 Okay, a huge amount of ground covered there, so I'm sure there could be all sorts of questions that people might have John I see you But in the Irish case the problem was that government the Irish banks had got out of Irish government debt, but into Irish property And that was where the doom loop was, which was a much riskier asset than Irish banks had been invested in government debt There would have been no crisis And what you're doing for countries you're increasing the risk of holding government debt is safer than property So banks in that portfolio would be incentivized Whereas what I think is needed is geographical diversity and the federal bank of Kansas region in 85 and banking collapse All the banks collapsed simultaneously, and their answer was increased securityization and US banking and banking union So I think that you need to go You need to go further on that Fiscal rules in 2016 when the both commission and the iron net came to Ireland We said to them Ireland is running a crazy fiscal policy to raise in the economy You should issue a warning and they both said there are going to fiscal rules We can't and we see that today that the minister and the fiscal advisory council said the government could spend On the rules and on the expenditure rule a large amount of money in the next year's budget But it will be most unwise and the opposition which has controls And says actually we want them to spend the money so that the fiscal rule before no fiscal rules There will be a development would have more protection and would there be less opposition to them taking a document fiscal policy Since the fiscal policy and fiscal rules Will allow them to spend an awful lot of money more money than both the government fiscal council think is wise So fiscal rules on a problem not the solution because they don't properly deal with the counter-secretary fiscal policy And by third point just is on the governance of the ESM from the Irish experience and The problem there was that unlike the IMF the ESM could not make decisions It had to go back so that they each time Authorizing funding for Ireland went back to the Bundestag And it is very difficult for governments to introduce different measures when you not only need your parliament to present them But the Bundestag has to as well and that The ESM having devolved responsibility up to a limit where they don't have to go back to national governments is I think important for the future Thank you very much. So on the do loop agree. It's not just government debt It's also property could be SMEs of course also So what is my answer to that? My answer to that is that at least we are diversifying part of the asset side of the of the balance sheets if you if you Refuse if you bind banks in their ability to To land SMEs then Maybe it's not no longer useful to advance This is a core the core business is to lend to SMEs Okay, if you you can drop everything else, they still need banks to lend to sms because they cannot go on the financial market Now for property, I would say that the answer is my confidential policy You have my confidential policy if you see above all in the country and Actually, I I look back at the at the council decisions concerning islands in 2000 where the council on the recommendation of the commission made recommendation to island for more fiscal retrenchments and the Irish government was against that it was complying with the fiscal rules so there was no reason for that And probably today the council would have advised more macro potential policies rather than fiscal adjustments So I think for for property. It's macro potential policy for SMEs You need to to accept the fact that you have a leak between the banks and And so you could have a scenario where the government is bankrupt and because it is bankrupt is going to To impose a 100% corporate income tax On the on the on the companies and then you have a collapse of the of the corporate sector and then you have a banking crisis I don't think this scenario is really really serious actually in London and I was Talked about this scenario And another response is that made tomorrow They expect foreign banks to be more active in island and Irish banks to be more active in other countries So there is more diversification And since there will be no reinforcing of the liquidity nor of the capital, even if there is a loss in islands and The bank can recover from another country Of fiscal rule, I think I agree with you that today The SGP can be counterproductive in a sense that it's very difficult to argue with the SGP against spending Spending the proceed from from growth And we have the same in France actually So this is why we propose a spending move the spending is much tougher And they haven't stood that they are very much against this today because there is growth Tomorrow if in a crisis, I would be very happy with that But in the growth they don't like it About ESM governance, I agree with you also What we propose is a governance that would be very much alike the IMF With consistencies and with much autonomy In terms of decisions, but this is not what we have today And unfortunately, some countries have a veto A parliamentary veto So the only solution to that would be to move the ESM This is the proposal by the Commission to have it as a European institution So it would be financed by the EU budget and with borrowing Which would be a European borrowing With no National guarantees Be directly European, but yeah quite far from that I think Good, Maureen And the treatment then of exceptional years So if there is a deficit of 10% of one year or I suppose a quality of 10% of one year or growth of 26% in another year How how is that smoothed because as was the experience here in Ireland Going back to 2015 by industry correctly is that we actually excluded In our trend growth calculation The one year of very exceptional growth So just just to understand a little bit more about that The second is with regards to the As per your counter proposal to a rainy day on which is as I understand it Transfer into the What we would have here is a social insurance fund So is it an existing social insurance fund across the world? Insurance fund so the social security contribution You talk there about the re-intuence I'm trying to remember what the phrase you used about it Basically is it to a new fund or into an existing Part of what we call the social security contributions going on I suppose this is the last from a broader question Certainly I think there's barriers in terms of separating on the creator of fiscal rules and the adjudicator of the rules But do not end up in a situation where you know, there's far less political leeway To to deal with countries in particular situations If the adjudicator of the rules is going to very strictly apply those rules As with the bigger countries indeed France would be a beneficiary of the current system Because there had to be a strict application of the Out of the Student Group Act on France Precise of the country has been managed by the European Commission But if it was to be adjudicated by some of the years or by another body Does France stand to be a Dead and Farming or Top Okay, so So the revision of potential growth is a big issue And I love it that's been massive A massive issue and so There needs to be a discussion on the frequency of the revision If you change the today the commission changes the the forecast for potential growth twice a year So the notion of potential growth is a little diluted So you need to accept the fact that You you set a potential growth for a number of years And then you reconsider smoothly the potential growth and you adjust maybe you have accumulated some debt in between And you so you readjust the spending path. This is the task of the council And so there's something I didn't say is that today we are in a corner we rely on rules And physical discipline could rely on Market it could rely on institutions And there is a literature showing that actually rules and institutions are complements So you have to have good rules The problem we we try to to make the rules more intelligent and then they became very complex and very difficult to understand Whereas if you have a rule whose interpretation is given to an independent body Then you complement the rule, which is not so well defined by a strong institution And then it becomes intelligent and credible. So this is the idea So our idea is to move from the corner, which is to rely only on the rules To something more balanced between rules Institutions and a little bit of market discipline And so this brings me to to the market discipline So we have the junior bonds. So suppose you are in a boom So you have plenty of of tax proceeds And then you can be obliged to issue junior bonds because you don't follow the spending rule So it's very strange because uh, perhaps you have a surplus even a fiscal surplus And still you have to issue junior bonds because you don't follow the spending This point isn't as clear to me if you're if you're running if you're taking in more money than you're spending Why would you be issuing bonds to take in even more money? Because your Your surplus is fake. It's just because you have a boom And the day it comes it comes down. Okay, then you will immediately have a deficit So you should not spend this money. You should save. Okay, you save it. But Why issue bonds which will give you more cash flow? Because if you don't save this money, it means that you borrow too much So the so so the borrowing so yes, I'm talking about the primary surplus Uh, so the question you maybe you ask is if you have a surplus oh an overall Okay, so but you still have redemptions. Okay, you still have redemptions. So you would issue junior bonds To uh to repay uh older bonds. So you still have a possibility. So there'll be an entirely new class of sovereign. Yes, okay Uh, so this is the way we introduce the the discipline in the after which is key absolutely key. Okay And uh about france that didn't and germany uh and germany no france. Sorry, uh, germany was before That didn't uh comply with the pact I think when we look back at the years 2012-13, there was a collective uh fiscal mistake That the fiscal policy was too too tight And it was in a sense. It was good that some big countries Didn't comply with the pact because otherwise the prices would have been even worse And this is not satisfactory. This is not satisfactory that you rely on big countries not complying with the pact Then you create a lot of uh of resentment from the small countries that do comply and uh But still from a collective point of view, uh, you need to have this kind of cyclical policy This is also a reason for having a different role And about the rainy day fund. So I was not specific enough So it could be a new fund. It could be thought as uh, uh subsidiary from the esm But not the esm itself because the esm needs to be to remain focused on crisis management It should start to do fiscal policy with the esm and it dilute the objective So it could be a subsidiary of of of the esm and the funding would not be through social security Over you could think at the later stage of unemployment federal fund like in the us Where it's uh, it's a social it's from each company directly to the fund What we propose is not that it's uh, you know It's a contribution every year on average of 0.1 percent of gtp. Maybe less for more stable countries Because otherwise they they won't agree So italy, germany, france are countries with very stable unemployment Although it can be high, but it's stable Whereas spain is typical country with a lot of volatility in the unemployment rate So uh, so the idea is to that most stable countries would pay a little less and uh more unstable countries would pay more and um, and then the In case of a big shock the country would receive money a transfer Which would be one of it's not a permanent So if if the unemployment rate jumps and stay at a high level It's just that the year of increase or the two years maybe that there will be and the There would be a conditionality, which is just the opposite as usual for the conditionality The conditionality would be please spend the body the money Spend it on high multiplier items like unemployment in an employment transfers benefits and investments It's a little unusual because you of course obviously you don't want to To make a transfer to a country that would be used to repay the debt Can I ask a supplementary? You mentioned a figure of 0.1 percent to GDP Yes In terms of dealing with an asymmetric shock So one country does have that increase in employment or decrease in employment of 2 percent either way That wouldn't seem to me to be enough As a macro stimulus 0.1 percent GDP is nothing If transfer would have to be bigger 0.1 percent of GDP is the contribution Then in case of a shock you get 0.25 percent of GDP per extra point of unemployment So we've made some simulation. It would have been sizable actually for private countries macro economy The comparison is with the US in the US you have an unemployment re-insurance system That delivered up to 0.5 percent of GDP to on average to the states in 2009 Which is sizable actually it's smaller compared to the Irish deficit maybe at the top of the crisis, but it's it's still in terms of of social Social deficits it can be sizable and we've made some Some simulations that's such a small contribution Well, it's it's not so small in fact 0.1 percent But it's not like you hear about two three percent of GDP or even seven percent of GDP the report in the 70s So it's very small the idea is that if you concentrate on stabilization and more than that you concentrate on big shocks Then a very small budget is sufficient and it would have covered All the crisis since 1990 so we started in 1999 And it would not have been depleted applying this rule 1999 1999 okay 2017 So it would have first accumulated funds and then spend the funds, but it would never have been depleted If at some point there is a symmetric big shock a huge crisis But I think politically there will be time to discuss again about a borrowing capacity So I'm not so worried about that. I'm not so worried Yeah, you mean if there was the entire eurozone had exactly 2008 National governments and a borough for whatever reason then I think the political So I think it's much more than nothing. So this this fund Even that that includes the 2008 2009 2012 up to 2012. Yeah, it still wouldn't have run out of no No, okay, and this is something that is very difficult to expand to a politician because politicians Especially french politicians probably You you talk about the budget they see That the eyes start to be too bright and they see money they can spend okay And you spend oh, no, no, no, you're not going to spend this money It's just you accumulate and in case you have a big shock The big shock will be for the next government. So by definition By definition they dislike it So the only possibility is easier to have it as a technical just a fund run by techno hats okay, or to Have it as an appendix to something else That is more That they will like more more like Budget or investment a budget for migrants whatever security So you have a budget But we didn't go in this direction because then you have to decide whether it's new or the new area And it's very difficult to argue that security is your area issue Yeah, it's basically you or a shagging issue but not you or it's not nothing to do with monetary union So we didn't go in this direction But probably for political reasons if we want to go to the since politicians hardly understand what is what stabilization is about You need to incorporate this in a package with something else to make them agree to go in this direction But for this to work. It's very important not to have Parliament a new area parliament that every year needs to decide on the budget because otherwise It will be depleted immediately The issue is how do you ensure the solidarity keeps retained into into the future among countries in terms of Staying with this in terms of a major crisis that we have Second point is Do you think that our concepts for potential GDP growth are adequately understood and accepted and whatever from actually managing your new Proposal which is to look at the expenditure which means a lot of sense But it does depend that research does depend on an acceptance and understanding that the concepts of potential GDP growth are adequately refined and and done in the transparent way that everybody accepts them And you don't get very little undercurrents in countries where they say well, that's really not what you think this is going on and the final point is you're quite In what we're quite dependent on the independence and the resilience of the local fiscal houses And just wondering Was that discussed as to how Just want to make sure that these these bodies Stay unmarried to to to have the power there because we see countries like Sweden where they work on a very powerful And they're crossing up in Europe. They actually had a mention of this week of their own And Very good points. So local fiscal councils are very unequal across countries And I think the application of It was a creation of the And the way it was applied in different countries Very different in France the fiscal council has very little Possibility to to do some home Analysis, so they are reliant on external On the analysis by the finance minister Than you Not really independent So there would be a need for harmonization Of these and to give them more power, which is not so easy because it's The the governments tend to dislike these countries, of course Which they feel take some power out of them and And also to have some So of course the potential growth methods would need to be discussed At the your area level and there is a European fiscal council that could harmonize the methodology and you write That it needs to be more transparent today. There is a bottom up top down or brooch and You mix everything and you get potential growth probably It's better to have something more transparent like Moving average or whatever And less perhaps less Adequate from an economic point of view, but that you can understand So I think we want to be too much intelligent And at the end we lose the transparency and we lose the connection with the policymakers So I think being a little less intelligent would help Connect better Have more ownership more national ownership How to maintain solidarity? Over a long period. This is your question. So I think I think institutions have a lot of resilience once you've created the ESM Probably the ESM will stay there. It's it's very rare that you destroy an institution So you create a fiscal fiscal capacity It's something even something that is really In design. I take the I take the case of Global adjustment fund the global globalization adjustment fund At the EU level which is notoriously inefficient Okay, everybody knows that it's a shared opinion and still is there and there is no serious Attempt to reform it. So I think institutions are very resilient And so if you create a fiscal capacity it will stay there. So there is a possibility at some point. It's empty And you or you freeze it It is and actually Actually, if you have no crisis you have a long period At some point you can freeze it And ask the countries instead of putting 0.1 percent of GDP in the fund Use this money to repay the debt to reduce their it would be Higher return to do that. You don't need so much money in the fund So you're not going to accumulate during 20 years without without a crisis Suppose there is no crisis during 20 years at some point you stop feeding the the fiscal capacity Because there are problems with this capacity. Where are you going to invest the money? If you invest the money in the new area, then you have a problem because you invest where there will be a crisis It's not an insurance If you invest it outside in non liquid Assets There's a risk that you don't have the money when you need it So it's a little tricky and actually there was a lot of discussion between the general side and the french side in our group With the french arguing that it's better to not to have a fund to have commitments In case so to have an institution that will borrow in case of a crisis So when there is no crisis it's better to use the money to reduce the debt And then there will be a crisis in one country that you borrow from the market and you and you help the country But I think at this stage there is so less so There is really a shortage of trust So any form of common borrowing is rejected from the germans I think at this stage we should refrain from proposing any kind of common borrowing Show that we are serious about the rest and then Maybe in 10 years things will be different Your comment about institutions I worked for a UN agency once and occasionally jokingly asked why do you exist? I didn't find it funny Last question Thank you very much Very interesting but because I can be fairly honest about certain things And you know it's a lot of concepts I mean financial markets are Like you're getting back to union sort of in stages But in the absence, I mean it's it's context If metron coal talked about economic amount of union rights are getting a month for union But there is no unified fiscal and economic policy made in capacity So the financial base is never going to be perfect It can't be perfectly with an improved With an improved banking union The second point I want to ask you what it really about was You know if final germans proposed, I mean they're very interesting But what about easily in spain now? You know big countries inside you I mean Ireland is now what I can see then Maybe some people are tempted to position Ireland in relations in the Nordic countries To debt them something to Germany Which has its own You know what I'm really asking you is When you take the German position and I know you're talking about Splishing deposit insurance, I mean a national capacity And sort of a euro area capacity But it's not at all feasible Do the Germans and the Northern European countries generally That they believe they're going to risk it? I mean There's a limit to the risk sharing that Speaking broadly in Northern Europe wants to do And if we're just interested to see how I mean I think that's somewhat of saying it's very important on the margins It's very important to see to improve But how effective that can be I mean if a 1% you're like federal budget Which is going to be a three-year route about how to make up the British deficit In other words the centralization of fiscal policy in terms of access to resources Is it's not going to be there? And therefore you have to I suggest fail around very much on the margins Okay, so very good questions. So is that all feasible? I think in fact the Germans are in a corner Why? Because if you're serious about monetary dominance, you refuse fiscal dominance You refuse monetary policy being dictated The balance sheet of the ECB being dictated by fiscal profiliacy Then you need it for the reason I said Why? Because if you don't have EDIS European deposit insurance, sorry You need European deposit insurance Why? Because it's the last belt Because probably it will never be used as I said because we have a lot of buffers now So it's the last belt And why is it useful? Because it guarantees that In case of a crisis in one country there will be no deposit flight So it really reduces the burden on the ECB And many of our proposals in fact reduce the burden of the ECB and However, I think there is an end set here in the in the report Which you mentioned with a convention with the UK. The UK is a standalone country with its own currency The Bank of England is not supposed to finance the government Okay However, everybody knows that if fiscal policy becomes non-sustainable in the UK At the very end, of course, the Bank of England will bail out The bank, the government So there is not such a thing in the EU area However, and I think it's very important for the debate on the safe assets The safe assets, so the idea of a European bond Which can be constructed based on existing bonds with SB's proposals and things like that or which can be issued by an institution In all cases Once there is a bond, a government bond that is truly EU area Then there is no problem for the ECB In the case of a big big crisis in buying this bond Okay, so in this sense, you normalize the EU area with respect to standalone countries You make it more alike the UK or the US You don't change the treaty because this is not going to be written at any time the treaty But we know that at the very very end and because institutions are there to stay the ECB will have a choice either on Between buying the bonds, the EU area bonds, or maybe there will be a bust of the EU area So the ECB will be done I think the ECB will cover the risk What is necessary is to limit To relive the ECB from From the national risk So that it can play its role, its pure liquidity role Liquidity to the banks, liquidity to the government, provided there is no risk And this is the spirit of our proposals It's kind of normalization with countries that do work Good, so thank you again for your talk And your question, your answers I thank you all for coming and I'm sure we'll See many of you back again soon