CSPAN - Debate on the Global Economy

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April 26, 2025 01:15-02:20 - CSPAN

01:04:58

Debate on the Global Economy

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kristalina georgieva

imf 09:59

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sara eisen

cnbc 00:50

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Speaker	Time	Text
unidentified		This is your government at work.
		This is C-SPAN, giving you your democracy unfiltered.
		International Monetary Fund Managing Director Cristalina Yorgheva joined government officials from Germany, the United Kingdom, and Argentina in a debate on the global economy hosted at the IMF meeting.
		They discussed the impact of the Trump tariffs, the pros and cons of regulations, and the possibility of a global recession.
		Ladies and gentlemen,
		please welcome on stage your moderator and distinguished panelists.
		Hello, everybody.
		Welcome.
		My name is Sarah Eisen.
		I'm from CNBC, and it is my honor to be back here at the IMF, the whole house.
		Very nice, which I think speaks to the distinguished panelists that we have here.
		You know, this is the global debate.
		This is the most important.
		And I was looking back at last year's global debate, and the moderator said the rule on that one was anyone who said the word transformative, transformative, would be fined a dollar.
		Today, I think it's uncertainty or uncertainty, right?
		Which shows you how much the world has changed.
		But I do just want to introduce our wonderful panelists, Chancellor of the Exchequer from the UK.
		We have Rachel Reeves here.
		Thank you very much.
		From Germany, we have the Minister of Finance, Minister Kukis.
		Thank you.
		We have the Managing Director, of course, the hostess with the mostest of the IMF, Kristalina Gorgeva.
		And we also have the Minister from Argentina, Schwarzenegger.
		We also have Kristen from MIT, who is an amazing professor and is going to speak about the entire world.
		So we have this great group, and I'm very excited to just jump into it.
sara eisen ▲ ● ▼		You know, a few weeks ago, even when the IMF called me about this panel, the discussion was: we're going to talk about boosting productivity and helping the private sector and moving from a government-led economy in terms of investment to the private.
unidentified		And we'll get to all of that.
		But we have more urgent matters to tackle, like trade and uncertainty.
		So, Managing Director, you are hosting 190 countries here.
		What's the level of uncertainty?
		What are you hearing?
kristalina georgieva ▲ ● ▼		Well, 191.
unidentified		Oh, excuse me.
kristalina georgieva ▲ ● ▼		People are anxious because what has happened over the last weeks derailed what we expected to be somewhat lookluster, but still not so bad growth.
		So, instead of having 3.3% this year, now we project 2.8%, half a percentage point, gone.
		They're anxious now that you put a ban on uncertainty.
		I'm going to say they're anxious because there is a very big cloud hanging over our heads, and it is difficult to see through.
		They're anxious because they are also unsure what is going to happen with inflation.
		We are projecting this inflation to continue somewhat more slowly, but we are also saying it is going to be very different in different countries.
		So no more central banks can sit next to each other in BIS and look at each other's snots and say, oh, you're doing this, I'm going to do the same.
		They're also actually more upbeat on one thing.
		Now that the risk of losing rule-based global trading system has become more real, they realise they really want it.
		They value it, they want to protect it.
unidentified		That's good for the IMF, right?
kristalina georgieva ▲ ● ▼		Yes.
unidentified		That's what you do.
		So, Madam Chancellor, you are here, I would think, on a mission to make some sort of trade deal with the United States.
		How's it going?
		So, I don't think it's, you know, we want these issues around tariffs and trade barriers to be resolved, not just for the UK, but for the global economy.
		But, where the US have a point is that there are substantial imbalances in the global economy, with some countries running large, persistent surpluses and others large, persistent deficits.
		And there does need to be a rebalancing of the global economy.
		And I say that for sort of two reasons, really.
		First of all, countries like America, countries like mine as well, have a democratic mandate from people to change things.
		There's been a feeling in my country and in America and in many other developed countries that the system we have today delivers to some but not for all, and that jobs have been hollowed out in certain sectors of the economy.
		And that while free trade is a good thing, and I'm a big extoller of the virtues of free trade, there also has to be some fairness in the system.
		The second reason I think that these global imbalances are a problem is that it does matter where things are made and who makes them.
		And we can't be agnostic or naïve about that, especially in the world in which we live today, where resilience and security I think matter more than they have done for a long time.
		So there are very real problems that need to be addressed.
		My issue is the way in which we address them.
		And I'm in favour of the use of multilateral institutions and dialogue to resolve differences rather than blunt instruments, which is what I think tariffs are.
		So no one wants a trade war.
		We have made a conscious decision in the UK not to retaliate and escalate because we think that ratcheting up benefits no one and instead we're approaching the dialogue with the US with sort of cool heads and a pragmatic sort of realism about what we want to achieve.
		But I think I'll just sort of end by saying for the UK we're an open trading economy.
		We are very much open to trade, investment and business.
		We want to improve our trading relationships with the US, but not just with the US.
		There's a summit next month between the UK and the EU where we all know that since Brexit there has been a sharp reduction in trade flows between the UK and the European Union.
		We want to improve those trading relationships.
		We are in dialogue with the Gulf countries and with India on free trade agreements and bilateral investment treaties.
		So, we want to position ourselves in the UK as an open trading economy that is open for business, where stability, both political and financial stability, which is in short supply around the world today, is something we can make a virtue of in the UK to attract the investment we need to grow our economy.
		I've heard so much of that this week, Minister Kukis.
sara eisen ▲ ● ▼		The idea that, okay, we're going to work on the US to try to get a deal, but we're also going to work with the UK or with China or with other parts.
unidentified		Intra-Europe, for instance, trade.
		Apparently, there are barriers to knock down on that front as well.
		How is it going to work?
		Because you represent Germany.
sara eisen ▲ ● ▼		27 nations and governments are going to have to deal with the Trump administration on some sort of trade deal.
unidentified		So, what does that look like?
		Well, I mean, we've ceded authority to negotiate trade deals to the European Commission.
		So, to avoid the fact that 27 would all go to Washington and negotiate separately, we've given the mandate on trade completely to the European Union, which is good because it means there's one gatekeeper, so to speak, on the access to 450 million consumers in the EU, and there is one powerful entity negotiating on all of our behalf, coordinating with us very closely, but at the end leading the negotiation,
		which I think increases the efficiency but also increases the ability to bring to the table a truly impactful ability to deal because it is the access on both directions to a big market.
		So, does that mean that you're not actively going to be negotiating?
		Because I mean, the Prime Minister of Italy was here last week.
		Well, of course, we talk to our friends in the United States.
		That's obvious.
		But at the end, the formal process of negotiating terms and conditions on how a trade deal can look lies with the Commission.
		And I think it's good that way.
		The Commission briefs us all the time.
		I speak with Maros Sefkovich, the Commissioner in charge all the time.
		So the Commission is doing a very good job at coordinating with us and understanding what our economic interests are.
		But at the end, the formal and final deal will be struck by the European Union.
		Any idea when?
		Well, 90 days, and we're optimistic that it will work.
		The sooner the better.
		The word that we cannot mention unless we're willing to pay a dollar is a lingering factor because our company...
		You're allowed to say it.
		You don't have to pay me a buck.
		Okay, I'll pay you a buck for uncertainty.
		So our companies are telling us that every day that passes of uncertainty, investment decisions are being delayed.
		We are seeing in our consumer data that especially large item consumption is declining because everyone feels this lack of clarity on where things are headed.
		People are afraid when they see volatility in markets, even though the markets have recovered most of their losses, in part even all of their losses.
		But it is still an implicit constraint and restriction on economic activity, which is negative in and of itself.
		So the sooner the better.
		Yeah, which we'll get into.
		But Mr. Minister, I would think that of all the relationships, the one between the U.S. and Argentina right now is super strong.
		Very good friendship there between the two leaders.
		What does that mean for you on the trade front?
		It feels like you'd be in pole position here for a trade deal.
		Yeah, I think definitely that's the case.
		In relative terms, we're in a better position.
		But I tend to be of the position that Argentina, with its history, most of the important thing is that we fix our own problems.
		Argentina's problems are 99% self-inflicted, and then maybe 1% comes from the rest.
		We have our home, our homework is mostly in terms of the domestic things we have to do.
		And I think in this regard, what we've seen in the last administration of Javier Millais is quite interesting because, first of all, there's kind of two main ideas.
		The first one is that Argentina is never again going to have a fiscal deficit.
		We're going to have a surplus.
		And President Millay, having inherited a deficit of 5% of GDP, balanced the budget in one month, okay, and he has sustained that.
		And many people thought that was impossible, I myself, and still it was done and it has been sustained.
		And it's interesting because in the case of Argentina, macroeconomic stability is not only a stabilization thing, it's not only a policy to reduce poverty because inflation is a tax that is paid by the poor, but it's also a growth strategy.
		Because in an environment which is unstable, you can't really have growth.
		And then the second idea of Javier Millais is economic freedom, which is deregulation.
		And I want to perhaps share this thought, which is that you have to have intelligent regulation.
		But think of the following.
		Regulation is basically something which is very much anti-entrepreneurial.
		Because the regulation is something that maybe the large firm can go over the hurdle, but the small firm, it's much more difficult to go over the hurdle of regulation.
		So it's anti-entrepreneurship.
		It's anti-small firms.
		It's anti-competition because it's barriers to entry.
		It's anti-growth.
		And it's pro-corruption.
		That's what regulation is.
		So the strategy of deregulation and economic freedom, together with economic stability, I think are the main drivers of, I think, a better prospect for Argentina.
		Many thanks to the IMF for their support in this process.
		And Argentina remains a very closed economy.
		And I think maybe the world and this uncertainty, as you said, in the world is an opportunity for us to move to a situation with much more exports and much more imports.
kristalina georgieva ▲ ● ▼		So Argentina is never going to have budget deficit.
kristalina georgieva ▲ ● ▼		Therefore, Argentina is never going to have another IMF program.
unidentified		This is the last one.
		We needed to make some news here.
		That's good.
		Kristen Forbes, I think I introduced you incorrectly at the top.
		My apologies.
		Kristen Forbes from MIT.
		Do tariffs work?
		So what are the impact of tariffs?
		We know the immediate impact of tariffs is going to be prices go up, prices go up for consumers who buy imported goods, prices will go up for companies that input any imported goods.
		I think there is a misunderstanding by some groups in the U.S. that tariffs on, say, focusing on China will just mean our t-shirts might cost more, our sneakers will cost more.
		I think what we don't fully understand is how many imported inputs go in, come from countries like China as well as around the world.
		Seen some statistics, different ways to count it, but roughly 40% of imports from China into the U.S. are inputs into other products made in the U.S.
		So we're going to see costs go up in lots of areas we didn't realize.
		What the effect will be though then will then matter what's next.
		And that's where it gets really hard to know.
		If the tariffs, it's a short-run bargaining position, many are rolled back, or even if they're put on and we have certainty about where they stop, then companies are quite resilient.
		I think we will see companies adjust.
		Prices will go up once, and then we'll see companies figure out how to reallocate supply chains, where they produce, and after the one-off increase in costs, sort of get on with it.
		I mean, we've seen just amazing resilience the last few years.
		For example, in response to COVID, we saw perfume companies make hand sanitizers.
		So companies can adapt if they know the rules of the game.
		The problem is going to be if this drags on a while, if you are not as quick at negotiating a new trade deal as we hope, then the uncertainty is what will become very painful.
		Then companies aren't going to want to invest or find new places to find inputs or buy goods.
		Then prices will be up for longer.
		We could see shortages.
		I could see in the US, well, during COVID, when we had supply chains freeze up, we all suddenly learned things like cars take a lot of semiconductors.
		Cars are more like a computer with a lot of safety around it.
		We're suddenly going to learn about a lot of other items in the US that actually depend on some little input from somewhere in the world that we may not be able to get.
		For example, gallium, a rare earth.
		If we can't get gallium, you might not be able to get a new microwave or a fixed light switch in your house.
		There's all these interconnections in supply chains that could become gummed up and could become big problems that we aren't even aware of now if these negotiations take a while and the uncertainty is not resolved.
		So I think we have a hard road ahead, especially if the uncertainty about what comes next takes a while to resolve.
		But with all of this, Managing Director, I mean, you did put out the global outlook this week, and a growth hit, but not a global recession, not a US recession.
		Are we close to that?
		Does it just depend how long this lasts?
kristalina georgieva ▲ ● ▼		So we, in our projections, we don't have recession in our reference scenario.
		And the reason we don't have recession is twofold.
		One, there is a lot of growth inertia in the economy.
		Take the United States.
		We have downgraded the US from 2.7% to 1.8%.
		You still have a long way to go.
		Two, when we look around, businesses, the economy is actually adapting.
		And so when we run our scenarios, we came up for the world economy, the probability of recession, yes, went up.
		Now it is 30%, it was 17%, now it is 30%.
		For the US, it went up from 25% to 37%.
		But I want to make a demonstration.
		So this is the probability.
		I want you to please look at my glass.
		That's my glass.
		This is 60%.
		How would you call this glass?
		You would call it, most likely, full, not empty.
		So my point is that we should not get carried away by panic because we are not.
		First, there are many things that would be happening and there would be a lot of adaptability in the business community, among consumers.
		And second, panic absolutely does not help.
		Cool hats do.
		Have I told you my favorite movie?
		Do you know what my favorite movie movie is?
unidentified		My favorite movie?
kristalina georgieva ▲ ● ▼		Okay.
		Do people want to know what is my favorite movie of all times?
		Okay.
		It is called The Bridges of Spies.
		It is about a Soviet spy in the United States caught by the Americans and be given a lawyer.
		This is in the 50s.
		The lawyer goes to the spy and says things really don't look good.
		Most likely you would hang.
		And the spy is very calm.
		Lawyer says, aren't you worried?
		The spy answers, would it help?
unidentified		That's good.
		Now I have to watch this movie.
		Watch the movie.
kristalina georgieva ▲ ● ▼		It's actually a very good movie.
unidentified		Kristen, is it a bigger threat to growth or inflation, what's happening on the tariff side?
		And does it matter, I guess, which country as well?
		I hate to be the economist.
		It depends, but it does depend what country you're talking about.
		Future U.S., which is a bigger threat right now?
		So in the U.S., for example, U.S. has not gotten inflation back to 2% yet.
		According to your latest forecasts, inflation was about 3%.
		And it will not hit 2% for roughly a decade, if your forecasts are right.
		So in the U.S. right now, the bigger risk is inflation.
		Inflation is going up because of the tariffs.
		Growth in the U.S. has held up pretty well.
		Unemployment is about 4.2%.
		So growth will likely slow.
		But the clear and present danger, to quote another movie, clear and present danger now is inflation keeping inflation expectations anchored.
		That's the U.S. If you switch over to Europe, though, the clear and present danger is probably in the opposite direction.
		Europe is going to be hit by more of a demand shock.
		Exports will be hit.
		Growth will likely slow.
		Inflation is on track to hit 2% and be below 2%.
		So inflation is not the immediate concern, especially if they don't retaliate and put increased costs on your inputs.
		Then Europe is looking at more of a situation of less concern about inflation, more concern about inflation.
		Except for Germany.
		Germany is like this darling now of the financial markets, and everyone's excited about the spending.
		Finally, what took so long?
		Well, first of all, I mean, to quote my favorite movie, Pulp Fiction.
		And my favorite scene when Harvey Keitel comes to fix the problem caused by John Travolta and Samuel Jackson.
		He introduces himself and says, I'm Vincent Wolfe.
		I solve problems.
		So we probably need more problem solvers rather than the causation of the problem.
		But what took Germany so long?
		I would argue against that.
		I mean, we've had, this is now the third big fiscal expansion within five years that we are seeing in Germany.
		The first came after the COVID crisis broke out and we resolutely launched what was called the bazooka and launched a $600 billion program to fight the economic consequences of the corona crisis.
		The second big fiscal expansion was after Russia invaded Ukraine, started stopping solving us, sending us gas, and we had to fix a huge deficiency because we had 55% of our gas imports coming from Russia and we had to figure out new logistics and to stabilize the companies in the very large sector of our energy intensive industry,
		which also was a several hundred billion program and $100 billion for our defense sector to strengthen.
		So I would say, yes, we tend to have a reputation as being fiscally conservative, but I do think we've evidenced in the last five years that we build fiscal space, but if we need the fiscal space, we actually use it quite aggressively.
		And so I would say the fact that we are now deploying fiscal space to solve two big problems, namely defense and lack of infrastructure investment, it shows that we don't only cause problems, but we try to solve them.
		And this is something that we are now addressing both quantitatively by large spending programs, but also qualitatively, because we are fully aware that it is a necessary but not sufficient condition to solve the defense and infrastructure problems.
		Also, we have to solve our underlying structural growth weakness because we will only be able to accommodate the additional demand that we trigger if we improve our economic strength to actually supply the goods and services that are necessary for that.
		So, we also need to fix a lot of issues on energy prices, on labor markets, on digitalization, on red tape and bureaucracy to be able to launch that.
		And last but not least, we also need to give more tax incentives for investment and research and development.
		But, just in terms of the boost now, how much is it going to do for your economy?
		Well, we are expecting for this year that the adverse impact of the tariff uncertainty and potential effect will outweigh the positive aspect of unleashing our fiscal strength and economic reform.
		So, we've just revised downward our growth forecast domestically to 0%, but that effect with hopefully a resolution of the trade issues and then deployment of the fiscal stimulus and economic reforms, we will embark on a growth path that more than doubles our growth potential to significantly above 1%.
		So, we are really looking for a significant expansion soon.
kristalina georgieva ▲ ● ▼		There are very important positive spillovers from Germany's decision for the rest of Europe.
		When we look at the downgrade for Europe in our growth projections, it is only 0.2%.
		And part of it is because by injecting fiscal capacity in Germany, given that the European economy is quite integrated, that helps the rest of Europe.
		And I can, you're very modest, you wouldn't say it, but I can tell you that there are cheers in Europe because of your decision.
		Germany is very popular as a result of it.
		And it adds something that is not tangible, but it is important: confidence.
		We can do it.
		And this confidence for the European Union would be absolutely paramount to bring the banking union to fruition, to build the capital markets union, and to eliminate obstacles to trade within Europe.
		In other words, to compete in the single market.
		So I think: are there Germans in the audience?
		Germans, they're very modest people.
		Bravo!
		How do you say bravo in Germany?
unidentified		Bravo!
		Bravo!
		Very simple.
		Minister, would you like to share your favorite movie?
		I think this has become a contest on movies.
		So I want to give my take on that.
		So everybody knows Star Wars, correct?
		The Phantom Menace.
		Anakin is being lured by the dark side.
		He goes to see Master Yoda, the biggest philosopher of the 20th century.
		And he says, Mr. Yoda, I'm being tempted by the dark side.
		What should I do?
		And then Yoda says, I tell this to my students, the fear of loss is the path to the dark side.
		The fear of loss.
		So what I try to say is in these turbulent times, you just have to stick to your vision, to your values, to your policies.
		In our case, as I was mentioning, fiscal macroeconomic stability, deregulation, and economic freedom, which is something that I think Latin America as a region in general has been lacking, and this is why Latin America has typically been quite disappointed in terms of growth as a region.
		And our commitment also to free trade.
		I think integration for the region is absolutely essential.
		So just stick your guns to your values and your policies, and you follow Master Ioda, and you'll be fine.
		Chancellor, I don't think we heard your movie pick.
		We want me to do a movie pick as well.
		A movie pick.
		And how is it emblematic of your policy, I guess?
		I've got two young children, so I only ever really go and see children's films these days.
		Paddington, Wicked, Harry Potter movies, is the sort of genre.
		I'm not sure it's my choice, but that is what I do.
		Maybe I'm the structural reforms that you're facing.
		I could try and segue to how Britain is great at creative industries and our film tax credits is attracting investment from around the world in the UK.
		Exactly.
		What I was going to ask, actually, though, is that you don't have necessarily the fiscal space to do spending like they do.
		It's a tighter situation.
		So what sort of reforms are you putting in place to boost the economy?
		As I've learned at the IMF many, many years, never waste a good crisis.
		What are you focused on?
		So I think you're absolutely right.
		And Kristalina makes this point, that countries that have got the space fiscally should use it.
		The UK is not one of those countries.
		Our debt as a share of GDP is around 100%.
		We've got a set of fiscal rules that say that we need to balance day-to-day spending with tax receipts and bring debt as a share of the economy down.
		Subject to that, investing in things to grow our economy.
		So we've taken a capital spending out of the balance rule, the stability rule, so that we can address some of those long-term structural problems we've faced in the UK of a lack of capital investment in energy infrastructure, transport infrastructure, and digital infrastructure.
		But that means there's an even greater onus on getting a grip of day-to-day spending.
		And we're conducting at the moment a zero-based review of every line of government spending to root out waste, drive efficiency, better digitalise public services so that we can deliver better services for citizens at a lower cost for taxpayers.
		But what we can offer in Britain today is stability, political stability and financial stability because of that set of fiscal rules.
		We know what happens when governments lose control of their public finances.
		We've had recent experience of that in the UK.
		It sends interest rates soaring and costs our citizens dearly.
		And one of the reasons why my party was elected last year into government, the Labour Party, was because we promised to return stability to the economy.
		This is the famous Liz Truss moment of the bond market.
		Yes, it is.
		Some people are wondering if that's happening in the US again, if we're seeing Treasury sell off as a result of the tariff policy.
		Are you having that deja vu or is it totally different?
		I think that there obviously are differences, but I do think, and you know, the US has a reserve currency and for all the concerns about that, you know, the dollar is in a very different position to what sterling was in 2022 when Liz Truss and Quasi Quatting did that experiment.
		I think it was on the way back from the IMF annual meeting in October 2022 that the Chancellor was sacked.
		So I hope that I'll still be Chancellor when I get back at the weekend.
		So look, we have had that recent experiment in the UK and the other thing we've had in the UK for now for more than a decade is lackluster growth, GDP growth and lackluster productivity growth.
		We are determined as a government to turn that around.
		That's why we are embarking on some pretty radical structural reforms in the economy, which are facilitated by the fact that we have a large parliamentary majority, which means we can drive through this legislative agenda.
		And that agenda is about reforming the planning, the permitting system to get Britain building again.
		Energy, housing, transport, digital infrastructure, reform of our regulatory framework.
		We've set a target to reduce the cost, the admin burden of regulation for businesses by 25% during the course of this parliament.
		We are closing regulators, merging regulators, reducing the number of targets that they have to make it easier to get things done in the UK.
		And we're reforming our capital market system.
		One complaint that we have from the fantastic start-up and scale-up community in the UK is that it is hard to raise finance, especially in later series of finance raising.
	And so we're reforming our capital markets, most significantly with big reforms to our pension system, where we're consolidating the number of pension schemes, a smaller number of big pension schemes that can invest at greater scale in productive assets in the real economy and significantly assets in the UK.
	So those are some of the changes we're making to boost economic growth and in the end to boost the wages and living standards of ordinary working people because in terms of the politics of all of this, and I guess that's sort of where I started in terms of acknowledging some of these global challenges and people voting in the elections all around the world really for change, this feeling that the economies are not working for too many people.
	And so as we deliver the growth that we are trying to achieve, we want that to flow to the pay packets of ordinary working people with more good jobs paying decent wages, but recognising the only way to do that, particularly in fiscally constrained countries like the UK, is to facilitate that private sector economic growth.
	That's where the growth has got to come from.
	It's the role of government to remove the barriers that have held back investment for too long.
	I mean, isn't everybody here, Kristen, isn't it amazing, is talking about deregulation.
	It's a pretty big change, especially hearing it from Europeans, if I do say so, right?
	I mean, that is what is in right now, clearly.
	It's happening in Argentina and in the US and now in the UK and in Europe.
	And I wonder, Kristen, what does that amount to in terms of growth, lasting growth, and really unleashing the private sector?
sara eisen ▲ ● ▼		And how do you do that right when there is risk of going too far?
unidentified		I actually want to link that question to how you started your question for the Chancellor.
		Yes, there are areas we can deregulate that will be important to support growth.
		I think the last few years we have seen a remarkable swing, particularly in the US, away from private sector-led growth to much greater government involvement in the economy, much greater government direction.
		Some of that is needed.
		We have seen the vulnerability of supply chains.
		There's vulnerabilities around geopolitical shifts.
		We do need to have government step in in certain sectors.
		But as often happens, I feel the pendulum has swung too far.
		It's probably time to swing back a little and think carefully about where regulation is needed, where government involvement is needed.
		But where I do worry I think we need to be very careful about stepping back is deregulation in the financial sector.
		So back to your question about what's been happening at financial markets.
		We have seen a lot of volatility in financial markets over the past few months.
		Some of that is a healthy repricing, painful for people who've been caught on the wrong side, but some of it is healthy.
		We have had some major changes in the global trading system, and we've seen equity markets adjust as some companies are going to see their expected future earnings fall.
		So if some of those stock prices are down, we've seen particularly companies most affected by tariffs have been hit harder.
		We've also seen repricing in bond markets as people reassess risks of what's happening with interest rates.
		But we've also seen some other moves that are not just a repricing to some of the economic news.
		For example, the fear index, the VIX, has been hitting records that we hadn't seen since COVID.
		And before COVID, we hadn't seen the VIX at this level since 2011, which is when U.S. debt was downgraded and when the Euro area was on the verge of their debt crisis and potentially breaking apart.
		So that is a warning sign.
		Financial markets have been under a lot of stress.
		Things have settled down today.
		But again, there is good news.
		We've been subject to substantial financial stress and volatility.
		And transactions have cleared.
		It's mostly been smooth.
		Markets have not collapsed.
		Markets have not frozen up.
		And again, the number of transactions is at record levels.
		Big hedge funds have unwound positions.
		So good news, it's happened smoothly so far, but it's a warning that we do want to be careful on keeping strong regulations in the financial sector.
		So if we have more bouts of volatility, which we may, we want to make sure the financial system does hold up.
		You mean now is a bad time to focus on deregulation of the financial sector in particular.
		Right, so I would say be cautious about any deregulation in the financial sector.
		There was so much excitement around deregulation in financials in particular.
		But I think it has to be done carefully.
		There were a lot of regulations put in place.
		We've now had time to test out what works, what doesn't work, what creates new risks.
		We've also learned a lot about how when you regulate one sector, investors are smart, money flows out another way, or the risks shift to other segments of the economy.
		Now we're looking at those new areas that are risky and present the next set of vulnerabilities.
		So it is a natural time to step back.
		What worked, what didn't work, what can we do better.
		But that doesn't mean we should deregulate more broadly.
		We need to think carefully about the bigger picture.
		Whenever I hear the talk about cutting of fiscal spending and government spending, I think of the chainsaw that President Millay gave, I think Elon Musk, that President Trump is now trying to do.
		Yeah, actually, I take up a position with the idea that the fiscal space is the place to go because you increase government expenditure, you have to increase taxes.
		So if you have an expansionary effect of the fiscal policy, you have a negative effect from the increase in taxes.
		Argentina, for example, with the chainsaw, we reduce government expenditure 5% of GDP and the economy grew 6%.
		But I want to go back to deregulation, if you allow me.
		I want to tell you a story, okay?
		Because I agree with Kirsten on being careful with the financial sector and with the ND on intelligent regulation and intelligent deregulation.
		But listen to this story.
		I have my email, I ask people to send me emails as to what are the things that are bothering them.
		So a guy sends to me an email and says, Federico, can you help me with my watermelons?
		Watermelons.
		The fruit.
		And I said, what's the problem with your watermelon?
		They don't taste good.
		I said, no, they taste great.
		In fact, I am a big exporter of watermelons from Argentina to other countries in the world.
		So what is the problem that you have?
		The problem that I have is that the Food and Drug Administration says that I have to package the watermelons in a specific way.
		And I say, look, this is not the way my clients want to buy the watermelons.
		And this is not plutonium, okay?
	This is not radioactive uranium.
	This is watermelons.
	So why do you force me to package?
	For 10 years, I've been trying to convince the authorities to allow me to package the watermelons the way my client wants and not the way you want the state.
	To no effect, okay?
	So what do I do?
	I package the watermelons, and then when the boat leaves the port, I send another boat with 60 guys, and they break up the packages and they package again.
	And I was reading this in the in the email and I turned to my team and I say, this has to be true, because if I'm trying to imagine this, I cannot imagine this.
	So it can't be made up.
	Why am I bringing this story here?
	Because we've really gone the other way in regulation.
	We find so many things.
	I mean, regulation always has an owner, and the owner is some interest, some business person who benefits from this, from this barrier to entry, or the bureaucracy, because for the bureaucracy it's power, it's an opportunity to exert that power, it's an opportunity to generate corruption.
	And so definitely, I don't know what's that particular situation in the UK or in Germany or in the US, but I can tell you that in Argentina, and I'm sure this is true in all of Latin America, we've really gone so far away that we need to move away from that very significantly.
	And the problem is that the bureaucrat tends to think that they have to avoid all kinds of risks.
	So the bureaucrat is thinking, oh, this risk, this risk, this risk.
	And you're trying to cover those risks, but you're not putting on the table the cost of protecting from those risks.
	The example I give, it's dangerous to cross the street, but we're not going to forbid people from crossing the street.
	You have to weight the benefits, the risks you're trying to contain with the cost of your doing that.
	I think that is tremendously, I mean, the cost of the regulation has not been put on the table in the way that they should have been.
	And I think we need to change the mind frame.
	And we have to do a little bit like Elon Musk, that he tells his engineer, delete, delete, delete, and he only congratulates the engineers that then tell him that they made a mistake, they deleted too many processes, okay, and then they have to put back some processes.
	You think that's a good way to do it?
	No, that's what we have to do.
	We have to err on the side and be attentive and be open that if we make a mistake, we turn back.
	But if you stay and you stop before, then you may stop very, very far away from the optimal position.
	So we need to really need to challenge ourselves.
	We need to go to the extreme.
	Look, if you've never missed a plane, you spend too much time at the airport.
	I totally agree with that.
	I always come very last minute.
	But wait, really quickly, did you change the watermelon law in your country?
	No, no, we changed everything.
	Look, it was fantastic because I printed everything and it was one kilo and a half of regulations to do watermelons and fruit in general, okay?
	So I said you have to have a PhD in literature before becoming a fruit producer to read all this stuff, okay?
	So I sat down with the Food and Drug Administration and said, what should the state do?
	Because another thing that is a problem is that sometimes we rush to simplify processes without asking ourselves if that process should exist at all.
	So I said, I'm going to forget about all this.
	And I asked the Food and Drug Administration, what should the government do on the fruit?
	And the guy said two things which were Very reasonable, which is we need to know who's producing fruit because if I have a sanitary issue, I need to know who I have to work with.
	And I also have to do certificates when you export fruit because you don't want the Germans opening up a container and all the flies come out of the apples because they're going to close and say nothing else from Argentina.
	And anything else?
	Nothing else.
	I had in the back of my office the kilo and a half of papers, the pile of paper.
	Okay, so I wrote a regulation which only had those two things: 80 grams.
	So I moved from one kilo and a half of regulations to 80 grams of regulation.
	And we really, because the Food and Drug Administration, in addition to doing the sanitary police of the sorry that I go to the detail, but the detail illustrates what all this is about.
	They were doing the quality control.
	They were controlling how you were producing.
	What was the quality?
	And the quality and the production function is for the customer to judge, not for the government official to judge.
	The government official can intervene if there's an externality, if there's a sanitary issue, but not how you produce or what quality of fruit you produce.
	That's for the market to determine and to assess and judge.
	So yeah, that's all gone in Argentina, and unfortunately it's working so.
	Managing director, I know you're very focused on this issue.
kristalina georgieva ▲ ● ▼		I don't have a watermelon story, but I want to go back to I love watermelons.
		I want to go back to financial regulation and make a very simple point: that when there is excessive regulation in one place, money moves to where regulation is light.
		And what we have seen over the last years is an increase of non-banking financial institutions to a point that we worry.
		Is there something that may come out of it that would be a bad surprise?
		So, in addition to concerns about what is regulated, in other words, concerns about the watermelon, we need to think what may be the impact on regulation, sorry, things moving into a non-regulated environment whatsoever.
		So, if you have a good balance, if you have a good, thoughtful regulation, then you're likely to sustain under the safe roof more of your financial system.
unidentified		Thank you.
		So, I think that the point that Kristen makes about being careful and getting the balance right is absolutely right, but we have gone too far in regulating for risk and we've forgotten about regulating for growth.
		And we do need to turn the pendulum back because at the moment it stifles innovation and innovation in the end is good for economies and good for our citizens.
		But excessive regulation makes it hard for new entrants to come into markets and it puts up prices for consumers.
		So, I do think that we've gone too far in one direction.
		And of course, after the financial crisis, we had to put in place a greater set of regulations than we had before, sure.
		But we are now, what, you know, getting on for 20 years since the financial crisis.
		And I do think we've got to think about that balance.
		But the point I wanted to make was about in other areas as well, where well-meaning regulations that come in for the right reasons end up stopping good things from happening.
		In the UK, that is particularly the case with environmental regulations.
		And environmental regulations are now the biggest barrier to investing in renewable energy in the UK.
		That is not the purpose of environmental regulations, but they're the things that are holding up pylons being built.
		They're stopping wind farms from being built.
		And the number of submissions, and we all get this as ministers, that we get in our boxes every day that I'm afraid that the minister had to block this wind farm development because of sea bream swimming in that part of the North Sea, or there are some spiders which are unique to this area, which means you can't build the thousands and thousands of homes that we need.
		Or we've spent £100 million in the UK in building a bat tunnel to go alongside the high-speed rail link between London and the north of England, because otherwise the bats would not be able to cross the road.
		I mean, it is absolutely insane the costs that are added to essential infrastructure investments.
		So they may have been introduced for all the right reasons.
		We all love nature, we all want to preserve nature, but we also all want homes for our families, our kids and grandkids to live in.
		We want energy infrastructure to reduce the costs of energy, and we want better transport infrastructure.
		And at the moment, the regulation in the UK holds that back, and we are ripping it out as well.
		I wonder about Europe, too, and something that the Chancellor said about deregulation for growth and for innovation.
		I often wonder why Europe, why all the biggest tech companies are in the US, Meta and Alphabet and OpenAI and all these cutting-edge technologies.
		Why can't Europe produce something like that?
		Is it because of regulation?
		And is there something to do to turn that back?
		Well, I would say regulation plays a role in that.
		And we are doing a lot now in the European Union under the competitiveness compass to reduce, for example, reporting obligations, right?
		I mean, we've seen for all the right reasons we've asked companies to report about what they're doing in terms of turning climate neutral.
		And I haven't met a CEO who doesn't want to talk about what they're doing to turn climate neutral, but we've just piled additional and additive and conflicting reporting obligations on the corporate sector.
		And now in Europe, they have to subscribe to the corporate sustainability reporting directive, the taxonomy, the due diligence directive, etc., etc.
		And it's very often duplicative and multiplicative, and that's what's, of course, especially for small companies, causing a very high burden because they have to overcome the high fixed cost.
		And that is what, for example, the European Commission just in February made a proposal that was passed in record time, and now we delayed the implementation of all new reporting directives.
		So I think that's going in the right direction.
		So the Draghi report is not only being read, it's being followed, it's being implemented, and there is a huge consensus in the European Union that we have to be very diligent about what we ask companies to do in order to avoid this multiplicative and etc. effect.
		The same goes, for example, for the chemicals strategy, where we've been gone overboard in if there's the slightest risk in a chemical to think about banning entire families of chemicals.
		We are in favour of revising that in going towards a risk-based approach and to only implement bans selectively and restrictively for really toxic chemicals, but to be more accommodative on the rest.
		And I think for innovative companies, The cost of entry is always the highest because they don't have cash flows to pay for hundreds of people who are able to cope with all the rules and regulations.
		So I think we have to, Mario Draghi gave a fantastic compendium of what needs to be done and differentiated approach of what makes sense and what doesn't make sense.
		The other big topic, though, that I think hurts Europe in terms of financing companies in the tech sector is that we tend to be very strong on debt-based financing for companies that tend to be able to attract debt financing, i.e., have assets that can serve as collateral, have years of cash flows that are documentable and have established business model.
		So that's what a lot of established companies have, but new companies tend not to have.
		The United States is much more, it's much better at funding companies that have neither collateralizable assets nor documented positive cash flows over years, nor an established soundproof business model.
		And if you read the history of Amazon, of Google, of Facebook, and all of the companies that got venture capital financing, they would never, if they went to a bank to ask for debt capital, they would not have survived the first rounds of funding.
		And the fact that our pension systems are much weaker as a percentage of GDP and much less invested in equity means that the pension system in the United States that pools a lot of capital towards the Andries and Horwitz and the Sequoias and all of the Sand Hill Road venture capitalists simply doesn't exist in even remotely the same amount as it does.
		It doesn't exist in the same amount in Europe.
		relative to the United States.
		However, there are examples that show that this is not a Europe-wide phenomenon.
		If you look at Sweden, if you look at Denmark, if you look at the Netherlands, if you look at the UK, those are examples of countries that have been much more successful at breeding this equity culture.
		So I'm proud to report that in the coalition contract in Germany, every child from the age of six will receive a grant of 10 euros per month to invest into equity to just change the culture of equity investing in Germany.
		We will also give tax incentives to the corporate pension system.
		We will give tax incentives to the private pension system, all in the idea that if we want to be strategic about the capital markets union and do our homework in Germany, we have to sponsor and encourage and incentivize the culture of equity investing.
		Because at the end of the day, if we don't do that, then the equity-based business models will simply always suffer from lack of local funding.
		And in a world where home bias in equity investing is still a reality, and venture capital from Sandhill Road disproportionately flows to companies in the vicinity and in the United States, we do have to also encourage and grow and make more prosperous the venture capital investing scheme in Germany, in the European Union.
		And this has to become a pan-European project, of course, because there are no venture capitalists that invest only in Germany or only in France or only in Bulgaria or any single.
		So this has to be also a pan-European project.
		Should also mandate that they watch CNBC if you want to change what those are.
		Absolutely.
		Absolutely.
		That's why I keep giving interviews with CNBC.
		I have to say, to tell all together, managing director, I came into this week thinking that it would actually be very gloomy, everyone would be fretting.
sara eisen ▲ ● ▼		Oh, the US is so crazy with the tariffs, and we're going to have to deal with it, and it changes our outlook.
sara eisen ▲ ● ▼		But instead, all the conversations have been like this: it's like waking everybody up into action, reform, regulation, cultural shifts.
unidentified		It's actually pretty amazing.
		Trading and reducing barriers around the world.
		Is the US still the engine of growth in the world?
kristalina georgieva ▲ ● ▼		It is really impressive.
		What you heard from the three policymakers on this panel is that they do things that were seen as impossible until not a long time ago.
		What Rachel is doing to lift up growth in the UK, she's tackling very tough issues, getting reprioritization of spending, getting the regulatory environment to be more rational, and then taking on the battle to get it done.
		And it's really impressive.
		Germany eliminated the debt break, but let me remind you: this was not at all easy.
		It was a very heavy lift.
unidentified		We're reforming it, we're not eliminating it.
unidentified		Okay, sorry, I'm taking that back.
kristalina georgieva ▲ ● ▼		Reforming.
		And we have the same in Argentina.
		But let me say, what I have seen this week, Sarah, is really a whole collection of the impossible becoming possible.
		And I think it is that realization that if we are moving in a new era, we better make sure that we protect what works, but also we shape it up differently.
		With your permission, Chancellor, I'm going to say this.
		When the divorcees, the EU and the UK are dating again.
unidentified		I know, I was thinking that.
kristalina georgieva ▲ ● ▼		We are in a great place.
unidentified		Rule date.
		We'll date.
		Maybe you should introduce a referendum.
		I don't want to do that again.
kristalina georgieva ▲ ● ▼		Let them just date.
unidentified		Let them just date.
		But for that question, and Kristen, I can ask you, because you're not a pop, you can answer this.
		Is the US still the engine?
		Because the U.S. has been the growth engine of the world in the last few years.
		The U.S. exceptionalism trade has dominated.
		Is that still the case?
		The U.S. is still, at least the largest of the individual advanced economies, growth is holding up quite strong.
		I mean, it is, look at what the U.S. has weathered the last few years.
		The world has weathered the last few years.
		And when you look at how countries have come out of the COVID shock, the U.S. has actually done remarkably well.
		Most other economies still real wages are below or have not recovered.
		U.S. real wages have now sort of recovered basically where they were before the huge price shocks around COVID and the inflation surge.
		Real incomes are stronger.
		Growth has held up quite well.
		Granted, there are some reasons that it's been held up quite well, large fiscal deficits, not sure how long that's sustainable.
		But the US has held up and been remarkably resilient amongst a range of shocks coming at it.
		So I wouldn't write the UF off US.
		And you're not worried about the dollar losing its reserve currency status or anything like that.
		There's chatter around that now.
		I mean, there does seem to be a gradual repositioning of portfolios where foreign in is now Shift gradually out of the dollar.
		It's different than the US in the reserves.
		It's very hard to see what other country, what other asset could replace the dollar right now.
		So we may see some gradual reduction in dollar holdings, but it's hard to see a large-scale shift to some other reserve currency anytime soon, at least.
		So, you know, coming from a country.
kristalina georgieva ▲ ● ▼		You're offering the peso.
unidentified		Peso reserve.
unidentified		I was going to say that I was saying that coming from a country with such long history of instability, you know, you have all this instability, and the moment you see it, you think everything is changing, but the world is a much more stable place than we tend to think.
kristalina georgieva ▲ ● ▼		Yes.
unidentified		I need to get off protocol for a second, if you allow me.
		Okay, so we love our protocol.
		We work in the Minister of Deregulation and State Reform, and then our symbol is this pin, which is a chainsaw.
		So we wear proudly this chainsaw pin, which paid with our own money and not with government money, just as I want to clarify.
		And as a big supporter of the Argentina program, I want to give as a gift to the MD chainsaw pin.
		It's not as big of a program.
kristalina georgieva ▲ ● ▼		Thank you.
kristalina georgieva ▲ ● ▼		I prefer the pin to the real thing.
unidentified		Thank you.
kristalina georgieva ▲ ● ▼		Thank you.
unidentified		Great.
		Okay, we're under a minute.
		If everyone could just say their number one goal, economic goal over the next year, what would that be?
		Economic growth.
		Well, I haven't had enough of it.
		We haven't had enough of it in any of our countries.
		And I think you made the point about what's happened recently is a wake-up call.
		And countries have got to take some ownership of what we are doing domestically to grow our economy.
		And if we want to reduce barriers to trade, then some of that is in our own hands.
		And we want to do that between the UK and the EU.
		We're seeking trade deals with other countries around the world.
		But I do think there's a time to take into our own hands what we need to do to grow our economies.
kristalina georgieva ▲ ● ▼		What's your goal?
unidentified		I would say increase the competitiveness and growth potential of Europe in general and Germany in particular in a very short time period.
		Managing director?
		We're putting the pin on last.
		What's the goal, the economic goal of the next year?
kristalina georgieva ▲ ● ▼		A very resilient, well-performing world economy.
		An economy that is integrated, that can withstand shocks because more shocks will come and is vibrant and imaginative.
		I don't know whether you notice, Sarah.
		Nobody talks about artificial intelligence as if it disappeared.
		But it is a big factor in our economy and it's very exciting that it is there.
		So this is what I want to see: a global economy that is well integrated, very dynamic, innovative, and where people can see that private initiative delivers for them, for them, for their families, for my grandchildren, for everybody.
unidentified		Sorry, my concern is not so global as for the MD, it's on Argentina, and I want Argentina to surprise again with an even larger fiscal surplus than we had last year.
unidentified		So that would be what I would say.
kristalina georgieva ▲ ● ▼		I'm wearing this pin.
kristalina georgieva ▲ ● ▼		With this promise, I'm putting the pin.
unidentified		I'll end with your movie theme.
		So I think Mission Impossible is the movie that comes to mind.
		Right now it feels like the start of a Mission Impossible movie where the challenges are very imposing.
		And so you don't see a way out.
		Some of the challenges around this new terrorist regime, uncertainty, hard to see a path out.
		And what worries me is the world has lived through a lot the last years.
		We've hit a major war in Europe.
		We've hit a pandemic.
		We've hit financial crises.
		Each time, these shocks have sort of come from outside, and we've weathered them through good policy responses and good policy choices, and that stabilized the global economy.
		This time, the uncertainty is not a pandemic, it is from the policy decisions being made by governments.
		It sort of feels like a Mission Impossible movie where you think the bad guy is some country and then you realize it's actually within your own organization that the trouble is occurring.
		But then at the end of Mission Impossible, you know, Tom Cruise always comes up with some neat technology, some neat new way that they adapt.
kristalina georgieva ▲ ● ▼		And may I remind everybody what is Mission Impossible Core?
kristalina georgieva ▲ ● ▼		IMS.
unidentified		Absolutely.
		But the bottom line, I think hopefully we will end like Mission Impossible, use some new technology, creative, and I think the global economy is adaptable, it is resilient.
		Once we know the rules of the game, that's the goal.
		Once we have some more certainty on where all of the new trading regime looks like, I think we will be able to adapt and recover.
		But hopefully we can have that resolution soon.
		Do you want to know my favorite movie?
		Love Act Thai, Love Actually, which is classic, and Meme Girls.
		And there's no metaphor, but both have very happy endings.
		That's it.
		Thank you all very much.
		We've gone over to the next one.
		Thank you very much.
		Thank you very much.
		For a productive conversation.
		I can't put it on.
		Can you put it on?
		Ah, too hard.
		Yep.
		Thank you, Sarah.
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