 Thank you very much, and it is a pleasure to chair this panel with such excellent Members of the panel our session is entitled the future of economic growth with and without Total factor productivity growth. Well, it's almost an oxymoron because indeed as we all know real Future economic growth will be very much dependent on TFB growth. We all know that particularly in Europe Population is declining particularly the working age population is going down by 0.5 percent a year and Demographic projections indicate that this will go on until 2030 So without TFB growth, we will have no Future economic growth to speak of In Europe at least and the situation is similar To a different degree in many other advanced economies So We also know that TFB growth depends basically on innovation of products Processes of course and that innovation is different from inventions. We have a lot of inventions going on innovation happens only when the ideas are brought to the market and find a Solvable demand. That's when they really impact the economic Process and in this respect already President Draghi mentioned what are some of the Divided opinions about this whole subject, which we can perhaps describe in two layers first the optimist and the pessimistic about the possibility of great jump of technological innovation and On the other side we find Bob Gordon and Tyler Cohen and others saying that The low-anging fruit of technological progress has been already collected They don't see the TFB has been declining for decades now consistently So they don't believe that this can jump now upwards in a significant way And what is at stake here is not again the earth of inventions There are many inventions. The doubt is about the possibility of having Innovations with significant economic traction in the market and be paid for such that then GDP and growth will will jump That's what they don't believe others believe on the contrary that the all the inventions particularly The possibilities of digitalization automation robotization will lead to huge technological progress and so increase in productivity and but then then leads to the second layer of Divided opinions between those who believe that if that happens there will be no jobs And there will be no income to demand the products that would be associated with the technological Progress so where will would be the jobs and our income would be distributed So that there will be a demand for those jobs. Those are the pessimistic about that And but there are optimists too like David Otter and from Harvard and others that say no where there will be Enormous amount of new jobs Because that has been the historical pattern when however there was a wave of innovation And the mechanism is productivity goes up prices go down income for other products then increases and then as human needs are insatiable then New products will be invented and there will be jobs for everyone. So I'm not Taking any view on these two big disputes because we are concerned here with a more narrow sort of subject first with I think a shorter horizon of our reflections today not on these big issues that have more to do with the I think the long term and Also with the Europe in particular and there we know and president drug They already reminded us that Europe lacks behind the US in particular Legs because it spends less in R&D around two percent against three percent But also second in terms of composition is the corporate sector that spends less than the US and Explains most of the difference with the US and third that there is not enough Diffusion that there are very good firms in Europe in the frontier But then the diffusion doesn't happen in the same in the same way and so I'm happy that We have a very good Panel to address these questions. We have First professor Diego common From Darthmooth College who has written a lot on precisely diffusion of technology So we hope that you will tell us something that is relevant for us on that score Then you we have Christophe Chasov who is head of innovation in the HSBC group and we'll talk from the perspective of investors what they look into to Open finance Innovation and finally We have professor Reinhild Vigelos from Q lovin University and also from Brugel who has written abundantly on the innovation in Europe Going into very granular analysis of All the indicators and problems that we face in Europe in particular Regarding the questions of organization of firms to really promote and implement Innovation so without further ado, I will start by giving the floor to professor common to Start our panel the rules are as you have read that each panelists as 10 minutes As an introductory remark and then we will have some time for a discussion Among the panel and then finally we open to the Q&A from the audience. So Professor common, please Thank you very much and thank you very much for the invitation to be in this very exciting conference The mandate I think is extremely broad It's interesting to frame it so that we are precise about what we talk about. So I find helpful To look at this plot which shows the evolution of TFP the level of TFP in a number of countries the US the UK Korea, Germany Spain and Ireland over the last 20-30 years and You know, if you look for example at Ireland or Korea These are countries that have grown very very fast over the last 30 years and much faster than say Spain Okay, and you know that presumably especially before before 2000 that can be explained by differences in the rate at which they have adopted new technologies and And I think that's an interesting question that requires certain tools and it would reach certain conclusions That's not what I think we're going to talk about today And I would like to focus on the other three lines Which correspond to the US the UK and Germany? Okay, and when you look at these three lines The main observation is that they have a ball finished broadly similar ways They are they are right in the middle and they have grown at certain rate quite similar Until around 2000 or so and then since 2000 they have a ball in a different way. Okay, and so What I'm going to be focusing about is what has happened roughly since 2000 in This bunch of countries in the US the UK and Germany and I think that will Help us frame better this issue of the slowdown in productivity. Okay, so Since 2000 or so there's been a slowdown in productivity In productivity growth in in in these rich countries The question is why we have observed this slowdown in productivity. Okay The US for example, this lowdown is quite noticeable since 2005 They are wrong at a high level. There are two hypotheses to understand this these dynamics for productivity One is the so-called bad luck hypothesis that John Furner has put nicely in a cease of papers and these these hypotheses argues that there was for reasons that have nothing to do with business cycle considerations there was Reduction in the innovative capacity in the productivity of the US economy and and that you know Kicking around the mid-2000s and it's going to stay here for a while That's one hypothesis alternative hypothesis is what I call the endogenous response view of of technology and this hypothesis basically argues that And by enlarge the slowdown in productivity In the US but also in this bunch of European countries corresponds to or is the result of a response of business Activities to develop and especially adopt new technologies that have a slowdown as a consequence of the business and financial conditions Driven by the by the great recession Okay, and so what I'm going to do here is to lay down this alternative Hypothesis and to show you some first some evidence and then some analysis that speaks about its importance Okay, and and this will be both in Europe and the US much of the analysis done in the US But there's lots of evidence that I'm going to be provided by in Europe so What type of evidence I'm going to present well going to show you some evidence about Innovation R&D and its cyclicality But then I will focus on what I think is more important Which is the dynamics of the speed of the fusion of technologies and in particular? I'm going to show you some new evidence on its cyclicality and then I will talk a little bit about the conversation I will show you some evidence of the on some technologies in the UK Okay, and and and Germany so This is the evolution of R&D private R&D in the US After you linearly trend it. Okay, so this is the deviations from a linear trend And you know, you see it's quite cyclical the slowdown in 91 slowdown around 2001 And and it's not a little bit during the conversation, but the slowdown during the conversation was not quite dramatic, okay, and Now let's show a little bit. I'm going to show let's let's talk a little bit more about about this transition from innovation to diffusion Okay, and so to do that. I'm going to show you some evidence from Germany. This is a measure of the share of sales by German companies on New or improved products. These are new improved from their perspective not necessarily from the perspective of the market Okay, so to this extent it shows a Captures when a company develops a new a new product But also when when the company it's not improving what we have in the market, but it's catching up with the frontier okay, and so what you can see in this in this plot is that the importance of improvements in the in the in the quality of the products in Germany and Deteriorated during the recession. It doesn't seem to have recovered. Okay more formally What I've done is I've looked at measures of diffusion of of specific technological processes In the US and the UK and in particular one beautiful example is manual track and burst data on the diffusion of cat scanners And I've posed a model for the diffusion statistical model that builds on the logistic process and I've introduced the a potential role for business cycles to Accelerate or slow down the diffusion of technologies and this is the first the first the first row of this table and Basically what I've tested is whether the speed of diffusion of technologies is cyclical or not Okay, and so what you can see and from those coefficients is that the speed of diffusion of technology is highly cyclical Basically the elasticity of the speed of diffusion with respect to a measure of the output gap is between three and four That means that it moves a lot when the economy Enters into a recession or in an expansion. Okay, and And so one illustration of that cyclicality comes for example from the UK So this is a deviation of the speed of diffusion of three technologies in the UK from their mean diffusion And these are technologies that measure the ability of companies to Leverage on the internet to reach to Providers and cost and customers And so what you saw here is that in the UK there was a slow down a dramatic slow down in the speed of diffusion of these technologies During the recession and then there was somehow for recovery, but then in the long run there's still an impact Okay, so four years after the recession. We're still seeing a slower diffusion than what we used to see Okay, so Based on this evidence then what I what I would like to do is to try to understand and What happened with productivity growth? During the last 15 years. Okay, and so basically to do that and you have to go beyond the Macro-economic framework that President Draghi Describe where there is a disconnection between business cycles and long-run trends, okay and in particular you have to enrich our macro-economic models to allow for a technology to potentially be affected by the Endogenous decisions of companies to develop and adopt technologies Responding to business cycle conditions And so that's what I've done, you know for the last 15 years to develop this class of dynamic stochastic generic area models and so taking one of these models and Disciplining it by the Observations the estimates using this micro evidence on the cyclicality of the speed of diffusion of technologies as well as with the actual R&D spending cities for the US. I can answer this question of how much of the productivity is low down that we have observed in the US over the last 10-15 years. It's due to cyclical response to business cycle conditions and how much is due to Sogenous factors that have nothing to do with business and financial conditions And so I'm going to do that in a city in a series of three plots Okay So this first plot I will ask you to focus on the black line and the blue line The black line is the evolution of the trended TFP in the US Okay, so you can see that around 2005 TFP started to accelerate and this is linearly trended TFP So relative to trend slow down The slowdown continued during the conversation and then continued after the conversation Okay, and the mind use are very large. Okay, they are not quite as large for those of you that remember the 70s and 80s They are not quite as large as 70s and 80s. My economists don't know the 70s and 80s Okay, they don't know that they don't know the real productivity is low down Okay, and But but they are they are significant and now in blue what you see is the evolution of TFP as produced by the endogenous response of this model to a series of macroeconomic shocks that explain business cycle fluctuations Okay, so basically if you think about how much TFP is due to the exogenous shocks that typically macroeconomy is focused on And how much is due to the endogenous response of a richer characterization of the technology side of the economy? And the blue line would be the second one and as you can see a Basically All virtually all of this low down in TFP between 2005 and 2015 can be attributed to these endogenous response in In in in technology. Okay. Now. I would like to Answer to rated question one is what type of shocks produce this is low down and second. What type of mechanisms? So to answer the type of shocks, I will ask you to hear to First look at the the the black line this corresponds to the endogenous TFP evolution and and then the other two lines the the blue and the and the red line correspond to the Evolution of these endogenous TFP Driven by two shocks one is a liquidity demand shock, which is what basically caused the greater session So there was a disruption financial conditions which was associated to People moving away from risky assets and holding on to risk less assets. And so this this shock Which basically is the shock responsible in a in a in a historical decomposition from the dynamics of output growth in the greater session It's also a fundamental to understand the evolution of TFP between 2008 and 2015 okay, so this is basically what what drives TFP After 2008 The shock that is important to understand what happened between 2005 and 2008 It's a shock that it's a shock to the productivity of R&D technology So basically it's a shock that measures how productive are R&D investments in the economy and so the shock in this setting can be estimated and by Looking at the free entry condition for R&D investments of the agents Okay, so basically when we see a drop in R&D investments That can be due to financial and business conditions or can be due to the fact that R&D is not that particularly productive at that At that period and so what we saw in the R&D data was that there was a big slowdown in R&D around 2001 And so that slowdown in R&D 2001 to a large extent was driven by a reduction in the productivity of R&D in that time And because it takes time for technologies to bring to be brought into production that only shows up in TFP Three or four years later. Okay, and so this is what explains the pre-greed recession is lowdown in productivity and I Don't have time to go through the details of the mechanisms But basically and when you think about the role of R&D and diffusion What was really important during the great recession to understand TFP during and after the recession Is this lowdown in the speed of the vision of technologies R&D didn't decline that much So basically plays absolutely no role in explaining TFP after 2008 So just to conclude Declined in productivity growth during after the recession. It's solely attributable in the US to the response of business to To the business cycle and financial conditions that induce them to spend less resources in bringing in new technologies Okay, and This mechanism seems likely to be also quite relevant in the in Europe because at least in Germany and the UK We have observed the same symptoms in terms of the slowdown in the division of technologies as we have seen in the US And the pre-greed recession decline TFP was due to a slowdown in the productivity of R&D And I have some independent evidence that is consistent with that finding So that lends a little bit of support to the Gordon hypothesis, but it's something that Didn't take place during the recession. So during the recession in a view that is consistent with the Discourse that We are finding from tech enthusiasts. We don't see any slowdown in the productivity of R&D activities. Okay. Thank you Thank you very much, and I'm sorry for insisting on the time but We have a limited time to manage and so I like now to give the floor to Mr Christoph Chazoux To give us well, whatever he wants to tell us, but of course we hope that he will tell us Significant things about the perspective from the investor side big investor side. Please you have the floor Yeah, first. Thank you to the central bank and to MIT to To invite the HSBC and myself to this conference. I'm even more Moved that I'm an MIT alumni. So it's always a great pleasure to contribute to the MIT research My role is head of innovation for the bank And so most of my role consisting investing into startups that are strategic to HSBC in one of these Corporate venture capital that Martin has mentioned in his introduction And we have a capacity of investment of 200 million that we invest into startups about 50 million a year and Startups which are strategic to us as the HSBC Hong Kong and Shanghai Bank And so before that role I was Co-head of global equities and head of equity derivatives for HSBC and some other firms like Bank Astras and I thought that my job was exciting But let me tell you in the environment we know in finance and with innovation. This role is even more exciting And why is it exciting is that all this innovation that we see in banking and in finance is mostly driven by entrepreneurs? Mostly driven by individuals that create things and that bring it to companies like us which are 50 100 1000 times bigger than them And these companies are called fintechs. So what is a fintech a fintech is a technology company that operate in the financial space? Financial services and you see that that's a broad definition, but there are two types of fintech those that Try to compete with the incumbents with banks Or those that try to help banks to develop and these are two very different Two different type of companies one would be more B2C and the other one would be B2B and So fintech have really taken a predominant role in the innovation in the financial services industry and it's interesting to reflect why and it's a combination of both technological progress and The financial crisis arriving at the same time and this same time is 2007 Actually, if you reflect and you come back to 98 98 99 2001 you got about the similar condition Financial crisis in 97 followed by technological development in 98 99 with the internet This time it's not the internet in 2007. It is the mobile Mobile phone smartphones with the iPhone and mobile data 3g 4g But it's also a whole bunch of other innovations like capacity of storage Which has been massively increased With SSD drive. It is the cloud computing that was launched by AWS in 2006 It is a new algorithm in AI so a bunch of new technologies that suddenly emerge in 2007 and then at the same time's bank where Experienced the worst crisis that they have known for like probably 60 years And so this crisis which started in 2007 Completely occupied banks and their whole time their management their resources It they had to remediate all the past mistakes with a regulator and so forth And so that took away all their energy all their resources all their thinking Away from the progress that we're seeing in technology. So it is no surprise That immediately you saw a bunch of Entrepreneurs saying hey, what are you guys doing and let's do it if you guys are not doing it Let's do it and this is why we saw this exponential rise of fintech Now when you see startups emerging it their needs. It's not just startups So it's not just entrepreneur coming and saying hey, I want to do this and it works they need other things and In financial services, they need four things and this is why they have been successful The first thing is they need technology enabling them much more and also prospect And the good thing was that the technology gave new prospect to the way we were doing banking So there was an exponential possibility didn't say that this exponential possibly was going to material quickly But at least there was a possibility for exponential growth. That's number one The second thing is money and here VCs venture capitalists are to put a main or most amount of money inside this business in 2008 the investments of venture capitalists in fintechs were one billion in 2012 it was three billion in 2015 it was 20 billion So they multiply by 20 the amount invested in fintechs in about six years So money is also nothing the third thing is the clients Suddenly the clients who are a bit upset with the banks had lost so much money during the crisis Which led to massive a massive suffering in in a tough countries Suddenly turned themselves to new to new ways of doing banking and they were quite receptive to this new ways of doing banking And the fourth thing is the regulator The regulator probably upset with the way bank had handled this period We're also very keen to push new competitors and to encourage new fintechs to do business in banking So these four things are relatively important and you see that in the 98 bubble Which also pushed something tech we have exactly the same conditions So exciting times But the question which I want to ask now is is a sustainable Can these companies Continue to grow and they can continue to develop and to bring their expertise to the financial services Are they are they going to hit a wall like they did in 2001? Remember PayPal for example that needed to sell itself to eBay Remember all these companies that disappeared at the time Or have they you know can they continue to grow and the second element which I'd like to tackle is What is really innovation in banking and are their tensions there? So if we look at the at fintechs There are in fact Two areas and we need to differentiate between developed countries and emerging countries And the situation is very different for companies in these two space in developed countries The banking is quite a mature business. It has been existing for a while But because it has been existing for a while all the rails all the infrastructure have been developed a long time ago And works extremely well Billions of transactions are done per day not one fell you never complain that suddenly you don't see a payment arrive when you've sent it So it's very robust infrastructure and reinventing that is very complex And that's what the fintechs that started to work on B2C So talking to clients that were the clients of bank started to see is that in fact their space Was not so much in innovation because they were not really innovating. There was not so much innovating It was just incremental innovation and as you all know when you enter in a space and you just do incremental innovation It's all about price and it's all about clients How many clients can you gather and that takes a lot of time in the financial services? So a lot of these fintechs in developed markets suddenly realize that they needed to pivot to more B2B type of model In emerging markets, it's a bit different like China, India, Indonesia, Kenya Here the fintechs really brought a new expertise by redefining what were the banking rails So for example in Kenya MPSR completely reinventing how you were doing payments Suddenly you could do your payments in remote places with yours with your telephone just a regular mobile with edge You could do payments there whereas before people needed to source the money and sourcing the money can be hard Sometimes you can't access to cash if you can't find access to cash You cannot pay something else. You cannot buy the economy is stuck You remember we had the same situation in the Renaissance when they were not enough gold So this situation can be sold with technology and that's what fintech broke in this emerging market So the same thing happened in China where Alipay completely redeveloped the economy by Encouraging and developing this capacity of doing payments through digital wallets Alibaba Alipay 10 cents they now on 85% of the mobile payments market in our country. So that's massive So you see that in emerging markets You need to reinvent what are the banking rails because the banking infrastructure is not robust enough Why sometimes too ancient are not able to sustain the growth that the government wants to see there and here They need to see the help of fintech on a B2C basis and its revolutionary So if I summarize this part Developed market evolutionary B2B emerging market revolutionary B2C the second question is about innovation in banking innovation in financial services and here what is very interesting is the tension that exists between the two at the beginning people were and The central banks the regulators were very encouraging the development of fintechs and And we saw for example some central banks thinking about how they could use a cryptocurrency In order to to issue some currency. So they were thinking about that. They were thinking plenty of things But in fact progressively there is a tension between Especially because banking is so regulated. It's regulated to protect the customers There is a tension between innovating and regulating Can you do both at the same time? This is a challenging job. It needs to be done But on the end it's very challenging and this is why at the same time you see some regulators like the monitorator issue of Singapore the UK regulator or the Or the HKMA in Hong Kong trying to push and develop the fintech environment by promoting and by launching a lot of projects at the same time You've got some regulators that also say like Mark Carney recently mentioned Hey robot visor could be a threat to the financial system Or you see that the ETF that was tried to be ETF on Bitcoin that they tried to launch in the US didn't have the The okay of the regulator. So there is a natural tension between the two and this is why Experiments like the sandbox which has been done by the FCA in in UK where Fintechs can try can conduct an experiment and then see what is a result You know to alleviate the tension between innovation and regulation are so important So it's an exciting area plenty of things are developing and you know, we think it as a bank We think it contributes a lot to the innovation in our sector. So we are very keen to promote The growth of fintech. We partner with them. We invest in them We also partner with universities and we with other firms, but fintechs is a particular exciting part of our daily job Thank you very much and thank you for keeping to the time You raised a very Interesting topic which is this relationship between innovation and regulation But there should be no Conflict there there should be no conflict there. It all depends on the good innovation and good regulation What one has to keep in mind is nevertheless the fact that the sort of externalities and market imperfections that justify the existence of regulation in the financial system those reasons are neutral to the technology of distributing and Providing the financial services. So by the fact that there are now new ways of Distributing the financial services does that does not eliminate the sort of imperfections the sort of Externalities that justify regulation. So that principle one has to keep in mind and then of course there are bad regulations. There are bad innovations or dangerous potential innovations and The solution of course is to be reasonable about all that But it's an important topic and perhaps it's unavoidable a certain degree of tension there but now I am Going to give the floor to professor Reinveld We hope will Tell us what are the problems in the corporate sector in Europe and other aspects that are Really creating obstacles to more innovation and higher productivity growth Okay, thanks. I can talk a lot about problems the solutions. That's a bit more difficult So I'd like to go back to to indeed the challenges for Getting innovation as a source for growth in in in Europe very high expectations of this But actually Europe has consistently already also in the past failed to really exploit its full potential for innovation based growth Despite a lot of innovation policy strategies and targets that we had and I think it's important that we also take stock of of our The past to learn on how we can actually improve in in the future I'm going to be very quick in terms of evidence because you know most of this here How good or bad Europe is doing in terms of innovation take a look at the latest innovation Union scoreboards the EU Consistently scores behind the US Is only very slowly catching up and China is a very quick Improving on this and the problem with with Europe's innovation capacity It's it's really a systemic problem. So it works on very different components off of innovation It's a public sector funding its private sector and the linking between the two Financial market access. So it's it's really a systemic problem But a very important part of of the systemic problem is the the business R&D intensity Which continues to be far below of other countries here And that's a very pivotal part of the innovation system on which I would like to to To focus my talk on here This is not to say that public funding also is is not an important part of the story here And particularly also because we see that in in the post-crisis trend the public spending on R&D Is is definitely also in jeopardy particularly in those countries, which are innovation legging countries here Which are also under fiscal pressure so that we do see an increasing Divide within Europe in terms of public spending particularly in the countries that were already We care here, but I'd like to focus most on on this corporate R&D And why is it that Europe is consistently lagging behind and only and is not able to to sufficiently quickly catch up and That's basically due to the nature of the EU's industrial Structure, which is really the basic reason why we have this persistency in in our corporate R&D Divide now the OECD work has identified that the problem in Europe is much more problem of diffusion of companies that are behind the frontier and are failing to catch up with the whole diffusion story They also claim that there is no problem for Europe for companies that are at the frontier in their sector But here I would actually want to to caution and say that maybe on average European firms in in average sectors at the frontier are not doing that badly But the problem still is that we are missing frontier firms in the sectors that really matter for innovation growth here and there Europe doesn't have the frontier firms to In these innovation based growth sectors here And that's the overall problem of Europe's innovation industrial Structure, which is still too much focused on the average medium tech sector with with strong Older incumbent firms that are doing well But where we are definitely missing the frontier companies in the sectors where there is the most Scope for innovation based growth here So it's this deficit in a what I would call a capacity for creative destruction is because we fail to specialize in particularly those new emerging sectors Where there is the most scope for innovation based growth and basically in those sectors of why Europe is not failing to specialize in these Sectors is because we're missing the pivotal companies in these sectors here Which is a are these young innovative companies that can really make it to world leading status here So it's this overall failure to specialize in the in the right type of sectors and with the companies that can make that specialization change here. That's overall Europe's Problem of why it's corporate R&D fails to catch up sufficiently Sufficiently fast. Let me just give you a few pieces of evidence on this So when when I talk about innovation based growth sectors, I mean those sectors where R&D is a very important driver for growth And we're also R&D Changes also very quickly. So there is a lot of scope for For innovation to drive the growth process and where there were lots of young companies that are driving this So that's particularly an ICT story With both computer hardware services But also particularly the software services part of it This is also a biotech story here, but it's not exclusively only those sectors here is in general New emerging markets here If you talk about these young innovative companies The companies we have in mind are not the startups But the ones that have already grown to become world-leading innovators in their sectors here So these are the examples like Amazon the Google the Microsoft unfortunately most of them are all US here so just to illustrate that our R&D landscape is really focused on Way more classic sectors here. So on the left side you have the more dynamic sector So these are the sectors where there's really high growth in R&D and where R&D is really driving The innovative potential in these sectors here You see that none of these sectors with exception of aerospace and defense And also pharmaceuticals, but pharmaceuticals is a bit of a broad sector here in all of the other sectors Europe is not specializing its R&D force into and it holds particularly in software like for instance internet We have no leading R&D players here on the right side You see where we do specialize in and those are very classic sectors here Where we specialize our R&D Expenditures in so that's industrial machinery industrial metals electrical components chemicals automobiles and parts here. So these are Sectors which are more classic where R&D is important, but more as an incremental Factor so here you see who these leading companies are in terms of large Scoreboard companies companies that spend a lot of R&D In the world you see on the top the US you see on the bottom the EU Companies here you see where they are in the world rank of biggest spenders here What I just like to point out is that if you look at the ones that are the largest spenders in the US The ones that are young are the ones that are colored If you look at the EU you see there is almost no all of the Leading spenders are older established their companies and in sectors like automobiles and parts Pharmaceuticals so more the classic sectors here while in the US the composition of the R&D landscape is way more in these younger Leading firms here and then also particularly in in ICT and particularly software services So what you see is that actually overall and so this were just examples But that holds in total so what you see is that the EU's R&D landscape has fewer less or has way less of these young Innovative companies that make it into world-leading innovators as compared to the US and That matters because these young companies are way more R&D intensive so they are an important driver of R&D change and What we do see also is that the reason why in Europe our young innovative companies are less R&D intensive is because if we have young Companies they are still in the more established older sectors here and way less in these new Emerging markets where there is a way more scope for for innovation growth here Because if we would have and that's what you see in the last row if we would have these young innovative companies in the right sectors And the ones we do have unfortunately, we don't have enough, but the ones we do have our S R&D Intensive and dynamic as a US counterparts here So it's really a failure of of the R&D landscape in Europe to Specialize on these sectors where there is most scope for innovation based growth If we would have more of our young companies in those sectors here We could really improve on our corporate R&D performance So that's overall a bit of the story of the creative Destruction story here is we keep too much in in the existing sectors here We're not moving enough to the the new sectors here And that really matters for for closing the R&D gap here So we did a bit of decomposition analysis here if you analyze the the gap that the EU has relative to the US Actually only very small part of it is due to our older established companies They do as well as their older established counterparts in in in the US here It's really because we have fewer of these young companies But the most important part is really that the young companies that we have are not sufficiently Innovation active here because they are not in the right sectors Emerging here now, of course the problem then is why are we missing these young innovative Companies in these innovation based growth sectors here And that of course is a is a is a problem that is due to many different factors that play at the same time So that's on the one hand simply because there are lower returns from investing in innovation capacity for these young innovative Companies we did some econometric estimates on it on this comparing US high-tech YOLI firms compared to to the EU and their rates of return are Substantially smaller in in Europe here So that of course it gives them lower incentives to invest in in the right In in in R&D here, but on top of these lower returns from investing in innovation capacity There are of course also higher barriers to access resources for innovation There are and again, it's a multitude of of barriers here often mentioned is the risk-taking financial markets Is inflexible labor market so that they don't get access to the right skills here It's insufficient linking to the right signs that they would often need in these new emerging markets here But all of the all of these higher barriers always have to do again with a lack of single market here It's it's it's not only the fact that it's difficult to link within your own Subsets, but also that it's very difficult to access these resources would they be available within the European scale here so for me a very big important story of why you are dismissing these young innovators is this Is the lack of a single market both product markets, but also a leg of single market in many of the input factors here So the policy agenda what to do, but that's a Big agenda here. That's not easy to deal with so what we should focus on more is really on Focusing on that creative destruction Element here, so it's not just enough to say we need more innovation But it's really also allowing the destruction to take place so that resources can be freed to go into really the new areas where most scope for for change actually is The current emphasis on framework conditions that is in in EU policy level present is of course not not the wrong strategy here But it's too much focused on the average Innovation here, so it's improving access to finance access to skills Access to large markets Having partnerships here, but it doesn't focus enough on really these new emerging markets And what the specific barriers would be for these new leading firms in these new emerging markets Because that's always it's not just access to finance. It's really early risk finance It's not just access to science but really access to frontier Signs that matters. It's not just access to customers But really to the risk-taking lead first-time customers here and complementary suppliers and really specialized Know-how for these young innovative companies here So it's really a much more clearer focus on the new emerging markets here with their specific constraints that I think is more important and it requires Evaluating and monitoring how well we are doing in these new emerging and innovative markets here because it's it's fair to say Also that it's hard to know which policy instruments would work in these settings or not here We don't have enough evidence on that yet So that's why I think close monitoring of what's going on trying experimenting with also new policy instruments here And then evaluating whether these these new experiments actually work or not is an important issue Thank you very much for this insights on policies now we I hope and a moment of Interaction among the panelists. So I know that professor coming already wants to say something about your Intervention so please No, I thought it was very interesting. I think that had two thoughts that came to mind immediately the first is that I don't think it's The appropriate way to frame it to compare the US with the whole Europe when when it comes to innovation because innovation R&D requires lots of knowledge you need to be at the same level of development and We know it's very non-linear, you know only the very very con you know most developed countries do a significant amount of R&D So if you bunch all the other countries in Europe that are way below that frontier then, you know You are basically blurring the image And so when you say compare the US with Germany, which I think are two countries that are in similar similar leaks Then this is what you see what you see is that they have grown You know TFP growth their productivity growth over the last 20 30 years has been very similar And they spend the same amount of R&D As a share of GDP the private R&D share of GDP is also the same and they differ in the sectors So the US does pharmaceutical software and electronics and Germany does you know machines cars and tools and You know in the way you portray it You assign a negative connotation to those sectors that the Germans do But for example in terms of the economy complexity of their exports is greater in Germany than in the US so, you know, I mean, this is a regard has mass index and it dominates those sectors that the German is has focused in their R&D have a feature which is that they leverage more on the semi-skill type of workers that they produce dramatically and Therefore they are harder to outsource and so, you know in the vein of what the provost Mention at the beginning, you know No wonder why the Germans have kept their manufacturing in land while the US has lost it I mean if you specialize in pharma electronics and software It's very easy to you know, very profitable to send the production elsewhere and as a result You know inequality has remained much lower in Germany in the US And I'm not going to go into the political implications that this has had in both countries in the US is quite obvious and so, so, you know not Denying the necessity to foster innovation Different policies. I mean, I think German policies are particularly interesting. I mean, I think that micro Element of the talk comes tomorrow. So I think I would like to talk about that tomorrow But but but I think that the picture is much more It's an impressionistic drawing is not, you know, a classical drawing. So there's lots of detail into the into the drawing And so my perception, you know, I I mean, I think the picking sectors is not is not I mean based on on what looks cool it's a bit difficult because a German the German sectors have been particularly productive in terms of delivering TFP Fostering exports and keeping inequality relatively lower So comparing the US and the EU I also agree We have to always go to a deeper level here, but the US also is a very it's not a homogeneous market, too So there also you have very big differences among states here and it's it's very often it's it will the growth will be driven by By a few regions which are very well in particular sectors here So that also holds on the US side here You really have to go to a much more granular level to really understand The dynamics of innovation systems here The point was not that I want to make that there are bad sectors where you should not specialize in It's just that if you want a dynamic R&D process that that funnels growth here then you If you would only focus on those sectors where there is a limited scope for technological opportunities to drive growth here There will be way more difficult to to increase the growth potential for me innovation and sectors that offer way more Technological opportunities for growth here are important sectors that also should be sufficiently part of your portfolio of activities here now if you mentioned Germany and and the car manufacturing is actually Maybe a nice story here because of course Germans are very good in increasing productivity in in in their Sector here, so they have a high TFP They they're very good in incremental innovations here But there are some really drastic changes going on in the automobile sector here Moving to connected cars where it's really the combination of digital and and cars here And you see that Germany is actually really struggling to keep up. I'm not saying they will lose the game I hope not but it's it's it's not obvious and there are important other players that are coming in into these sectors here Which are really creating way more scope for technological opportunity here and therefore You do have to be really very careful about What kind of companies you have in that sector here to really pick up the challenges that are present in these sectors Yeah Kenny it goes back also to ICT content of the different types of activities and sectors because that's very important what is now driving Everything is digitalization Invading everything so but you want also to be on this one No, no, I was I was reflecting on this R&D and I'm part of a sector that that invest little in R&D actually we were discussing with the chief scientist of UK recently but What I was really I was looking at at a report and statistics and When when you ask companies Where is innovation coming from actually the answer are quite strong quite amazing like 41 percent respond that employees create innovation 40 percent Resprive that business partner create innovation 40 percent create a customer create innovation or bring innovation and that just 17% say that it's R&D Actually, there are statistics we show that it's even lower and so Is R&D really producing innovation that's a question I have when I hear you talk It's and the and the second question I had relating to that is we see more and more that companies like Google or Microsoft or over in fact innovate through acquiring other companies. So are we moving to a different model? I mean I Google the high they acquire like five six company per quarter You know, they acquire deep mine in order to sell some AI they acquire Microsoft is the same So are we moving on from it from us from Something where big companies were doing R&D and this was generating innovation to something else Yeah, so it's not that there is only one type of company that would actually be the innovating company We really have to understand the heterogeneity in the ecosystem here So you have the the incumbent firms which will be adopting Technologies here and probably those are the ones that you were serving Surveying in your case then you have the the small startup companies that some of them will actually grow To become new world leaders Otherwise others will be taken up either by incumbents or by some of these fast-growing Companies to here So it's really the whole ecosystem that you have to understand of different types of companies that play very Complementary roles and and it depends on whether you are really pushing the frontier from the start with really frontier Innovations that are really completely disruptive That's a different kind of ecosystem that then will evolve once the technology becomes more mature as well So you really need to trace these ecosystems and what the best composition of these ecosystems are over the lifecycle of technologies here and really looking at disruptive of Moments in time of the technology versus the more maturing ones here And what we need to to understand better also from a policy agenda is how to support the right type of ecosystems here Where are their failures in terms of that the market doesn't reach enough that ecosystem between the different types of innovators here Can I raise a question for So so FinTech is also a very nice example here of So the incumbent Financial sector companies here and then the startup companies and you mentioned these two types those that serve service as clients that Banks and those that go directly to To the clients so and you mentioned also the impact of regulation So I was wondering to what extent actually the regulation is is indeed like you say Is it a barrier to innovation or does it protect consumers? For the wrong type of innovation So in general there is a lot of discussion also at the level on on having using the innovation principle and financial regulation as you Design the regulation in such a way that it's completely neutral to any type of Of technology that is being used here So do you think that the whole process that we had of financial regulation was sufficiently neutral in terms of Allowing these new FinTech companies I think that you you where you are going to ask questions. That's not the case and we're going to ask questions Now seriously we Regulation is very important in all in our activities much more than in any other activity maybe apart from pharmaceutical and it is essential because the role of bank and the role of financial system is to grow the Economy but protect it from collapsing. So having a regulators that do the job that put regulation is essential and Parament so you know, that's that's it And otherwise the system would collapse and we've seen some of the some of consequence happening from time to time of Things which are not exactly properly regulated but and Regulation is also a fantastic innovation capacity for us So whenever there is a regulation there is often a lot of innovation behind so for example, take the swap market Which is a multi trillion dollar markets. This was created because of the Forex regulation that were existing during the 70s that prevented money from flowing between countries and the financial system invented Over the counter and derivatives and swap market. So you see that innovation Is very often generated by by regulation and by constraints But they are also the difficulty. I think of the regulator. I was I was not saying that Regulation hinders innovation. We need to be regulated and for very obvious reason I was just mentioning the challenge that it is for regulator to try to do the right regulation That at the same time protect the client and at the same time Faster innovation and I want to give two examples The first one is is the the cap on interchange fees You may know that when a credit card down when the transaction is happening on your credit card In some countries like us There is no cap on the interchange fee which is on the money that the system between the bank the issuing bank The acquiring bank and visa is taking on this in the US It can be two three percent in Europe. This is now cap to five ten Few basis points and the question is is that good or is that bad or not? Is that good or is that bad because that would be a wrong question? But is it what are the impact of such a regulation and what is it? What is very interesting is that the impact of such a regulation protects the customer because they pay less that in the US But because in the US with the two percent They give you kickback in terms of advantages reward scheme and so forth. This doesn't happen in Europe so it means that the incumbents the visa master card and there is no real over incumbents incumbents have Who have a network that have been developed in the past year who is very very low fees nobody else can enter You will never have a new player coming is with five with five of just five to ten basis points So you see at the same time this regulation protects the customer It also prevents the entry of new competitors because it's going to be very difficult for new competitors to compete at five basis points PSD 2 is another is another interesting example where again you can you say at the same time you try to open the database of banks and the capacity of bank to conduct payment to the outside world, which is an extremely good thing and Very good for innovation at the same time. You wonder who is going to benefit from that Because fintechs are certainly going to try to enter in this market and process payment But at the same time you can also imagine that big firms like Google Amazon and so forth are going to also be tempted to act on this or maybe other banks who are going to try to look at What are in the accounts of client or banks and so so It is what what I was managing is it is a very difficult job and it is extremely difficult to to consider all the consequences In a world that is progressing so fast and where the opportunities arrive at such at such an important speed So maybe before 20 years ago. It was easier because the developments were much slower today The capacity the the number of people that innovate their capacity to innovate extremely quickly at scale Using cloud using data and so forth is such that the job is very challenging. So there is a natural tension that exists I agree with you. It's a matter of proper Regulation which as you said nevertheless in the end it will be unavoidable because of the nature of the activities We are talking about and and and so on so now I will turn to the audience for questions and comments and and so on before doing that I just wanted to highlight one point that was Raised by professor Reinild that I think deserves being underlined which has to do with the size of the market and the size and depth of Financial markets one of the things that we saw Is that what we have in Europe is old big firms doing the R&D and innovation and less startups but startups in the US are benefiting from a very sizable deep financial markets so that risk capital firms can embark into financing very risky Projects and many of those fail pure and simple Because in the ones that succeed even if they are very few by doing IPOs in the deep market they can get high returns on the success stories even if they are few and That's why it's not Also totally proper to compare the USA with Germany or France or countries of that size What we need indeed is more financial integration in Europe and in particular the Capital markets union if it could be achieved Would be a big change and a bigger improvement in that respect because it would provide indeed higher returns for the startups that really succeed by doing IPOs into such deep markets And we see of course in the US Good examples and perhaps not so good examples as the recent snap a chat Example of a firm that does allow these exchanges of video texts and photos that disappear after a certain number of minutes and Did an IPO and suddenly was more kept valued in the market than GM and other you know good and and old traditional firms But that's what a deep market the capital markets allow to happen with of course big returns So now I open to the audience and I already had one Participant that wanted to intervene and I will collect other One two three Okay, so I guess I Memorized the order. So please thank you. My name is Stefan Neugebauer. I'm working for BMW Mm-hmm, and I'm chairman of the European technology platform for road transport. I have a comment for you Professor and Hilde you described very clear picture with the old economy like Automotive industry and the new economy Like data management software and so on but I think this doesn't describe the reality As you know, digitalization for road transport Will be a game changer and we are working on this very hard and there are a lot of opportunities in this area and even today the value of a car is mainly the electronic the electric mode and the software behind this so the Different The different pillars are coming together the different sectors So the future will not be described by thinking in silos by thinking in This is the technologies are coming together and this creates jobs and this creates growth. Thank you Thank you very much. I will collect three questions And then we progress like that, please Yeah, please you have the microphone Question for everybody, but in particular for Diego, you know, you presented very interesting Pictures of what's going on and it's a great diagnosis or a few It's like going to the doctor and asking for a second or a third opinion And you get confused but the question is what what are the policy implications of all that? And it's not the coincidence that we are holding this conference here at the European Central Bank And I must say that that very fact is an innovation who does say that, you know that but to Diego You know the the you present a very interesting evidence about the fact that Diffusion is it seems to be responsive to the business cycle. Okay, pros and cons But you know what the president was saying is hey guys, you know, I'm suffering from low productivity growth So give me some productivity growth to get out of the cycle. So what's exogenous and what it's endogenous It's in the high eyes of the beholder. So, you know, because you seem to be saying, let's wait out you know this cycle and then diffusion will take off again and Diego and my mother is saying hey, give me some productivity growth to get out of it Yes, there is some Circularity in these because we estimate total factor productivity as a residual So first comes the growth of GDP and that may depend on other things including the cycle as you showed and so on But of course professor common will answer you now. I have down there. No below. Yes, please Yes I'm Yona Svensson. I'm from the UN. I have a question to the entire panel based on the Lloyd's Study on the tax incentives for Indian innovation Most countries in the EU have substantial tax breaks Is that something that you feel have an impact or have we seen that it has very little impact? Well, no, I will give then the floor to the members of the panel So I think the first question was mostly for you professor. I know, please. Well, I'm very happy with the question Because it's actually it actually makes my point is that these It's true. I don't want to so you shouldn't interpret it as it's old versus new here It's really we should focus on emerging new innovative markets here and these Emerging innovative markets, they are indeed crossing any kind of Boundaries that we might have had in terms of skills also on the science side We see all these blurring boundaries between different scientific disciplines that have to go into these new emerging markets And also the players very often new entrants are not necessarily completely startups Those are entrants that were already in another sector and moved into other applications here So it's really these new emerging markets. They do cross indeed and cross a lot of Create and destruct also a lot of boundaries here and particularly also like in the car manufacturing All these connected cars self-driving cars here That's really emerging of completely different disciplines and different sectors We're also new players will be coming in and then the question is who will actually sit on top of these new value chains And will capture the value is it the established the established old car manufacturers? Or is it the ones that come in with the digital technology? So that's still and that still depends on what kind of specific unique Comparative advantages you bring into into the value chain here Who will be in the driver's seat of these new emerging markets here? But I fully agree you should not think of old sectors and new sectors here It's new emerging markets here where you are crossing the boundaries of the old sectoral divides Your professor coming, please so I think my most questions is very good one and and I think it highlights the point of disagreement between the class of models that I've developed together with my co-authors and the standard Neoconation Traditional macro models that take productivity as given by God and and you know They use it as a as a you know central bankers or policymakers use it as a way to weep countries and and as if it was something that it was not impacted by certain economic policies and so One implications of of these class of models is that Productivity is endogenous. Therefore, there's a class of policies that can impact it And so if you ignore those impacts, you are going to Undertake their own policies of just to give you a brief example Things that impact aggregate demand or these count rates are going to have a huge impact on the dynamics of productivity through adoption and so if say Greece is having low productivity You Try to push them to cut their budget deficits And and to do a structural reform thinking that that's the the panacea for fixing Problems you may be pushing them to a lower productivity. And so ignoring that channel It's a mistake That might be counterproductive. So that's that's one thing And on on the question on R&D, I think I think R&D is very interesting You made a point before of you know the source of innovation and why we do so much R&D There is this all-economics joke that the drug man looks for the keys where there is light not where he lost them And so I think that R&D shares that feature which is that we have lots of data on R&D I'm not on other things and that's in part why we do lots of research on R&D Not only because it's important, but because we have data and so Maybe the keys are somewhere else. And so part of the problem. I think is that That is that and and then about the drivers of R&D my sense is that money is not the most important thing. I Mean many people want to spend money on R&D, but they don't know how and so I think that's one of the beauties of the German system actually that they have mechanisms to Bring technologies to companies that they don't per se would have the ability to develop them. And so That's that that transfer of knowledge. I think it's critical to induce innovation I'm not an expert. I'm not an economist. I don't deal with that. But the anecdotal Evidence that I have on on fintechs if you look at where fintech grew and and what was the mechanism? They grew they started to grow from from the Silicon Valley The Silicon Valley doesn't have so much expert in finance, but they have people they have talent people who are multidisciplinary I think the the capacity to source various talents at the same place from various fields is very important And people that had the energy to say hey, I want to transform finance Because it's important for me and because it's important for the world. So talent and energy was the first thing I think that's exactly what MIT has in Boston the second place where fintech emerged really was London and here It's a different story. It's not so much about money. It's less about talent although there is a lot of talent But it's about the ecosystem. There are so many finance here There is such an expertise on an ecosystem around London with also people in data with also people in in it and so far that suddenly the The Innovation emerged there because there are so many problems to solve and there was so much expertise in finance locally So on the tax, I mean, I'm a banker So I'm always careful with deals that are just tax motivated because they can get you in the wrong direction Even though you do a deal where you get a 50% tax You still have the dealer you still have the position and if it goes wrong, you'll still end up losing everything So it's better to deal on a deal which has no tax advantage But which is a good deal than just looking at the tax advantage And so I think that's this this tax advantage are very good But sometimes you can also lead us in the wrong direction and I think the other elements are more important than this tax advantage On the tax issue. Yes, please Yeah, so on the tax R&D tax credits there have been quite a lot of Economic studies on that trying to evaluate how effective these tax credits are so first of all at the level of the individual countries There was of course always the prisoners dilemma problem if other countries are doing it Do you need to follow or not? But in respect of that issue here. So how effective our tax breaks? So in general, they're not too ineffective But the fact that they are very general and work for every company here Doesn't allow enough Differentiation into where the biggest market failures are which are the companies where you particularly want to incentivate them to start doing R&D And the tax credit is for that a two-general Instrument here and for instance where it fails to work most effectively is Companies that were not doing any R&D how to incentivate them to start doing for the first time R&D there It's not very effective for you It's particularly effective to to improve the incumbent firms which are already doing R&D But where there isn't particularly a market failure on the new firms trying to incentivate them there It works less effectively here. So tax Tax credits is one part of the instrument here But definitely needs to also be complemented with other policy instruments that would leverage where there are specific Market failures for particular types of companies Thank you. So when I have two other Gentlemen down there. Yeah at the back. Yes in the middle. Yeah, you and then you Yeah, sorry Yes, please European patent office, so I noted to two key points regarding the The need to develop innovation in Europe The lack of an ecosystem and and the lack of scale meaning integration of the of the single market So I have a good news regarding integration the The patent system is very fragmented today in Europe You have no single title for Europe But this will change by by the end of the year with the creation of the unitary patent and a unified patent court And my question is how does this how can that translate into a better ecosystem? And especially into the integral integration of the innovation ecosystem in Europe and especially with respect to funding Yes, thank you for your question. Yes, you can give the microphone to you. Yeah, that's right My name is Stefan Weisblop from the MIT club of Germany. I have a well, maybe method logic methodological question I think an experience that all of us see in this room can relate to cultures are different If you look at a sort of microeconomic level, of course, there are cultural difference within between companies There's also cultural difference between industries and there's cultural There are cultural difference on the national level. How does culture figure as a barrier or enabler in terms of Innovation, that's my question. Does it show up? Is this the key that the case of the lost keys in the dark? Yeah, or is it can it be ruled out because of your findings? Yeah, thank you. Yes, please Yeah, sir, can you give the microphone here? I know you have also asked there, but okay one year. Oh, is there Yes, you we can hear you In view of Diego's comment, I'm really wondering are the solutions at the European level, you know You talked about the deep financial markets or should we really talk about National or in some cases even regional solutions to the type of issues that you've identified Yeah, there are many drivers of course of the whole thing. Some may be more European and others more National so we have three questions so who wants to Try to answer the first question about the importance or significance or potential impact of Patent office that will be unified at the European level. Certainly it has importance How important I don't know really I don't know if any Any member of the panel will risk to say something against professor, right? Yeah, so first of all, I hope that the Brexit discussion will not jeopardize any of this here So let's assume not The unitary pattern is definitely way forward here particularly because IP and being able to protect Your IP is very important for young innovative companies whose whose very often whose critical asset is technology The know-how rather than the complementary assets to develop So if they want to be a strong partner in the ecosystem with other Companies that supply the complementary assets that they need they need a very strong or a strong IP protection which partly depends on patents But also on other things with patents definitely is an important story. It also helps these young companies to access finance if they can have patents as a collateral here, so Reducing that cost and making sure that the patent protection works on a larger market here. Definitely Is a very good way forward here. So I hope the Brexit discussion won't jeopardize this Anyone will pick up the question about the importance of culture meaning, you know in a broad sense of collective mentalities in different countries It's a very broad difficult issue. I'm sure but And certainly impacts things In general, but we also see that when we compare advanced countries they have Sufficiently convergent levels of technology or productivity and so on so it seems that in that respect different cultures of advanced countries Are all compatible with the absorption of technological innovation and technological progress? so maybe if we then look to other parts of the world and Totally different cultures based on different Values, maybe we find but then we have Japan and now we have China and we see that you know In a broad sense culture seems not to be the ultimate obstacle to technological progress, so It's a difficult one now on the last question on the importance of national regional and local and European levels and What can you any of the members say and professor Ryan you'll be you were specifically? Addressed to on these one. I think the the answer is like you expect it should be complimentary, right? So it's What I think is very important and actually it's bit the same question also in the US here So you also have their regional state levels and even below a state level But how that also interplays with the federal level is is very important And I think that's bit the same here in Europe So we need a better connected set of policy levels here where you get way more leverage out of any regional initiative if it's also fits within an integrated Market where the regions can also find The the right access to markets and skills and whatever and can also interconnect with other Regions at the EU level here. So of course the regional level is important to local level here But if it's coordinated within within also a federal European Policy level you get way more leverage out of your regional initiatives you I think oh, yes, please So on that point, I think one issue is that in general we know relatively little about R&D policies Beyond you know the brainless R&D subsidies and so Much of what we have In different countries has emerged in a very organic way without clear plan. So for example just to give you an example of what They have here in Germany in Germany There's this organization called Fra Hofer which emerged organically, you know after World War two to Basically, I reindustrialized the country to do applied R&D and to bring technologies to companies It emerged from that idea, but in a very, you know and plan way indeed It was very inefficient for several decades until the mid 70s when it became very efficient and so that's just something that came out in a country and Because we don't know very well how effective these organizations are Fra Hofer in particular is quite efficient And but that's just beginning to be established now It's hard to impose something like that at the European level And so I think that the level of Which you would design the policies has to do a little bit with the you know with the evidence we have on the policies and so Thank you very much and we have exhausted our time for this session I'm sorry for the members of the audience that still wanted to put questions before we Get out and go to a coffee break before we will have our Set of questions via the mobile phones and before that I suggest we show our appreciation for the members of the panel