 Well, good morning everyone. Thank you for swimming here. You know this is a hearty group to come out in the rain. My name is Heather Conley. I am Senior Fellow and Director of the Europe Program here at the Center for Strategic and International Studies. And we have a fantastic discussion planned for you this morning. So by coming through the rain, we are going to give you a treat as you drip dry. CSIS is a fantastic partnership with East Magazine. And I'm going to ask my colleague Giuseppe to tell you a little bit about the magazine. But amidst all the complexity and the events that are going on globally, we wanted to shine a spotlight on some pretty fundamental transformations going on in Southeast Europe, particularly in Turkey and in Italy. And that was before the crisis in Ukraine. So now we see, as we said in the title, the global shockwaves, if you will, from that crisis and what they'll impact will be on Southeast Europe in addition to the dynamics within the region. And evidently, the Wall Street Journal must have had the foresight and knowing our discussion this morning because there's a very provocative article entitled Can Italy Find the Way Back? So again, I think we are so topical and so timely today. Let me briefly introduce our three panelists, and then I will get out of the way and let them share their insights with you. And again, first, we are so delighted to welcome Giuseppe Scognamilio. How did I do? Oh, God bless. God bless. I told him that if there was one thing I was stressed about, it was pronouncing his last name. And then he gave me my permission to call him Giuseppe for the rest of the morning. Giuseppe, thank you for being with us. You are president of a publishing house called Europe Eye, an editor of the geopolitical and international economic magazine East European Crossroads, but he is a career diplomat and has served with distinction at the United Nations in Turkey and Argentina. He has also served as diplomatic counselor for international relations for two ministers of industry and trade. One of those ministers was Anuicoleta. So we certainly know that Giuseppe is well-placed to tell us dynamics within Italy, but also Turkey and in the region. And then we are delighted to turn to my friend Tim Adams, who is president and CEO of the International, the Institute of International Finance, IIF. My favorite title for Tim, though, is CSIS Senior Advisor. We rely on Tim so completely for his insights on the international economic situation. Tim has also previously served as undersecretary of Treasury for international affairs. He has also served as a chief of staff to two Treasury secretaries. So extremely well-placed to tell us what are the dynamics of the international economic dynamics, and hopefully he will help us stare into a crystal ball and tell us what all of this means. I have some very gloomy economic data coming out this morning about the U.S., so I hope you help us understand those dynamics. And last but not least, CSIS is delighted to welcome Anne-Marie Slatter, the president and CEO of New America, and I'll let her explain a little bit of that. Anne-Marie is currently a professor of politics and international affairs at Princeton University, and we know her so well for serving as the first female director of policy planning at the State Department from 2009 to 2011 prior to that. She was the dean of Princeton's Woodrow Wilson School of Public and International Affairs. So I told you this is a lineup. We are going to learn a lot today about this important part of the world, and I'm sure help put some very transformative events in some perspective. So with that, welcome. Thank you all for being with us, and I will turn the floor to Giuseppe. Thank you. Thanks a lot. I'll try to go through the 10, 12 questions that you put on the table, being brief at the same time. You asked first to say a few words about the magazine. I'll start from there since we started only a few months ago to distribute the magazine also in the United States, and this has been for us a meaningful initiative because we think that modestly that the only competitor that we have at the time on the market is foreign policy that is American made, and so we want to be the European alternative to foreign policy. Hopefully we can do with your help if you buy our magazine. For the time being, we are in 21 countries distributing the magazine. From the United States to Brazil, in the Americas, and to Japan, in Asia, and main European countries. So this is on the retail market. It is quite a big effort. And for the time being, we are only in some independent bookstores here in the States, and I think very soon we want to make a big investment and go through big chains like Barnes and Nobles will see. So more and more important in the American market as far as our magazine is concerned. The focus of our initiative in the magazine is the European integration. We want a Europe, a protagonist of the future scenarios. And of course looking at the emerging markets means above all East, but we want to stimulate the international debate focusing on Europe in a period of time in which when you speak about Europe, you associate always the world crisis with Europe. But we try also to see what we can positively have from this process that I think is developing and we will see also through the single issues that we have on the table. Why? Well, having said that as an introduction, maybe I let me say just a few words on the single issues. Starting from Turkey maybe. We have, I mean, I feel entitled to say something about Turkey, not only because I know it since a long time having lived there at the beginning of my diplomatic career, but then I have never left aside this country from my life. Now Unicredit has an important bank in Turkey. It's the third bank of the country with almost 2,000 branches around and 18,000 people in the working employees. So we have quite peculiar and important observation, point of observation in the country. I think that many opinionists have been surprised by the recent elections, local elections in Turkey because of this outstanding victory of Erdogan. I must say not so much we were, because for a couple of good reasons. First, the people are still grateful to Erdogan for what has been for sure the best ten years in their recent history. The success that Erdogan has guaranteed in economic terms and social growth and also for the development of the middle class that this is a very important target that has been achieved. And for the first time in Turkish history I think is one of the main reasons for the vote. And it's not true like someone has written that the vote is only the rural vote because if you see the map of Turkey and you check where the opposition party, the Kemalist traditional party has gained the cities. This is only in Izmir that is, yes, a progressive area of the country, but then is in Turkey that is a total progressive. It's on the contrary the most nationalist regions of the country. So the CHP and this leadership, Kilec Darolu, they express really something old that is not at all able to draw a future of progress for the country. So there is no alternative. This is another very important aspect to Erdogan and to Akepe. The economic successes that are in the figures that everyone knows about Turkey has allowed the development also of a small and medium enterprise in all the Anatolian part of the country that is the biggest part where Akepe has won elections. And this is also a very important social effect, not only economic because the development of a small enterprise means also distribution of richness. It means a lot of things that not necessarily you can achieve easily with fiscal reform or at least it takes you much more time. So we do not have to under-revaluate these effects and if you then look through what is happening in the Turkish society, you realize that there is many witnesses of modernity in what is happening. So paradoxically and differently from what we western, in the western countries we are tended to think, the religious party has guaranteed progress in the country while the Kemalist party represents tradition in these latest years. Let me just mention a couple of examples, some figures that give you substance to what I am saying. From the experience on the ground, for example, in our group, in the banking group, we used to fix in the leadership of specific sectors where we find that this sector is more innovative and developed. For example, credit card that is a very high technology sector, we decided that all over the 17 countries in Europe where we have banks, we decided that Turkey, in Istanbul, we fixed the center of governance of all the credit card sector in the group because in Turkey we found the most innovative capacity. And now a woman, a Turkish woman, is the leader of the old credit card of our group. This is a good example and we have exported in only six months this highly innovative component to all the other countries. For example, this is one of the good reasons for having international groups. We could export the Turkish credit card system in countries like Bosnia, Croatia or Serbia that would have taken two generations for having the same innovative system. And having spoken of a woman, not for case, another perception, wrong perception about the Turkish society is the role of women. If I compare the bank that we have in Turkey with the bank that we have in Italy, in Turkey 60% of our employees are women, in Italy 52%, so less. And when you go to top management, in Turkey we have 21% that are top managers, in Italy 9%, so it falls down, in Italy more than in Turkey the percentage. That gives again another example of how modern the Turkish society is developing. Let me just give you another couple of examples that I think are quite meaningful that I just wrote it down. Apart from the attraction that Turkey now has like in terms of tourism revenues, it is the sixth country in the world for attraction of tourists after Italy, that is the fifth. But I think that some numbers maybe not so well known are significant. Let me mention, for example, this 36 million internet users that makes Turkey among the top 20 countries in the world. And with 46% of penetration, rate of penetration, it ranks it 11th in the world. That may be something not so common, not so well known. And it is, by the way, again a couple of positions more advanced than Italy. Let me just use Italy as an example of a Western society that we tend to consider more modern than Turkey. I already mentioned the credit card penetration and again also in this case in terms of credit cards, it took 54 million credit cards. That means second highest penetration in Europe. These are only cell phones, also this seems to me quite significant. Cell phones, 93.7% of penetration rate, around 70 million users. That makes it the fifth highest rate of growth in the world for use of cell phones. Also social networking seems to me quite significant, ranks seventh in the world among Facebook users, 11th with Twitter, 14th with YouTube and 20th among Pinterest users. I mean, this is just some of the examples that I chose to show that the Akepi revolution has meant a lot for the Turkish society. So it's not, of course we know and we have seen that in the latest 18 months from Getzipark to the corruption scandals and also in terms of freedom of press. Erdogan maybe is not lucid like it was before in keeping a good balance between the most traditional and most extremist part of his supporters. But this after 12 years of good governance is something that may happen and of course is causing some problems also in economic terms, even if not to the structural, I would say, numbers but that is already recovering by the way. And so the bet for the future is how much this leadership is able to go on and to overcome what I consider a normal, I would say, fatigue of being leading the country for so long. Again, what is the alternative? This is important to understand I don't see any for the time being and so this is part of the issue. I would stop here even if I touch only two of the three or four questions that you put but I think we will have a possibility to say something later on. Thank you Giuseppe and we definitely want to circle back to you on Italy. I think number one foreign policy, David Rothkoff, look out. East Magazine is coming, thank you for that. And those numbers are quite stunning on the internet use, the cell phone use and it's an incredible paradox that actually Prime Minister Erdogan has been trying to suppress that very impressive social media network. All right, Mr. Adams, look into our economic crystal ball. How can leaders deliver growth in this very challenging environment and Italy has been struggling with this for the last decade and Turkey may be struggling with it as Syrian crisis, Russia, Ukraine issues, the external factors may really be impacting this growing emerging market. They call it the dismal science for a reason. You know, the way I think about it is, you know, Turkey was a high flyer for the pre-crisis for the decade prior to the crisis, averaging 6% growth, integrating further into Europe, there's a tremendous amount of European FDI into Turkey and it rode the wave as so many emerging markets did and then the crisis hit which began to buff it, the Turkish economy, although they have benefited in the post-crisis period because of the ocean of cheap and abundant capital as investors were searching for yield and Turkey was still riding on its laurels from the previous decade and then of course we had the European crisis, which Italy but also hit Turkey and then we have the political crisis, the internal political crisis of the past year as Ben Bernanke a year ago started talking about tapering and we had a very tough and tumultuous time in the emerging markets last May and June then again this January and then just as you think things may have stabilized a bit just, you know, a 45 minute flight to the north you have problems in Crimea and Ukraine and obviously Russia as well, we can talk a lot about that, there's a lot of Turkish exposure, construction companies and other Turkish exposure to Russia so it's an economy that performed extraordinarily well for many, many years but is struggling and will I think continue to face challenges just because of political uncertainty we got through the municipal elections late last month but we have the presidential elections early up in August and then the parliamentary elections mid-2015 and it will continue to hang over an economy which is incredibly dependent on imported capital and I like to say capital is a coward, it goes where it's treated well, it flees where it's treated badly and Turkey's got a role about $160 billion worth of short-term debt this year so they're very vulnerable to shocks in the system whether it comes from the Federal Reserve or whether it comes from domestic conditions the central bank hiked rates in response to the crisis in January substantially hiked rates which is having a deleterious effect on growth we do see a contraction in credit banks are hunkering down, many of the top banks in Turkey are members of the IAF and certainly become much more cautious about domestic conditions as well as their exposure to Europe and exposure regionally and it's not just the region to the north the region to the south is a pretty tough neighborhood as well and inflation is a problem although I think most analysts believe that inflation breaks mid-year and tends to fall off the end of the year maybe the central bank can begin to ease monetary conditions a bit but it is an economy that will remain dependent and therefore vulnerable to external shocks as well as internal shocks and we just have to get through these milestones of dealing with some of the political uncertainty they also have invested in a way which reminds me of Spain and the periphery including the US in the 1990s and that it's mostly about construction, some of that is infrastructure but if you tour around Istanbul there's a lot of buildings being built there or there now that weren't there 10 years ago again part of this extraordinary growth story where per capita income has exploded in the past decade but it's investment in the non-tradable sector which doesn't help them with respect to a very large current account deficit there's heavily dependent on imported energy so it's another source of vulnerability but it's an economy that continues to focus and spend time and attention and resources on the non-tradable sector and I suspect we could see even more of that if the government feels that the economy is weaker than they'd like and they'll start spending a little bit with respect to some physical stimulus so that's a problem because it's tough to deal with external imbalances if you're not investing in the export capacity of your economy and as we learn in the US with a massive amount of investment in housing or in Spain eventually you have to find ways to earn income to pay off your external debts with respect to Italy, it's a different story it's been a long-term and long-time discussion and you and I and my dear friend Errigo Sedun and others have been discussing the challenges facing the Italian economy existed prior to the crisis and it exists now we have very low productivity, we have a labor force that needs to be updated we have high unemployment, deflationary pressures the European-wide inflation numbers are out this morning a little bit weaker which statistics used but a little bit weaker than expected certainly on the radar screen of the ECB as Mario Draghi continues to threaten to do and undertake extraordinary policies which will benefit Italy and Europe writ large but Italy's problems are really about competitiveness and productivity now I've got a whole host of statistics about where Italy ranks on the World Bank doing business report and it really is about creating a much more productive and competitive environment in changing the industrial structure of Italy which is really quite fascinating to look at in fact Mario Draghi during one of his stints in the official sector looked at the structural rigidities in the Italian economy it was alluded to in this excellent Wall Street Journal piece today in which you have a whole host of very small firms that operate under just certain thresholds where regulators are the tax man shows up and begins to pay attention to you so you have this proliferation of very small family-owned enterprises some of them are world-class, they're the best around in what they do but you cannot get the kind of volume or the efficiencies of size and there also started a capital my colleague Jeff Anderson has just written a seminal piece on SME funding in the peripheral countries and each of the peripheral countries suffer from its own unique maladies but Italy is also suffering and those firms, those small medium-sized enterprises that can get access to capital are paying significant amounts of money for it the cost of capital is very, very high, it's simply not sustainable so it really is about a new government we have a new prime minister, very young, very charismatic a generational change in Italian politics who is very ambitious and has certainly started on the supply side of the economy which I think is right, but they're enormous vested interests which you know well, the labor unions and others that are going to make this a trench warfare for him so I hope, I wish him all the best I hope that he can continue to show success there is a cyclical recovery in Europe there's a cyclical recovery here although it looks a little weak this morning but it really is about creating a more competitive economy larger scale and dealing with all the sclerosis all the regulatory burdens, the tax burdens that exist that really keep that economy from growing at a half a percentage point to three percentage points, or you know, who knows, maybe higher I'll stop there Tim, thank you so much Henry, help us put this in a larger framework a larger perspective, looking at the geopolitical situation and where this very important part of the world fits into that great, thank you so two preliminary remarks one, just when I listened to Yousefie yes, thank you when I was listening to Yousefie I was remembering when I was in the State Department on my first trip to Turkey and I met with the two business associations one is TUSIAD, the traditional, secular you would say, allied with the Kamalist parties big business, and not particularly happy with the AKBARTI and then I met with Moussiad which is exactly the small and medium enterprises and I wrote back to the State Department that this was just like meeting with Republicans, small and medium enterprise in the Midwest, Faith, Family and Flag right, they were religious they were committed to kind of traditional values in terms of family I mean it wasn't it felt very familiar to me regardless of whether it was Islamic or Christian the point was kind of good traditional values and nationalists but in a kind of proud way and so just to underline your point it was very far from the picture of an Islamist party that had taken over it felt more like red state Turks if I... and just a quick comment Tim on your point is I'm listening to you as to how Italy will rescue its economy we are building a small house in Umbria which we've been there for 20 straight years we finally decided okay we're going to build and my husband keeps reading the paper going any day now it's going to be taxes on more known property so let's hope that's not let's hope it remains the fifth most visited tourist destination and doesn't alienate those of us who love it so I'm going to give you three points really as Heather as you said looking at the diplomatic context and trying to take the economics into account but also looking at energy specifically at the end and the first thing I want to say in terms of the fallout from Ukraine is to borrow from my former boss Secretary Clinton's one of her favorite frames is that we shouldn't be looking at either or we should be looking at both and and I'm going to use that to talk about Italy and Turkey in particular but actually all the parts of NATO or of Europe who have close relations with Russia because we are looking at this as either you side with the United States and Poland and the Baltic States and Romania and you support really strong sanctions on Russia or you follow your commercial interest particularly your energy interest and you try to block those sanctions and you make nice with Moscow I think that's the wrong way to look at it I really do think it has to be both and if Russia succeeds in destabilizing much less annexing southeastern Ukraine we are going to see a period of instability in former Eastern Europe that is going to be very bad for everybody it's really going to be bad for Russia it's going to be bad for Europe it's going to be bad for the global economy so everybody has a stake in basically saying stop and frankly creating a combination of real pressure and a face saving diplomatic settlement that allows Putin to climb down because one of the dangers of sanctions is if we push too hard he will have paid the cost and then he might as well get the benefit because the benefit nationally to him in terms of staying in power in Russia is to go ahead and bring in as many former many territories with Russian speakers let me put it that way as possible so you want to make clear look you're going to pay an enormous cost if you keep going and particularly he can keep people on the border he can keep separatists there to me the red line is crossing to some kind of another referendum annexation however he does it because at that point you are dismembering a country and you cannot do that we can't recognize what he already did in Crimea but above all that's been done you cannot recognize it you can fight it over the long term you must stop him where he is so it seems to me everybody Turkey and Italy absolutely combined particularly given their economic situation have a stake in joining a set of sanctions that are very carefully calibrated as I said to say stop now or you are going to feel much much more pain but if you note what we did on Monday we didn't go too far because you really it's got to be enough to deter not so much as to say fine ok I'm going to pay this price now I'm going to reap the benefits so that's on the side of joining the sanctions but the flip side is all of us the US Western Europe we all have we should have a relationship with Russia that is both adversarial in some areas but it's also cooperative in others and right now we need Russia to get a deal with Iran we need Russia ultimately to do whatever if we're ever going to get anything in Syria we can't get it without Russia on a host of other issues ranging from trade to climate change to international criminal activity to terrorism we have to still be able to deal with Russia so the way I look at it is Turkey and Italy are remarkably well-placed to be the both and they are the countries they are countries that have very strong relations with Russia as does Germany we need those countries we need those ties at the same time that they need to be sending a tough message this can be done and then Secretary Clinton used to say you can walk in two gum at the same time we are tough with China on a bunch of things but we also cooperate with China on a bunch of things and the two are not this sort of immediate line-up on one side or the other I think misunderstands the complexity of the relationship and misunderstands where we need to go so that's the first point I would make in terms of individual countries the second going from individual countries to blocks of countries is I was in Brussels at the Brussels forum the German Marshall Fund Brussels forum right after the annexation of Crimea and I wrote about this in the post there was a kind of gee we're back in business right we're in Brussels we're the head of NATO we're talking to former NATO secretaries general you know the US has been going over and beating up on the Europeans every year twice a year your defense spending is way below the 2% you know and this was kind of okay we now are back on familiar turf where NATO has a reason to exist Russia has shown its colors once again I'm all for a tighter transatlantic relationship I always am I'm half Belgian so you know it's kind of come by it naturally but and I do think this is going to push NATO closer together it has to but we go too far we are going to push Russia and China together and we've been we've seen that movie before too and nobody well a few of you in this room many of you are way too young to remember the Sino-Soviet alliance much less the Sino-Soviet split but the point being if you really push too hard on block politics here then you're not leaving Russia anywhere to go other than to to pull closer to China that has all sorts of implications in Japan in East Asian politics and everything that we've been trying to do in East Asia you know under this administration we joined the East Asia summit we joined with Russia and India and to make a sort of broader forum in which we could all work out these security issues so that's the my second point geopolitically is as we are sort of thinking okay this means we need to draw closer to Europe and revitalize NATO again we don't want to push that so far that we end up in a world that looks much more like the Cold War than any of us any of us whether it's Russia, China or Western Europe or Europe and the United States want and the final thing I'll say now looking for you know where how I would be advising both Turkey and Italy and the EU more generally one way to think about Russia the old Reagan trust but verify I would call I would think about trust but do a lot of contingency planning or trust but prepare and one of the things very clearly if you are dependent on Russian energy as many countries are you should be thinking about okay fine I'm not going I don't want to disrupt this relationship right now but I sure want to be developing alternative sources of energy and that means that means again that you know southern stream versus southern corridor pipelines we're again sort of thinking about how to make sure there are pipelines that don't depend or that can't be stopped by Russia but it also should give new life to the possibility and I've written about this of a Mediterranean oil and gas community right the European Union started with the European steel community and everybody says oh yeah but that was Europe but that wasn't Europe that was Europe in the 1950s right again I'm half Belgian we did not love the Germans right the Belgians the French the enmity there 1940s 1950s is just as powerful as anything that you're seeing now in the Middle East you had three wars between 1870 and 1945 between the French and the Germans and yet there was the ability around energy to create a coal and steel community you now have Turkey Greece Cyprus Lebanon if it's stable enough and Israel with an extraordinary ability to invest in oil and gas community the amount of gas that's there the possibility of revitalizing the Mediterranean as a whole as the center of Europe and northern Africa really Europe and Africa is vast now that may seem like a pipe dream but so too did the EU when Paul-Enri Spock and Jean Manet started talking about it step by step so there's an actual huge diplomatic opportunity here and you note that Turkey and Israel have been creeping closer together right I somebody was just telling me that there are 11 flights a day from Tel Aviv to Ankara 11 flights a day that's a lot right and they're tremendous there's lots of business connections there there is a chance here again with Cyprus there's there and there's clearly a tremendous need on the side and I would go all the way to Italy for at least starting to do that diplomatic work and start to do it in the shadow of you know we want to diversify our options we want to trust but prepare so with that sort of Israel I'm sorry Italy and Turkey NATO the possibility of renewed Russian Chinese ties in ways that I think would not be beneficial and then thinking about the Mediterranean I think I'll leave it there Great food for thought I love that that concept of the Mediterranean oil and gas community I love this type of discussion because what I've been trying to do with the Europe program here at CSIS is park us right in the intersection of the politics and the economics and as I've examined the European economic crisis and all the dynamics if you don't park yourself there you really miss that very rich interaction I'll pose a few questions to the panelists and then we will turn to you and we look forward to bringing your thoughts and questions into the conversation I would like to say for the last 45 minutes we have talked about the economic dynamic and we have not mentioned once t-tip the transatlantic trade and invest usually we can't carry a conversation here in Washington on Europe if that word doesn't enter into our conversation so I'm going to just pose a few questions to all three take a swing at them the transatlantic trade and investment partnership enormous amounts of enthusiasm on both sides of the Atlantic we've just finished the fifth round and we're starting to fall back into our routines which we dig in a little bit Europe digs in a little bit and I think we're both feeling a bit frustrated this is big money is at stake this is a very big deal strategically but I fear and I just would love your thoughts on how t-tip can change the dynamic now obviously turkey now has a bilateral conversation with the U.S. on that but how would t-tip if it's successful and if it is not successful how would that change the dynamic and then my second question and we've been lots of polling data has been coming out of course today's Wall Street I feel like I'm a plug in the Wall Street Journal the Wall Street Journal I guess NBC News had a very striking poll about sort of American faith in institutions which is dramatically low my that big I would say the same in Europe and next month we have the European Parliament elections which I think we're going to have my predictions are all wrong extremely low turnout and we're going to see a rise of anti-European parties that are saying I don't want this maybe ill defining what they want so at a moment when we need governments to reform in Italy in Turkey they are meeting public opinion that is very angry and does not trust them so how does this work I love Giuseppe your reflections on how the outcome of the European Parliament elections I think some commentary some analysts believe that Prime Minister Renzi actually in anticipation of some volatility on the European Parliament elections actually had to push forward in the shake up in the party to actually try to get ahead of that volatile political moment I'd welcome your thoughts as well as Tim and Emery the faith in institutions and in leadership there was some very sobering poll numbers for President Obama in foreign policy that if you have some reflections I would be grateful and then my last question I just came back from Estonia several days ago so Emery I have the Baltics are ringing in my ears right now and I can't tell you how sobering and serious the situation is as the Baltic states and Poland look after it the one issue that came creeping back into discussion time and time again and I pose this to all three panelists because I think it is there we're not talking about it is Russian influence in Europe and by influence I mean the commercial influence one colleague gave me a statistic I had not realized that in Pax we see political party influence and go money there's a lot of money and I think with that money brings influence and that is going to be a complicating factor when we talk about the punishment if you will about what has happened in Ukraine and I just welcome reflections I often get asked questions do Americans watch Russia today do they watch RT television that's a moment of propaganda we've seen how powerful President Putin's propaganda is so with those three very easy very simple questions just set me let me turn over to you you can walk away at those I'm helping you guys think your questions so be ready when we come to you okay thank you let me also make a very brief comment on what has been said before in Italy since I think I should be entitled to say something because it must be clear that I think that Renzi understood one thing that was not clear to his predecessors and that is that the real match that we are going to play and hopefully win as a country but he has a leader is not on the economic policy that doesn't move anything in the budget law that is now under discussion 10 billion euro don't change anything in the country if you put on the enterprises or if you put on the people low salaries doesn't move anything what means is the structural institutional reforms that is the key point that you were rightly underlining that means the competitiveness of the country because if he manages and he did understand that to change something and gives the impression to the markets that we are able to facilitate the decision process in this country that has not moved in the latest 40 years then it would change something because the 300 trillion euro of liquidity that are going around the world that don't stop in Italy never ever maybe could stop and this would change something let me also say word on the cost of capital because this is important as well in the economic framework in Italy I don't think that to come out from the crisis we need to focus on the cost of capital I think that the real issue is an issue of industrial policy we have our the Italian enterprises average they are exposed to banking debt for 80% of their funds this is not sustainable any longer in the United States is exactly the opposite the average in Europe continental Europe is 70-30 so we need to rebalance this we need to push the businessmen to put more own funds into the capital of their enterprises otherwise we will not survive further crisis in the future I'm saying this against the interest of the short term of the banks but it's absolutely in the interest of the society we cannot stand anymore with these small enterprises it's too small we cannot go anywhere we are not competitive at all on the global markets with the small enterprises that by the way are all bank debted how can you do that the first credit crunch will destroy completely the industrial environment in Italy so this has to be changed and we are in close contact with the Ministry of Economy they know perfectly that this is a big weakness the problem is that whatever fiscal push you decide it's very difficult to push the single owners to change this situation so they are asking us to make a kind of educational continuous task towards the businessmen in order to let them understand that for more capital we can guarantee for more loans we can guarantee they have to put some of their own funds in their enterprise this is feasible in absolute term because you know that the private richness in Italy is the highest in the world so every single businessman has his own enterprise it has his own real estate enterprise that is we have the productive richness that is the most taxed in Europe but we have the unproductive the least taxed in Europe at least until the EMU tax was introduced so we have to it's very simple I mean we have to switch some taxes from the productive to the unproductive and push the businessmen to put money to sell one real estate asset and to put that money in his company we don't do this we will never solve the problem and if we speak if we go on with the discourse about the cost of the capital in terms of banking we do not focus on the real problem in our country sorry but I had to say that because it's easy but at the same time it's complex so you also mentioned that and I cannot miss to say a word and that since again we have a bank in Ukraine 6,000 people 400 branches of which 20 are in Crimea well I must say we're in Crimea because we were forced to close of course just because of lack of liquidity because we were operating in Grievne but we couldn't transfer liquidity from Kiev the Russian authorities are asking us to operate in rubles but I mean we are in a strange transition time quite complex to manage and we have a bank in Russia that is the first foreign private bank with 2% of the market not much but still in a big country like Russia means something I think that whenever we speak about Ukrainian crisis everyone is asking about Putin that I'm not sure is the center of the problem especially if we speak about the causes of the crisis now maybe yes because now I mean on the ground but when we if we go back to the causes and this is important to go because otherwise we miss the strategy of how to come out from this crisis then I see before Putin I see some responsibilities that I put in first line maybe Natus Rasmussen statements secondly strange Lithuanian Polish leadership of the European Union and third Ukrainian ruling class and then finally Putin I would say I would put in fourth position now just to be short and constructive the sanction policy is of course key but is key if we have in mind what is our strategy because it cannot be the target the sanction policy the sanction policy can be a tool and mean to reach something strange not to read so much about what is our final target I personally think that part of our target is already in the Geneva agreements because the fifth point on the constitutional reforms is key to calm down the situation about the more responsibility to local authorities and then we should start speaking about the neutrality of this country that is not a scandal I mean we have used in the past for countries like Austria maybe we should recover some idea I don't know updated maybe but it's what has been missed until Geneva it has been to sit down around the table and discuss about the issues I understand that there is sometimes also the idea that why the young Ukrainian should condition their future to talks with Mr. Putin but I also was surprised to see Mrs. Sexton or Mr. John Kerry offering coffee to Maidan young people that were mixed with other strange people that were not exactly the future hope of democracy in Maidan Square so I think we really can find a mediation solution sitting around the table the sanction policy I agree with Anne Marie is necessary and is especially if it is well balanced like it has been until now so I feel that just to make an example if the sanction policy as a target Russia bank that is a small bank that has among its clients all the oligarchs that are supporting these riots that is perfectly targeted very differently is if it goes towards the major banks in in Russia like Bank of Nestor Bank that are involving all the people then here we risk to stimulate some nationalist reaction that I don't think is in the common interest so but I think again that this has been perfectly organized until now I also had a meeting a couple of weeks ago with Shuval of the deputy premier in Berlin and himself I mean was very happy approach a little bit less for the European because he said I don't know who to speak to and it depends on what nationality he is that he changed completely the approach so I would leave the TTIP to the American friends because I think that it's the ball is in their field frankly speaking so I would prefer to listen instead of saying so thank you thank you Jim Henry sure I completely agree Italy like Europe large needs to move from a mindset of wealth preservation to wealth creation that is a mindset and you need a set of policies tax policies regulatory policies that represent that change in mindset and you need industrial policy as you noted that allows for economies of scale and doesn't penalize it which is the current situation and I agree that you need equity debt investment but you need capital markets to do that capital markets don't exist but we're all for it and we'd love to see capital markets develop in Europe and generally and Italy specifically on TTIP the challenge is one is that the financial services is not a part of this conversation so you've just written off an entire industry that would love to see TTIP come to fruition the other is that no one believes that you're going to get trade promotion authority which is certainly why would you whether it's the trans-Pacific partnership or it's the transatlantic negotiations if you're we're trading partner or negotiate on the other side why would you put your best deal on the table if you know the Americans are just going to pocket it wait and come back and try to start negotiating once again I wouldn't so I think that's I don't think anything happens until we get past the midterm elections maybe if we get TPA passed in a lame duck session then 2015 can be a more attractive environment to get these deals done but I don't think you can get anything done this year on on the faith in institutions there's been a long-term trend that Americans have lost faith in organized religion anything big big is bad Wall Street is bad professional sports doesn't look so good today anything this large is bad and there is this desire for what is small and what is authentic and if you're 20 years old and you're sitting in your parent's basement because you don't have a job and you can't afford rent we have the highest percentage of young men living at home at any time since the 1950s it's pretty hard to get excited about all those institutions which you think failed you over the previous 20 years and it's a broader movement so how it manifests itself going forward remains to be seen but we see it in politics again we see it in religion we see it in sports and we see it in the way in which young people think about professional careers the number one recruit out of Princeton is what we teach for America it's not Wall Street anymore so I think there is a larger issue technology I think enables social disintermediation and allows people to bypass the big three networks you can watch whatever show you want to watch whenever you want to watch it you don't need someone to decide that for you so I think those are interesting trends on Ukraine I'll defer to the foreign policy experts here about two things one is there are no heroes here and the idea that we want to, you know, glamorize the those who are now in power in Kiev versus the others they're all very shades of gray and the second point is we in the West need to be very careful we make decisions about how we think about other countries making decisions about themselves without thinking longer term and we don't we the West and certainly Europe doesn't want Ukraine but it doesn't want Russia to have Ukraine and so it's stuck in the middle and that's a suspect that's what the Chancellor and the President will be talking about in the next 24 hours is we're not going to see Ukraine or Western Ukraine or whatever is left of it as a part of the EU in our lifetime and we're not going to see it a part of NATO in our lifetime so what is it and what are we prepared to do for it and how long are we prepared certainly the US to sustain financial support and I suspect not very long I mean the US grow very bored and we're easily distracted by other events and other events will come along so let me start with Ukraine and then turn to T-Tip and your other questions I think there's no question that there are many sources of the Ukraine crisis but I wouldn't say they're no heroes really what created this again more than Putin, more than Europe was the desire of the Ukrainian people to have a government that works and they tried it once there was the Orange Revolution and they put in place they thought a new government that would work and it was not much better than the old government and then they returned to the old government but I think what people overlooked here was everyone said Yanukovych canceled the negotiations with Europe and turned to Russia and everybody went into the streets because they wanted Europe everybody went into the streets because they thought Europe was a better bet of a decent government than Russia was which I think is true I don't think they're joining the EU anytime soon but I do think the countries that have joined the EU have less corruption than the countries that haven't and what we're missing is actually tied to what you just said about faith in government you've got a whole group of Ukrainian young people who want a different future meaning we want decent government that works like a lot of Americans are saying we would like decent government that works and we're not getting it at the federal level you are getting it in some cities and a lot of those folks are heroes they're next to some pretty ugly nationalists and they're next to some shady characters I grant that but there is a core of people who are willing to die I don't know many Americans who are willing to stand up and take against bullets and they did they kept going and our job in all this is to not let the geopolitics take over that everybody thinks here we go here's NATO, here's Russia we're back with this familiar script but what's really going on is the demand of a population for a decent government and part of what's got Putin so scared is that if they succeed that is something Russians think they can do too this is like Tunisia and Egypt when the Tunisians did it and the Egyptians who sort of see Tunisia as not nearly as good of football power and a sort of smaller country without any of the great history and civilization that Egypt had if Tunisia could do it so could the Egyptians well Putin is very very worried that if this succeeds in getting a decent government then he's got plenty of opposition just under the surface and he keeps going down so that's that's where I would say that and that's where Giuseppe I would I'd push back I mean I you know Dennis McDonough says in the White House nothing about you without you I think we have gone past the age where the United States and Europe sits down with Russia and decides Ukraine's future no not today that's not okay it was bad enough it was going to be Russia and the US at least we got Europe in there but it's got to have Ukraine at the table to say will be neutral great you know they could I actually think if you put that to Ukraine as a whole you're not getting yes we're dying to join NATO but neither can we say as you know Brzezinski's talking throwing around terms like Finlandization that's 20th century politics that's gone you can't do that today successfully in my view on t-tip so this goes back to my point about Russia and China t-tip and TTP two great trade initiatives who's left out of both Russia and China and China thinks that TTP I support both but they think it's a pretty clear effort to contain them or to shut them out we think I think it's more likely that we want to set the standards with the current negotiating partners and then we probably will open it up to China in the same way as with the WTO but once again if you're pushing you know we want a transatlantic trade partnership without Russia and we want a trans-pacific trade partnership without China think through the next steps last point on trust in government yet this is everywhere and this is I think this is a much larger revolution I often say that the divide between the digital natives and the non-natives e.g. my generation and older is as great as the divide between the hippies in the 1960s and the 50s establishment you just can't see it as visibly they're not marching around in long hair and flower power and jeans but they live in a different world and they live in a world in which they're accustomed to being able to make things happen as you point out the there's no the disintermediation another way to see that is if my son wants to learn something and finds online and finds courses or information or other people who will do it and he gets what he wants and so they have no patience with institutions that can't deliver and there I think you're actually seeing that globally and it's a source of a whole other conversation so and the last thing I'll just say Heather because you raised it and it's very important go to the city of London and start talking about Russian influence Russia owns enormous chunks of the city of London and enormous chunks of the French Riviera and enormous chunks of nice places to live and be all over Europe and yeah I mean that that is definitely a factor here this is part of what I was saying that actually you can't go back to the Cold War you actually want a Russia that is integrated with Europe in all sorts of ways preferably less criminally than a lot of this money where it's coming from but the US cannot jerk us back to a world in which the Soviet Union was politically separate but it was also economically separate now we've got something that's economically connected more like China and politically separate I have to say and thank you Bob really great discussion and you really see corruption as this unifying thread starting with Gezi Park in some way sort of the corruption of forcing something that obviously what those ties were was China undergoing right now it was a profound attempt to retain power and address corruption Mr. Putin's how he's organized his economy is so much based on corruption and of course Ukraine is sort of the epicenter of that and I think exactly the Ukrainian people wasn't an east-west question it was a question of corruption and that we do not focus on enough and quite frankly the corruption in our own society that that has come into so thank you boy I've got some good nuggets coming out of this conversation I've got some writing to do now let's welcome you into the conversation great I see a hand I see two hands I see three hands we're going to bundle four hands we're going to keep these questions short my friends but I want to bundle all of them together and then I'll let you guys have the final say so I saw sir I saw you over there please wait for a microphone identify yourself your name and your affiliation thank you yes Clem Miller of Wilmington Trust Investment Advisors last year well before the latest of developments in the Ukraine the European Union Troika basically attacked Russian money in Cyprus they there was a huge write-off of deposits of Russian flight capital I'm wondering if you think that that might be indicative of the degree to which the European Union might actually go in terms of attacking a Russian crony capitalist money going forward and I'll just put a parenthesis on that that as I think probably Tim knows you've got a lot of and you probably know as well you've got come a lot of Russian companies especially bigger Russian companies that have American depository receipts and global depository receipts in listed in the in New York listed in London listed in Luxembourg custodied not in Russia but custodied in the west and it seems to me that that could be a way of selectively targeting the crony capitalist companies to table translate for the non experts in the room there was one question there yes and then the woman in the back after that thank you thank you I I'm a visiting scholar at CIS I'm from Shanghai institutes for international studies my question is about relationship between US and China and Russia I think Mary has mentioned something on this regard my understanding is US is trying to enforce enhance its security relationship with its allies both in the Europe and Asia relationship with Russia and China and the at the economical front you mentioned the TPP and the DTIP both exclude Russia and China of course China's attitude towards TPP is changing it's getting more active my question is if the US and want to integrate the constructive role of Russia and China in dealing with global issues what kind of strategies we should be thinking about the new emerging powers thank you my name is Lydia I'm an independent consultant on EU policies I have a question for Miss Ann Marie regarding your statement you said that there should not be too much pressure over NATO my question is what do you mean by that because there is an upcoming summit this autumn in Wales and it should be like enlargement summit but according to you I would like to hear your opinion do you think it should be an enlargement summit or should be just like an ordinary summit as it was six years and back thank you so much and right there and we'll have the final one right here thank you, I'm Helena Georgievich voice of America's Serbian service we've talked about Italy and Turkey specifically but I wanted to ask you about Balkans the position of the Balkans is a bit between rock and hard place Balkans countries want to join European Union Montenegro is fighting for NATO membership on the other hand ties with Russia are extremely strong traditionally and today commercially what do you see that Balkans will have to choose sides eventually or what would be the good strategy and balance for Balkan countries to deal in terms of Ukrainian crisis thank you we'll take two more questions right up here and right back there thank you I am Ricardo Alcaro from Brookings I have a question also for Mrs. Lothar concerning the punch he made about the fact that sort of win-win or both end solution, arrangement is by far the most realistic prospect for managing if not solving the Ukrainian crisis, I agree with that however how do you I mean I do see a sort of contradiction between this proposition and what you said about the fact that discussing neutralization of Ukraine at the level of Europe, US Russia is 20th century policy which we cannot indulge in any longer I must say it is perhaps 20th century policy because in the 20th century for a large part of it the US and Europe were keenly aware that there were limits that could do what I see as a newcomer here to Washington is that the Washington foreign policy establishment including perhaps the State Department but certainly the think tank community and the media is stuck in a 1990 mentality in which basically anything that the US sets itself to doing and so it's a sort of victory mentality which has a lot of issues with even imagining a situation with which the US has to align with, has to accept without actually being without actually wanting it but the reality is that Russia has much more interest in Ukraine than the West has and this has been led by this crisis to all governments. So the problem we had in Ukraine, one of the many problems is that we did not have any contingency planning the kind you actually said we would basically need many more I mean much more of in 2008 Georgia's president was basically approached to adopt very, very aggressive stances or very perhaps not the right word but very daring, a very daring approach which eventually backfired because he told the United States would be at his height and the United States wasn't when the tank came for using arms or standing up in the defense of Georgia. We had something very similar in Ukraine. So I'd say that the United States and Europe recognized themselves in terms of what they can do and what they want the chief to do in Ukraine talking about neutralization of Ukraine is just a sensible proposition. Thank you. One last question. Hi. Luca Francetti from the Italian Embassy. Very shortly while I agree with Anne-Marie on her reading how to deal with Russia, I mean Russia matters but this brings to a second what is my question to tip. It's true that Russia matters but Russia should not be incumbent on our decisions and I think that while you say that one of the weaknesses of the TIP is that Russia is not involved there I slightly disagree in the sense that maybe Tim can correct me if I'm not wrong, roughly two-thirds of the world trade is a two-block. So the fact that these two blocks decide to go for an agreement that is in projection demonstrates that it will trigger our internal GDP and our trade is not per se anti-Russia and we may be wrong not to do it because Russia is outside and Russia is outside because we are homogeneous economies and this is why the TIP I've used as more chances to succeed than the TPP where you are talking with these homogeneous blocks so I think that it is more than normal that the US and the EU look for a transatlantic partnership that would benefit both economies and at the end of the story maybe also set standards and maybe this is what worries countries like Russia or China who despite one of them being in the WTO is really fully met so I don't see the absence of Russia in the TTIP as a weakness, on the contrary we think it's a natural interest that both shores of the Atlantic have and it can even have a positive influence in the negotiations in the future of the WTO, thank you You had some really good questions Thuron at you and your challenges you have two minutes each to respond to them So Joseph I'm going to start with you to work quickly down I think most of the questions were for Anne-Marie I will focus on one question that you did and it was without answer at the end of the day that is about European elections I think it is important to evaluate properly a new fact that has not been yet underlined that is for the first time in history we have candidates of the two major political blocs that are going to be chosen as president of the commission this means for the first time we will have a form of election even if not direct of the president of Europe and this will have I think an incredible positive effect on the upgrade of the European institutions that we would need and there is a never ending debate on what would be the right way to modify the treaties in order to and this is possible to have because with the present crisis and the idea of passing through approval of the 28th parliament is impossible but this is cleaning all the picture with a political decision that is forcing the institutions to have a strong finally person leading you I think that this would affect also the relationship of strength between the temporary presidency and the president of the council so the three people that today are the leaders of Europe risks to gathering only one only because of this pressure and by the way this is not shared by all the opinion is because there is some cynical typical approach that is going to say that then at the end they will negotiate lower position for one of them as a commissioner and this will be left aside because Mrs. Merkel doesn't agree etc. but on the contrary I do not agree that this will be feasible once we will have an action and the strong support one of these parties I think that this is the real new fact more than the populist and nationalist parties that by the way they are not united so I don't think that despite the importance of the political meaning of their growth they will not be into a real political power inside the European party thank you that was a great reflection Tim sure two minutes Russian sanctions are coming I suspect we will see it on increasing number of financial institutions maybe writ large and then from there they go after critical industries there will be question of whether they go after oil and gas but certainly you can go after aircraft spare parts for example Boeing and Airbus would be a real way to cripple the Russians but I suspect banks are the next and then the issue will be how wide acceptance the sanctions will be I suspect the UK will join in which will certainly hurt the Russians what happens in continental Europe remains to be seen on global trade it doesn't bother me the Russians aren't there we have to think about this as a multiple tier chess game the global trade negotiations which unfortunately Doha round is dead and will remain dead so what you go with second best solutions which are regional and you piece them together the best you can and on top of that you also do bilateral so I hope I'm wrong I hope that congressional sentiment changes and we'll be able to get TPA done quickly and then we can go to TPP and TTIP but I don't think I'm wrong and Ukraine I didn't mean to say the Ukraine people weren't heroes I'm just saying the people who are actually occupying seats and levers of power are not heroes and what really pains me is that we in the West could repeat this cycle where we encourage them to take up arms and to liberate themselves and we send a few billion dollars and we send over a couple congressional bills and we have some panels and then we go home and we go off to the next crisis the next issue it will take a the best set of circumstances it will take a generation to transform that economy into a true western style functioning non-failed state and the question is are we in the West are we willing to stay there and do what it takes to help them be what they want to be I'm skeptical thank you let me be clear I support both TTP TTP and in their current form but I would say from 1990 to the present the politics of inclusion have worked better than the politics of division the EU has been the single greatest force for peace in the world without the EU and joining the EU you would have Ukraine all over Europe you would have Hungary Bulgaria the Czech Republic Slovakia the Balkans without the ability to join the EU and NATO those countries would have been destabilized and we would be in a far worse position I'd say more broadly without the WTO and the ability of China to join the WTO and Russia to join the WTO you didn't have all the incentives you want to start getting to those modern economies but the problem was we were only willing to include up to a certain point in east-west relations so I was part of the debate about the expansion of NATO and I supported the expansion of NATO but I remember hearing Brzezinski say we should expand NATO and get as close to the Russian border as we can and when Russia flips we'll be in a much better position not surprisingly the Russians don't particularly love that view I always point out if the Warsaw Pact had expanded to Mexico we'd have gone bananas you have to what I'm trying to suggest is we need to find ways and this goes to your enlargement summit question I think the future of NATO probably has to be a defense community and some kind of political community and maybe some kind of a broader community that's committed to good governance there have got to be some parts that Russia can join otherwise you just can't you've got a classic security dilemma of course Russia is going to push back with the idea that it's going to recreate parts of the Soviet Union so should we so what I'm suggesting I don't think we are going to enlarge to take Georgia or Ukraine I don't think there's an appetite in NATO I don't think there was an appetite in NATO five years ago and there's certainly not now but then you have to create other things that both the west and Russia can be part of that give the countries be they in the Balkans, be they in the Russia's near abroad Russia once, right the Ukraine that was my point about both end Ukraine can be part of the west and part of the east and most importantly it's got to forge its own path just one more point and do I have the perfect solution no but I'm pushing us to go in that direction rather than returning to a world in which I don't think we can get there economically we are now interdependent and politically we're in a very different place last thing I'll just say on your point it's interesting to hear you say that we're back in the 1990s and the US thinks we can do anything when most Americans are attacking the president for basically saying you know we can't do what we used to do I mean he just gave this powerful argument about how no we're no longer in a situation where we can dictate results and I'm doing the best I can one crisis at a time yeah he's being my final point would be I actually think the United States cannot dictate it never could dictate as well as we think it could I mean I you know I remember 1982 when our popularity in Germany was 4% because we were trying to put in intermediate nuclear missiles the idea that we could dictate to Europe is a figment of our imaginations I think to me the issue is really figuring out how to lead in a different way and I will end with the point that I think we can simultaneously engage the Ukrainian people or the Russian people or the Chinese people in one way and yes we're out there with them we're communicating with them we're working with them in all sorts of ways and engage their governments often in a different way and I see the foreign policy of this future is that the nation that figures out how to do that best so you are simultaneously doing your diplomacy with respect to people groups of people and with governments are the countries that are going to be best positioned for this constant disruptive flow of popular politics and traditional geopolitics there's just some big ideas and we need to think New America is about big ideas absolutely thank you all so much this was a really terrific discussion I think we need to do more of it thank you all three of you for wonderful insights and audience again thank you for trekking through bad weather please join me