 Thank you very much. Good morning. Well, thanks to the organization for fighting me for the second time, which tells me that I didn't mess up the previous time completely. Very happy to be back here. And I want to discuss the world economy. I will be very briefly on the baseline scenario and then spend most of my time on the risks I see looming at the horizon. But for a start, what did I tell you the previous time? These two slides are the summary of my previous presentation three years ago. And when I read them back, I said, well, many of these things are still on the agenda. What we see, these actions of the European Central Bank have helped, but more European cooperation is necessary to solve the problems. Yes, and that's the big problem of today as well. In the United States, budgetary, the Toppersville returned on the agenda. Well, they returned, but they were not that important after all. In China, still thinking about what will the transformation of the Chinese economy do for the world economy. Well, it's still on the agenda. And monetary policy won't work. I said three years ago, and now we're three years down the line. And I think more and more people start to realize that monetary policy alone is not enough to help a sound recovery of the world economy. Emerging markets at the time were seen as potential engines for world economic growth. Well, they did, but today many of them are overdebted. And the other slides, I get the most noteworthy risk at the time. A new escalation of the euro crisis. Well, the euro crisis isn't solved yet for the time being, but underlying there are big problems. I will come to that later. And the global reshuffling of currencies. Well, today we changed our vocabulary. We're talking about currency wars, which is basically the same thing. And Japan, economics is still not working. And the hard landing of China is still one of the risks that people see. So more or less, I thought, well, after these two slides, I basically can stop my presentation because this was on the agenda three years ago, and it's determining a lot of discussions today as well. But alas, there is a lot more to be said. I will start with a brief summary of the economic environment. And, well, it is not too bad. It's not spectacular, but it's not too bad. We see economic growth in the United States of America for many years in a row now. And there is some fear or some deceleration of growth next year. But so far, so good this year. There will be some economic growth there. The UK is more or less the US light. It's not too bad. In the euro zone, we see a slow recovery of economic growth. The average figures look quite well for European standards. And in Japan, it's still the same thing. Abinomics not delivering, the yen weakening, big fiscal problems, low growth, deflation. It's not very helping. Emerging markets are a more different and difficult thing. So major emerging markets are deep in recession. Brazil, for example, is deeply disappointing. They messed up. They had a big boom in commodity prices and they didn't spend money wisely. So now they have financial problems, economic problems, the economy shrinking by 3% to 4%. A political mess in the country. Argentina has a crisis every 10 years. Well, we're now in, it has arrived. Russia, with the suffering from the low oil prices, among other things, shrinking, declining, large economies. Other emerging markets are doing quite well, of course. We're talking about Indonesia and especially India, which will be the star performer of these years. This table, I will skip it after five seconds, I think. The most important thing here is if you look at the figures of the euro zone, you see here that the euro zone is growing by one and a half to 2% this year and next. But if you look at the lines below euro zone, then you see the growth performance of individual countries and they're widely diverging. And the starting position of those countries is also, well, there's enormous variety within Europe and I will come to that later more in detail. And then the risks and uncertainties. And it's important that we understand the difference between a risk and an uncertainty. A risk is a thing we can deal with. We know what's happening. If stock prices decline with 5% or 10%, we have our models, we can calculate the effects of our portfolios, we can see what we'll do for the economy, its input for models, scenario analysis, great. We can deal with that. We should be able to deal with that. Uncertainties are, by the way, we know that things can go wrong, but we do not exactly know the transmission channels. We do not exactly know what will be the ultimate effect or series it will be. It's just a big if. And a lot of the risk scenarios I will discuss today are very big questions, especially again in Europe. And we have political risks, of course, of uncertainties in the Middle East where the wars are going on, proxy wars between Saudi Arabia and Iran, countries that refuse to cooperate on almost every front. In a cynical situation where Turkey buys oil from IS and sells it to Syria and the world just watching. In NATO tensions between Turkey, which is a prominent NATO member and the rest of NATO that doesn't like at all what Turkey is doing against Russia in the Middle East, it's a mess, it's a mess. And the direct consequence for Europe is an enormous inflow of refugees which is more or less derailing the cooperation within Europe. In the U.S. also a political risk, what would happen if Donald Trump would become president of the United States of America? I have no idea. But my intuition tells me it might be not good news. Okay, now we go to the economic crisis. I'm more certain there. First, I will discuss the exchange rate developments, low oil prices and the financial markets which are in turmoil and nobody knows exactly why. Well, I will try to, although I'm not a financial market analyst but I think I have some gut feeling what's going on underlying there and then I will focus on Europe just to have a happy ending of the presentation. Currency wars are no solutions. Everybody knows the theory. If you have a currency, it can decline its value, it improves your competitive position so it helps your exports. That's good news. There's only one precondition. You cannot do it all at the same time because if all countries want to have a more competitive exchange rate then the only thing is that you see is that there's a race to the bottom in interest rates in liquidity in the markets with no effects on exchange rates at all and we don't have an exchange rate towards the moon or Mars so it doesn't help really. Exchange rates are zero-sum games and exchange rates which are very volatile are even negative-sum games. And what is happening today is there is no cooperation between central banks. Central banks are running out of options. They stopped their cooperation in the course of the last three, four years and it's just a rather a mess and this graph illustrates it a little but it also illustrates that markets can be nervous about nothing. What you see here are the real effective exchange rates and these are exchange rates corrected for inflation and from international trade patterns. It's more or less the best indicator we have of competitive positions and if it goes up you become more expensive and if it goes down you get cheaper. It's quite an easy graph. And there are a number of countries in here. The red line there is China and actually China is a textbook example of how to run an exchange rate although it's not a free exchange rate which is one of their problems that they have to liberate the currency. But if you look at a country, fast-cropping country, saving surpluses, surpluses on the current account of the balance of payments the textbooks describe you have to have an appreciating currency and China has had an appreciating currency. The recent turmoil on the currency here is just minor compared to the large movement but it started a whole panic in financial markets about China's starting currency wars, etc. Well, from an economic point of view they didn't. The country actually does is Japan, also a surplus country. The government has terrible public finances. I think they're the worst of any industrial country in peacetime. Public debt is 250% of GDP. I've never seen it before in peacetime in the country. But Japanese companies and consumers, they save and they save a lot. If retired Japanese save for the old age because they know that they don't have much to expect from the government, I'm afraid. And so as a whole, Japan is a surplus country. And in spite of that, Japan has a depreciating currency and it's the only thing of economics that's visible. The other two areas of economics, economic reform and restoration of fiscal authority in the country, well, it's not there. Another thing here, and then I will stop here, the blue one is the dollar. If you see the orange one and the blue one, the dollar and the euro, they are surprisingly stable over the long run against each other. But a recent movement here is that the dollar is increasing in value, the euro is becoming cheaper. The euro is also a surplus economy, a substantial surplus on the current account and the United States is a deficit economy with huge foreign debts in dollars, so they don't care. And this is certainly not a good direction for the dollar to go and if this would go on for the longer time, well, I will just recall the previous crisis started in the United States when something in the housing market there ran out of hand and spread all over the world. I don't like to see stronger dollars because in the end it will turn sooner or later in financial turmoil. The low oil prices, they were here to stay for us for years. Our new kids in town, the United States indeed is an energy exporting country now which changed the whole geopolitical situation as well in the Middle East as we have noticed earlier. We see that Iran is back as a major supplier. The Saudis hate Iran so they keep on pumping just to annoy each other. So the supply side will be flooding the market this year, next year. And in the end, of course, there's a decline in investment in new wells. There will be a stop to this movement but not in the short term. This is good news for consumers and this is bad news for producers. This is basically the bottom line. Financial markets are highly volatile and then the question is why? And when in January the market started with what they were doing, the first story was, well, it has all to do with China. China is slowing down. Okay, China is slowing down. This has been in the forecast for a number of years now that China is slowing down. They actually are slowing down. The figures for the beginning of last year already showed that they were slowing down. So where's the news? In spite of the slowing down, we had a major bubble in the Chinese stock markets last year and nobody said, ooh, hey, China is slowing down. Let's have a party in the stock market. It has nothing to do with the real economy. Many stock markets are very, very volatile simply because they're small compared to the economy and it's more gambling than serious investors. It's going on there, at least that's my opinion and I know many people that agree on that. A more important cause here is that there is a gradual loss in confidence in policymakers and it is not only central banks. Increasing numbers of analysts say what central banks are doing, pumping money in the money market, quantitative easing, declining interest rates, bring them in zero, below zero territory. Today 20% of the world economy already is operating with negative interest rates which doesn't make sense from an economic point of view and the effects on the real economy are not there. This quantitative easing thing for example is just a central bank pumping money in the money market but this money does not end in the pocket of the consumer. It does not end in the pocket of the businesses. It just stays in the financial system, driving down interest rates all over the world, coming to emerging markets, creating bubbles all over the world but the real economy is hardly touched and more and more analysts lose their confidence in this policy. What's the reaction by the central banks? Well, we do still the same but in larger quantities and I read reports from JP Morgan for example that say well interest rates can go down to minus 4.5 and then I think I'm a monetary economist and say this is madness, this is madness. This will not work and also in China it's of course a different story but one of the things we see is that policymakers are losing their grip on events and actually that's what they have to do because Chinese authorities have to learn to cannot steer a money market by decree by the Communist Party. That is not working anymore. If you want to have a full-fledged market economy you need to have a convertible currency and open balance of payments and well they are not used to this. So there is a lot of, well, people know that more volatile is going on and policymakers in China don't like this. This slide is just a brief illustration here of what I said. The economy in China, the light blue one, it was already slowing down and what you see in spite of that last year we had a serious two bubble period in the Chinese stock markets. They're just two worlds apart, the real economy and what the stock markets in China are doing. If you look what's going on in China, of course China is a major success story. 40 years ago it was a huge, extremely poor backwater economy and since they started with the deregulation and the reforms China has evolved to one of the largest economies in the world, a major exporting, importing country and that the millennium goal of let's fight poverty has been met is fully to the credits of China moving hundreds of million people out of poverty to middle income status. So it's a success story but what they have to do is change the growth model. The growth model was export led, it was industry led. There's a lot of property building going on, real estate things and they will have to change to a more consumer led economy, more free markets and it changed from industry to services movement. The movement we all went through as when we came from old status to modern industrial status as we are today in Australia or in Europe and this is a turbulent and uncertain environment so what you may expect is not a strong slowdown but there will be a change in trade with China. They will import less hard commodities, they will import more consumer goods for more food I suppose especially in the longer term. So there will be changes, there will be volatility when we have to settle this but in the end China will go on and even if growth would slow down to 4% which is not our baseline scenario but even in that case China would be one of the major engines of the world economy still. So no reason for panic there but expect a lot of volatility in Chinese financial markets. Back to the financial markets, high interest rates are not a problem, interest rates are extremely low and quantum easing is not effective. And here you can see this illustrated how central banks all went in the negative territory, there are more of them Sweden, Denmark, Japan is in the picture and it's an increasing group of countries. The problem is that low interest rates are in themselves quite harmful for the economy and for negative interest rates it becomes even worse. They undermine the business model of financial institutions and many people would say well I don't care that much about financial institutions, remember the crisis but if a bank cannot function it also cannot deliver the services to its clients. So negative interest rates, extremely low interest rates are bad for financial stability from the supervisory point of view. For pension funds they're deadly. In the Netherlands we have a major crisis in pension funds which are huge compared to any other country in the world but with zero interest rates certainly your liabilities blow up and it all becomes more or less valueless if you don't care. There are bubbles and they're well it's not a good thing. What should be happened is that we should have what we call a big reset of monetary policy and there are more options here. If you read the economists two weeks ago they had a whole set of options how to get out of this mess. The first thing the precondition is cooperation between central banks should be back on the agenda. It's extremely important and I was very happy that the G20 last weekend came to the same conclusion. It's a first step. The second thing is interest rates should be back in positive territory again. That's better for the economy that's the normal way to run a country because interest rates reflect some long-term inflation expectations which should be brought back into the system and they also play a role in allocation of capital which is very difficult with negative interest rates. So one of the ideas we had and we have two colleagues of mine and myself is what we should do is a combination of a big fiscal impulse to the economy to be financed by a gradual, a very gradual increase in value added taxes over years in predictable small steps bringing back inflationary expectations and monetary policy should have a reset massively by the major central banks with policy rates slightly in the positive stop with the debying of all these bonds they are doing stop quantity-reveasing and go back to normal and the IMF of course is very necessary in this important scenario just to help emerging markets. It is one of the options. Another option is of course start spending money that actually comes with the people. So do major infrastructure projects in Europe you can use a little some of them and finance those with new money monetary financing. Well in Germany that's cursing in church that's not allowed by European law so it's not an option left but it could have helped it could have helped and a third option increasingly popular the people among you who read the Financial Times last week it's good old helicopter money back on the agenda central banks should do bring an enormous amount of new money into circulation but not by buying bonds but by buying anyone who's a taxpayer his bank account with a couple of thousand euros or dollars or whatever just make sure that the money that's brought into circulation will also be spent well all these proposals are very radical and I know they're not on apology agenda so they're well their future but without such radical solutions I am afraid that we are just will run deeper into this dead LA of quantitative easing and when the next recession comes and as we know in market economies they go up or they come down on average they go up if things go right but during the next recession we're still complete out of all our monetary options and then we have to choose more radical things so remind me on my proposal when I'm allowed to come back in three years time focus on Europe I am it's time do we have not much okay Europe is not much Europe is deeply in trouble period cooperation is very bad and the problem is that Europe is an aging continent we have but we have still huge unemployment this picture shows the real problem in Europe youth unemployment in Southern Europe is over 40% of the population this is not sustainable not politically and not economically and socially Europe needs a much higher economic growth than it has and this is a fundamental drag fundamental source of instability within the Eurozone Europe is shrinking this picture summarized the whole thing it's an aging continent and we have less and less people to pay for the retired people that live longer happily and have higher healthcare costs but the economic base is shrinking and the whole thing and again such a background the inflow of immigrants could of course be a good thing because immigrants we have flows of immigrants in the past in Europe and what they actually did over the centuries they usually were the preclude for a period of high economic growth and wealth in the Netherlands our golden age was caused by an enormous inflow of people from other parts of Europe but instead of this blessing in disguise the cooperation has collapsed and what Europe is doing is reintroducing border barriers and you live in a big country but if you are in Europe and you take your car and you drive a day you at least meet four or five country borders and there were barriers there in the past and you have to wait sometimes you have to wait for hours and every truck was controlled it was a major drag on trade and all these things have gone thanks to European integration and cooperation and now they are gradually bringing them back and this is extremely, extremely harmful for the economic potential of Europe politicians in Europe at least do not exactly know what they are doing the Brexit I am almost there bad for Europe because we lose a major member the United Kingdom if they would say no to Europe and also very, very bad for England themselves because out of Europe England is not that spectacular economy foreign FDI inflows will disappear the city of London will suffer and in the end Scotland will demand a new referendum because Scotland wants to stay in the European Union which in the end, so in the end it may be a very expensive way to get rid of the Scottish but it's a absolutely a loose, loose situation here, this Brexit thing so lecture lesson two, never choose a real dangerous gambler as prime minister demise of the euro would be bad and it's not because Europe is that important but Europe as a whole is a major economy, the largest economy in the world largest exporter, importer, major political diplomatic force so in the future Western values like we like at least I like them, free trade, human rights, all that kind of stuff well, Europe is its fortress, is one of its fortresses but a splintered Europe if the European Union would fall apart what I don't expect but with this risk scenario then the influence of Europe on many, many fields will more or less gradually disappear between now and the next 50 years so this is much larger than European wealth it is all about the states of Western values in a world which is changing because the US and Europe still are a major influence on here but the US with a splintered Europe is much more lonely there coming to conclusions, the economy is in better shape than many people think although it's not too strong, large risks Europe cooperation is in worse shape than 3 years ago because then it was only money in the Greek crisis and we had a central bank which could print money if necessary and just solve the problem, which they did but the problems we face today are political problems have to be solved by politicians and their track record in Europe is not too good on that in the end I'm not too pessimistic because I think that everybody realizes that there's so much at stake that common sense will prevail but it may take longer than we like so expect a lot of turmoil and turbulence coming from Europe in the year ahead thank you very much