people of Europe, the feeling that they are on board and that their wishes are respected. So please look at all this. Let's try to all look at all these issues from a global perspective. And none insists so much on what the differences are. They exist. We have to work. It's a lot of work to overcome some divergences. But if we look at it from Shanghai or from San Francisco, in my opinion, some of our divergences are very minor. Thank you. Thank you. Thank you very much, Sylvie, for putting Europe into a broader perspective of a very rapidly changing international environment. And also for pointing out that the differences we actually have to work on day by day in the Eurozone shouldn't shy us away from being more ambitious in achieving the next steps. Now I welcome Mario Monti, former prime minister of Italy, former European commissioner. It's great to have you here. And we're all keen to listen to your remarks after this panel. Thank you very much. I thank President Draghi for having invited me as a long time admirer of Peter, the economist and Peter the man. I greatly value the opportunity to be here today. I would like to make a few observations on the interplay, as I see it, between political authorities and monetary authorities in the context of an incomplete monetary union, in particularly as regards the degree of de facto accommodation by monetary policy of inadequate government policies. I will make reference to three episodes, quite distant from one another in terms of time. The first point is that the preparation towards monetary union has proved, as we all know, a very powerful vector for structural reforms of national monetary systems and national monetary policies, making those national monetary policies much less accommodating to inadequate government policies. I bumped into this sort of problems many, many years ago in the late 70s in Italy. The Bank of Italy was and is, I believe, one of the most advanced central banks in the world, both in terms of the level and sophistication of its economic analysis and in terms of its moral authority in the country and beyond. Yet, I noticed a slightly skewed, schizophrenic attitude, which I found logically and politically non-acceptable. There was always, in the positions taken by the Bank of Italy, a very high degree of calls and recommendations to the political authorities, particularly as regards to fiscal policy and structural reforms already then. That had normally a huge impact on the public opinion for about a week. During that week, there was a bit of lip service by the political authorities, but then the normality came about again with a continuing vast non-observance of those deeply respected intellectually recommendations. So that connotated the rising deficit and debt of the Italian economy, and it was a perfect system of monetary accommodation through two categories of instruments, well, the monetary financing of the treasury by the central bank, and the central bank being at the time the key regulator of the banking and financial system, a whole net of portfolio constraints on banks, plus, of course, prohibitions of capital exports by private citizens, so that there was little alternative in the aggregate than buying treasury securities. So government do reduce the deficit, but government, if you don't succeed, here is a vast supply of instruments that make you able to finance that huge deficit even without the nuisance of a visibly high interest rate. Now, those were the times when I became attracted by the virtues of the much less sophisticated, somewhat more brutal framework of the Deutsche Bundesbank, as I had the opportunity to say a couple of years ago at the celebration of the 60 years of the Bundesbank. So in Italy at that time, there was a lot of intellectual fervor policy proposals which in due course came to introducing the so-called divorce between the treasury and the Bank of Italy in 1981, and the structural liberalization of the financial and banking system, sort of considerable reduction in the financial repression that was taking place. And of course, the EMU, which was not clearly connotated yet, which had the probabilities, subjective probabilities of one day being achieved variable over time and over space, but that was really the guiding star. And of course, when later, I believe it was 1991, when Mario Draghi became director general of the treasury, then he, well, incorporated in his personality that guiding star. The second episode I would like to refer to is then we do come to the Monetary Union. We have historic achievements through the great jobs done by Wim Doisenberg, Jean-Claude Trichet, Mario Draghi, and we come to the great financial crisis. And here the interplay of the political authorities and the monetary authorities in improving under the pressure of the crisis, not a potential crisis, but a tough actual crisis. The governance of the Eurozone was something I had the opportunity to see from inside and to contribute from the inside to some degree. And we had very intensive discussions, particularly among the, well, Chancellor Merkel, President Sarkozy then on land and myself with the willingness to reincorporate Italy into a serious and deep political discourse concerning Europe and the Eurozone. And there were two steps in this internal reflection, not without concrete political results. The first was rather minimal, but when we first met, first concerning myself in Strasbourg in November 2011 with the Chancellor and the President, we decided to increase our, the political authorities, space of respect for the ECB. Those were the times when it was very frequent for some government leaders, particularly in the western component of the Franco-German Axis to insist for lower interest rates and so on and so forth. So we established what we agreed to call the doctrine of symmetric silence. No government should either insist for the ECB to go lower or to go higher on interest rates. And then continuing the work, we did something that wanted to go further, namely to increase among ourselves the space of acceptance of possible moves of the ECB, which some of us hoped would come towards doing exactly what Mario described in his introductory remarks, namely to avoid, given the fragmentation, the paralysis of the monetary policy transmission channels, and to put it differently, a policy action which would recognize that if countries, some countries, still had very high interest rates and spreads in spite of the good work done on public finance and structural forms, that was also because there was a systemic euro risk component which might have required some stabilization by the ECB, and then we come to the European Council of June 2012 with the start of the Monetary Union but also with that pronouncement on stabilization which made it impossible for reasons of coherence and the eastern part of the Franco-German Axis is particularly sensitive to the need of coherence that should one day the ECB come out with bolder pronouncements toward expansion, then after that unanimously adopted statement at the European Council, none of us should react negatively. And then I come to the third episode. Now, observing from Italy again, I go back to Italy which is still an important component of our Monetary Union. What is the relationship, and I will, Madam Chair, close in a couple of minutes, between monetary accommodation in new forms and the insurgents of populist parties? Well, my impression is that because monetary accommodation by the ECB came a bit late, probably it could not come earlier, but certainly if there were in 2012, 2013 moments when in the public opinion of the countries which were trying to address their situation, it was seen that in spite of structural reforms and budgetary discipline, interest rates did not really come down. So that discredited the good policies that the ECB and the EU always recommended and gave steam to the rise of populists. And then, so to some extent, this contributed to the arrival of populists. Then the shift which came at a certain point to monetary accommodation did in connection with the pre-electoral campaign in Italy for the national elections of 2018, created a situation of total sense of lack of pressures. Italians had, in the meantime, become largely sensitive to the spread which they vastly ignored earlier. And the issue of totally unrealistic and irresponsible promises by the populist parties, but also the others, were de facto encouraged by the sense that the spread was down there rather quiet. But of course, once they took government and started with some concrete measures, the spread and the interest rates went up even though they are about one half the level they were in 2011. So I think, and also earlier speakers hinted at populism, the relationship between monetary policy, the completion of the monetary area and the link between monetary accommodation and the populism opens up a new agenda for research and practice. Thank you very much. So ladies and gentlemen, we have listened to very thoughtful remarks from all five speakers and now it's a chance for you to get in. And I see that Klaus Riegling raises his hand. Please take the floor. I'm sure a microphone will come to you. Yes, thank you very much. Peter asked me to intervene early on to give a few comments from my perspective from the ESM. Everybody here agreed that monetary union is incomplete. Everybody agreed that we have seen progress the last 10 years. I'm a bit sad that nobody mentioned the ESM this morning, so that's one reason I have to stand up to bring my little commercial. I think you are all happy that we have the ESM. We have shown that it's important to have the end of last resort for sovereigns. It was a gap in the initial design of monetary union, so we closed that gap. That's good. We disbursed 300 billion euros. And it's not only that we disbursed a lot of money, all the five countries that benefited from that have a good economic performance now because in the context of the ESM programs, they went through conditionality and the reforms that we are all looking for then really happened and the results, not surprisingly, are positive. But it's also important to have the ESM because I think it provides some elements of more political union in the euro area and some elements of more fiscal union because there is risk sharing via the ESM. So I think it goes also in that direction. That's good. And the final reason why I think it's good to have the ESM and nobody mentioned it here in this building, which is surprising because it's the other anchor of OMT. And OMT, of course, is the brilliant idea that Mario and his colleagues and the executive board had in the summer of 2012, which really combines in a perfect way the firepower of the ECB when there's OMT activated only by the ECB. There's never a lack of money. With the conditionality that only the ESM can provide. So I think all that is good. What it means is, looking back, I think we have learned how to deal with a big crisis. And that's good. It was helpful. So I think we're also prepared if there's another big crisis, hopefully not soon. We know what to do. I don't think we are very good yet to small with little problems, smaller crisis. How to deal with divergence and regional business cycles and member states of the Marital Union have different cycles. Just like the Midwest has a different, in the US has a different cycle from Florida or California. So I think that's why for me, risk sharing is the key word. It was mentioned by several and I think the analysis is right. But I see three reasons why risk sharing is really essential moving forward. One is that we must have a system in the end to make Marital Union work smoothly that has the kind of automatic stabilizing mechanisms that we do see in the US. Through the social security system, the tax system, financial markets, of course, there's a capital markets union because then the regional business cycles will not diverge excessively. We don't have these mechanisms and I think we need to work on that. So that also means that if we had more of that, more risk sharing, then the smaller problems will not become big problems so easily. That means we need CESM-ness and I'm very happy about that. We are busy enough at Naxenburg. So if we can prevent small problems from becoming big problems, that's good. And the final reason why I think we need more risk sharing is not so often discussed, that monetary policy in a big economic entity like Marital Union Europe, like the US, like China may be perfect for the region as a whole but it's always tends to be pro-cyclic for individual regions or countries because countries, regions that do well, have higher gross, higher inflation, have real interest rates that's too low, lower than the average, and the countries that don't do so well have high read interest rates. And I think that's unavoidable. People don't talk about it but I see that as a fact even if the overall monetary policy is perfect. So that also means we need other mechanisms to counter that. So I think there are a number of reasons really to work on more risk sharing through the different channels that were mentioned. My question to the panel is the same ones that Daniela mentioned in the beginning and it was not very much answered a little bit by Jeroen and Sylvie. We all agree on the diagnosis. We all agree what needs to be done but how do we get there? There are five nationalities on the panel. Good ones, Germany, Belgium, Netherlands, France and Italy. And I think the political problems are different in each country so time permitting you may want to say a few words on what needs to change in your country to get where we all want to go. Thank you very much Klaus. We'll keep that for the last round on the panel indeed. So who else would like to come in? Yes please. The microphone is coming, please introduce yourself. Well first of all I'd like to congratulate Peter for his achievements all these years and also for contributing to a better understanding between the financially distressed member states during the crisis and the core countries, the core member states. So we'll miss you Peter I think. Now a question. I think Mattias complained about too much home bias in supervision but the other speakers gave the answer. It's because there is not enough integration because there is not enough instruments at the center of the Eurozone. So what we effectively have, and Gerun I think is a position to know very well, it's a non-cooperative game. And we think that this is a zero sum game but can we make it a win-win if we cooperate? For instance if we move simultaneously with risk sharing and risk reduction, I will avoid going into the technicalities because there are too many. But the political principle of moving together simultaneously on risk sharing and risk reduction perhaps gives an answer and I would like the comments of the panel. Thank you. Thank you very much. Yes please. Thank you. Lano from Seps and Brussels. Again also my thanks to a great colloquium also. Thanks to Peter for his time here. If I could just ask the panel a question. We have discussed capitalization or Mattias has mentioned capitalization say the regulatory capitalization but why is the market capitalization of the European Bank so low? Thank you. Very short and precise. I'd like to take one more before I hand it back to the panel. I can't believe all questions have been answered this morning. So yes please. I'm Alexander Leipold, member of staff premises. So I very much agree with that we need capital market integration and banking union. I think this is necessary to cope with asymmetric shocks as we see for example the large German trade surplus. What's ever I think the major major problem we face are common shocks like the great financial crisis and I think to cope with those common shocks financial or fiscal integration is necessary and it is necessary to foster public infrastructure investments in times of crisis. Thanks. Thank you very much. Now with that, I would like to hand it back to the panel and I would like to ask a panelist to respond in reverse order. So there has been a number of topics have been raised. Obviously if you would like to comment on the role of the ESM and also the perspectives, I think that would be a great addition to the previous round of discussions. The issue of again risk sharing, risk reduction has been mentioned. The question of market capitalization of banks was one topic, the question of fiscal capacity and shop absorption in this case symmetric shocks. And finally, I would like to ask every panelist to point out your top priority, what you think should be done and how and what should happen in your country or what can happen and what should be sort of pushed ahead after the European elections. So Mario, if you would like to start and we have to respect time a little bit because there's a coffee break and a second panel. I liked the definition of good nationalities. The duty of good nationalities is to be at least up to the level of their historical contribution to the European construction. Well, what should Italy be doing after the European elections? That's a good one. I think we have the advantage of having to go through in the summer and the autumn, a very tough moment for our budgetary policy. So the issues about the EU and the issues about the conduct of domestic policies will be luckily totally inextricable so that Europe will be there. And I think there will be ample opportunities in the debates to show that Europe helps us do something that would be needed at any rate. So the thing I believe is most important in Italy now is to bring back the notion that even if there weren't any EU or EMU, some notion of fiscal discipline would be necessary strictly for ethical, intergenerational reasons. Thank you very much, silly. As far as France is concerned, but it is true for many countries in Europe, I would insist on the human capital, vocational training, reskilling people, put them at the level of the demands of the enterprises and in a world where technology is changing everything. We don't know what type of banks we will have in 10 years. We already see how communications through internet is changing democracy. We see, I insist, how much other countries invest in future-oriented fields where we take the risk not to be in the position to catch up, so reskilling. And one remark to Yanis, I don't think that the main question is more or less integration, but it is at least to do seriously what we pretend to do. When we decide something, when the European Council is deciding to create a banking union, then of course there are many difficult things to discuss and it's not going to be easy, but what I remember from my discussion in the European Parliament and what I observe is that sometimes you wonder if people believe in what they are pretending to do. And this is the most important thing, not to be on all issues at the European level, but if we decide to put something at the European level then just do it. And I remember Tomás O'Pado asked Joppa in this House telling us that what we need is an integration that is narrow and deep in some fields and not an integration that is just touching upon all fields and not giving the feeling to the citizens that it is working. Thank you very much. Joan, your view on the Netherlands, but also pick up any of the other topics. Yeah, yeah, so in the reverse order there was a question about how to deal with common shocks and the importance of infrastructure investments. My experience is that in the Netherlands to really get infrastructure investment going, it takes at least 10 years. So it's a very poor answer to economic shocks and crises because by the time you really get to spend the money and the spade goes into the ground, very often you're out of the crisis already. So let's not expect too much there. Why is market capitalization of European banks? So low, I would say because profitability is still very low. We have too many banks. Their cost-income ratio is far too high. So if I were an investor, why put my money in European banks at the moment? There is still a lot of shakeout that needs to happen and policies and regulations are at the moment hindering that shakeout, which is going to be inevitable. I mean, the zero-sum game, I think that's a very important point Jan has made, sorry, the governor of the Central Bank of Greece made because this is exactly what's happening in the populist economic debate. The vision of Trump on the world economy, it's a zero-sum game. The vision of some of the debate going on in the Netherlands about how we should work together in a monetary union is looking at it as a zero-sum game. If we share something with other countries, whether it's risks or funds, it deprives us of our own wealth. And if we can't break that thinking, because of course it's fundamentally wrong. If you design the monetary union well, if you deepen the internal market, but also in a way, again, by also protecting the social model of Europe, I will put emphasis on that again, then it's not a zero-sum game. So you're absolutely right. That is the loop that we need to break. Finally, what should change in the Netherlands after the election clause? Sorry for not mentioning the ESM. That is a terrible mistake. I chaired the Board of the ESM for five years, and I think it's one of the most substantial additions in terms of institutions and instruments for the monetary union with the banking union, and of course, so I deeply apologize for that. What should change in the Netherlands? Well, the new Dutch government has built something called the Hanseatic League. Wouldn't it be a great move if after the European elections they call stop to that? Good idea. On a serious note, I think that every member of the Eurogroup has a responsibility in the end to contribute to striking the deal. And this goes back to the point I made earlier. This attitude of I'm just there to stop things happening. I'm just there to not engage into real talks about how to do it. That is leading to a complete standstill. Every member of the Eurogroup should not come in as a small group and a coalition with the aim to not go somewhere. They should come in individually, taking their individual responsibility to strike the deal at the end of the day in a way which they can politically accept and explain at home. That is how it should work. And that's why I think this kind of coalition building outside of the Eurogroup is really a major issue. So, yeah. Thank you very much. Oh, please, over to you, Mattias. Yes, thank you. So, well, why is market capitalization of banks so low? Indeed, as Jeroen said, there is overbanking. There is indeed, first of all, maybe the official capitalization is not so high thanks to internal models and the like. I think it's a bit of an excessively rosy picture. Now, of course, there is a lot of diversity. Not every bank is such a bank. Let's face it, there are much more profitable banks, but clearly, there are big problems that still need to be dealt with and concentration is important. I think in this market, it's never very good the way in which the speed of restructuring is always too slow. That means, by the way, that are we ready for the big shock? I would not be so optimistic. I think we still need to work on that. And one of the things, kind of, keep improving the implementation of BRB to be ready is, I think, very, very important. On the issue of, well, I didn't say that there was too much home bias in supervision. I think there was too much home bias in banking, sovereign and domestic. On the other hand, indeed, it's too much of a zero sum game at times and so on. I think, frankly, one thing which has always struck me beyond, like everybody seems to agree with in these structural reforms and the like, I think that some structural reforms have negative externalities on the neighbors and some can have positive externalities. I think both austerity and wage cuts and the like, it's, at times, a way to export your unemployment. So I think I would really look in much more detail of the negative or positive externalities of all the policies that member states put in place. Now, as for what Belgium should do, well, beyond things like France and so on, I'm not sure you wanna know too much about Belgium and definitely not in two minutes, because I won't be able to explain that to the complicated countries. So that stays for the coffee break, please, Lela. Yes, thank you very much. A lot of good and interesting points have already been made, so we'll just pick up on a few of them. The first one, basically echoing what Jerome said about the lack of the waning expertise of people who have really experienced the crisis, were in the room and have tried to solve it. I think on the other end, we also need to be aware that there is a young generation out there who are lucky enough to only know the euro as their currency, who are lucky enough to have never seen the iron curtain, but who also have spent their formative years in experiencing the euro crisis. Their perspective will be very different from our perspective here. And I think it's really important for these young generations, especially in those countries where youth unemployment is very high, that we change these expectations and experiences with great urgency. I think two things that will help to do that, and even though I cannot speak for Germany or its government, I would sort of probably stress two things, and that also brings me back to my remarks. One is on the economic front, I think like Suvi already said, we really need to focus on addressing the long-term challenges that requires human capital, but it also requires physical capital and particularly public infrastructure. I think public infrastructure is not really a good instrument to find you in the business cycle, but it's a great instrument to invest in our joint future. That means the digitalization, it means fast communication systems. It could also mean all sorts of aspects in terms of moving to a much cleaner way of living and producing and so on, so that we tackle also climate change and the transition towards it. On the financial side, the issue of banks came up in the discussion again and again, and I think that's clearly the first step to address some of the long-term challenges for the banking system, because the banking system, after all, and it was said on this panel many times before, is such an important part of financing economic activity both in this country and in the euro area more broadly. So those would be my two priorities. Thank you very much, Ega. Ladies and gentlemen, in my view, this panel has provided a broad but at the same time deep view of the challenges ahead, and I think we have all good reason to hope that the completion or the future progress of the European Monetary Union remains high on the European agenda, in particular when the strategic agenda for the next five years will be forged in the month to come. Now, I guess in five days' time, Monday morning, we will all be discussing the results of the European elections, and that will be a moment where questions of legitimacy, the socioeconomic dimension, which was brought in from panelists around here, they will create a sense of urgency, and I very much hope policymakers will be able to develop a positive view forward and not shy away from the major issues we have addressed on this panel this morning. So I hope this is a good backdrop for the next panel that is coming up after the coffee break, which will be dealing with monetary policy in an incomplete European Monetary Union. We all agree it is incomplete, so over to the next panel to discuss monetary policy moving forward, and I kindly ask you to join me in thanking our panelists.