Latest / Gunther Fehlinger Podcast / Prof. Piroska Nagy Mohácsi: Euro Enlargement & Europe’s Defense-Tech Wake-Up Call

Transcript

Prof. Piroska Nagy Mohácsi: Euro Enlargement & Europe’s Defense-Tech Wake-Up Call · Gunther Fehlinger Podcast

0:02
Welcome to The Gunter Failing, a podcast here at the beginning of
0:05
2026. A very exciting year for the
0:08
world and also for this podcast because we are developing very
0:11
well. We have now 133,000 followers on
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ICS and also we crossed the 16,000 on YouTube and we are
0:19
growing and we are growing because we have very interesting
0:23
guests at our podcast. And today we again have a very
0:27
interesting professor. I'm very happy to meet you, to
0:31
have met you last year at the conference of the Austrian
0:33
National Bank that we got acquainted and then we have been
0:37
in contact in the meantime and agreed to have a podcast about
0:40
two important topics. That's the Euro and that's the
0:43
defence industry and that's the areas of your expertise.
0:47
Professor Piroshka, I'm very happy you are, I think in the US
0:50
at the moment. And we are exciting to learn a
0:53
little bit about your background, where you are
0:55
teaching and where you're from and all these things that first
0:58
of all, I want to say thank you very much that you take time to
1:01
discuss with our podcast here. And you're welcome and please
1:04
introduce yourself. I can say happy New Year too
1:08
from you too to you and then your your increasing pool of
1:12
audience which is good to hear. My name is Pirosh Kanoy Mohachi.
1:17
Originally I'm from Hungary, so from Central Europe.
1:21
And neighbor to Austria. Absolutely.
1:24
And you know, we shared, we shared some common empirical
1:28
roots as well, right through the history, which actually worked
1:33
well in the end, I think for both parties and the region sort
1:37
of as a model. But you know, don't go there
1:40
going back. So I did my major studies in
1:44
Hungary at the time and then continued in the USI where I
1:51
joined the International Monetary Fund.
1:53
And I, I did post graduate studies at the, at the George
1:57
Washington University as well. I worked at the fund for about
2:01
20 years on, on a vast number of countries.
2:08
For me, the most memorable was via my work on, on on the
2:12
dissolution of the Soviet Union and, and the the establishment
2:18
of the the 1st and I think only democratic Russia that existed
2:23
under President Yeltsin from the early 1990s.
2:27
I, I wrote a book about that experience.
2:30
I also worked in other parts of Europe as well as advanced
2:35
Europe and Southern Eastern Europe a little bit, as well as
2:40
in Asia and and Africa. Then I also worked in the
2:45
European bank for recurse sectional development.
2:48
It's a transition bank with a very interesting mission.
2:51
It's helping countries to move from centrally planned
2:55
autocratic, you know, set ups to to democracy.
3:01
A market based economy sounds familiar, like is an issue these
3:06
days. Venezuela, maybe Cuba at some
3:09
point. And there I was policy director.
3:15
I enjoy that very much. I've heard a lot with the
3:17
Austrian authorities in the context of, of handling the, the
3:22
global financial crisis in 2008 and 9 and the fallout and how
3:28
collaboration, sovereign based collaboration, additional
3:32
complementing the EU structures can help, you know, address
3:38
crisis situations. That that was the so-called
3:40
Vienna initiative. It's, it's made, it's after
3:44
your, your capital because of the critical involvement of the
3:49
ocean authorities. And then this is my last bit in
3:55
my CV. I've been working at the London
3:58
School of Economics, first as, as, as part of an institute and
4:04
now as a visiting professor. As you, you said, I am in, in
4:08
the US. Actually, I'm in sunny Miami
4:11
these days. Contrast, contrast.
4:18
And so I, I do mainly mainly research, but I also
4:24
occasionally lecture there. That's in a nutshell.
4:27
That's a lot. That's a lot to talk about and
4:29
the quite impressive CV and life experience and it would
4:33
immediately lead me to the dissolution of the Soviet Union
4:37
and Russia. Very interesting your experience
4:40
in transition economies, but we agreed in the beginning that we
4:44
will discuss about two of your recent articles which you have
4:47
published recently. The one was, I think about the
4:50
defence industry and European need for rearmament and the
4:54
other one about the need for Euro enlargement and that's two
4:58
important texts. Maybe you want to explain us why
5:02
you published it. What's your interest here?
5:06
Look, I think that the both articles and then we go of
5:10
course beyond the articles so that the issues covered in the
5:12
articles really relate to the to the existential struggle that
5:18
that Europe all of a sudden faces, right.
5:21
So it faces a double threat. One is the threat to its
5:26
economic model and the welfare system that that is being
5:30
supported by that economic model, the model itself, the
5:33
welfare system behind it on the one hand.
5:36
And the military threat that of course we know comes directly
5:42
from Russia through the kind of gradual wars which is now a
5:49
full-fledged war in Ukraine starting from 2014 and now from
5:54
2022. This one of the longest, right
5:56
these days we just said remind us that that this war in Ukraine
6:03
and I is is is the last thing almost longer than the Second
6:06
World War. Isn't that terrible?
6:09
OK, so Europe is is is is threatened by this double, you
6:16
know, risk economic on the one hand and military on the other.
6:21
And it seems to me that that addressing these double risks,
6:27
these twin risks is to Emulgate link the two meet the military
6:36
imperative that Europe has to face up with with the economic
6:40
imperative. Now on the economic imperative,
6:43
what to do? There are a lot of very good
6:45
research, very good policy, the Draghi report, the latter
6:50
report. It's it's really we know what to
6:53
do right HIVE being implemented. It's another matter.
6:57
We, we, we, we are not happy. And then the authors of the
7:01
report and the the EU leaders are not happy with the speed of
7:05
implementation. That's a a big issue, but
7:08
something is happening separately lot is happening in
7:13
the military area, which is like, you know, the risks are
7:17
augmented by by the EU s s virtual withdrawal, right or or
7:21
the fact of withdrawal or the set of withdrawal of the of the
7:25
US military umbrella in one form of a way.
7:28
I don't think we should, you know, eat that soup that hot,
7:32
but but there are there are serious questions.
7:35
They're related to issues also as Greenland and, you know,
7:39
distractions. But we have an economic problem
7:42
and we have a military problem, but it's not linked together.
7:46
It's not linked together. And that's a big problem, I
7:48
think. And where I'm was looking in, in
7:52
my work is to see countries where where these two by way of
8:02
necessity has been linked historically in modern history.
8:06
And that's that's the example of Israel.
8:09
Israel has developed a vast military industry over the
8:14
decades since it's most modern, you know, establishment in 1948.
8:23
First it was like a traditional type of military development,
8:27
little bit of traditional industrial policy.
8:30
But what is interesting is now that it has turned out to be a
8:35
high tech type military development, which by design is
8:43
not simply tickling down in its effect to the to the non
8:48
military sector, to the rest of society.
8:51
Despite design, the military development, high tech
8:54
development infuses, informs and transforms the rest of the
9:00
economy. And it's very powerful.
9:03
You know, this is the startup nation.
9:05
I'm sure your, your, your followers know about that.
9:09
Israel's a startup nation, but it's, it's military based and
9:13
it's nothing to be ashamed of. This is the, the necessity.
9:16
This was a necessity in Israel. This is not the necessity in
9:19
Europe. So let's learn, you know, from
9:23
where lessons are to be learned. And this is not a political
9:27
issue as far as I'm concerned. It's not about the issue of Gaza
9:30
is not about the issue, but it's about the model, the economic
9:33
model that is led by, informed by and led by military, high
9:38
tech, high tech, military development.
9:41
If you want, I can, yes, I can. Go, go.
9:46
No, the question is basically you think that we have to copy
9:49
Israel in terms of high tech defence industry under the
9:52
threat of Russia and also to be more unified internally.
9:57
Let's discuss it. Do you think the last years have
9:59
been showing that we are really living up to the efforts and
10:03
that we produce enough military equipment and that we are now
10:07
turning Europe into a high tech leader in the defence industry?
10:15
Not yet. I think this kind of holistic
10:21
thinking is, is still not there. I think we will be there.
10:25
I mean, the realization that that that military spending has
10:28
to be increased. This, this is clearly there.
10:31
We we've seen Germany moving importantly, removing the that
10:37
related obstacle for military spending and increasing literary
10:42
spending. All the countries, almost all
10:44
the countries are committed now to to deliver on this 2% of GDP
10:50
military spending. Poland said that they they, they
10:56
will probably aim to four and a half 5% because of the direct
11:00
threat from from from Russia side.
11:03
So in terms of, you know, the numbers, the big aggregate
11:07
numbers are there to what extent it's really high tech military,
11:12
which would then, you know, be laid back and any and and and
11:16
support the economic transformation that we said the
11:19
second existential threat. I I am really not sure the
11:24
first. So so the numbers are there.
11:26
So the fiscal effort is there. That's good that it's really,
11:31
really have the type of planning that Israel has had to, to do a
11:38
central, a concentrated, unified, you know, high tech
11:44
focus spending. I'm, I'm not sure it requires a
11:46
lot of things in Israel. It didn't happen overnight.
11:49
Of course, it, it requires a commitment for, for, for, you
11:56
know, transferring part of your education accordingly.
11:59
It requires the involvement, engagement of, of, of the young
12:02
people who are willing to, to do this type of, of, of, of, you
12:08
know, education and, and engagement, commitment.
12:12
Maybe it requires, you know, voluntary service or one form of
12:16
the other. So it's, it's not simply the
12:19
capital, but it's the human aspect.
12:21
And that the that the European leaders really can, can, can
12:24
wake up, you know, the young generation to, to to distract
12:28
and, and, and commit. One country which has relatively
12:32
under pressure now developed a very good high tech industry is
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of course a country which of miscompared actually with
12:38
Israel. This is Ukraine and for many
12:41
historic reasons Ukraine had already a big defence industry
12:44
we inherited from the Soviet Union.
12:47
And now under this extreme pressure of the war, they have
12:51
really turned out surprisingly effective and important high
12:56
tech instrument, among them flamingos and all the other now
13:01
famous weapon systems. And can we not merge in a
13:04
certain way the European, the Israeli, the Ukrainian effort
13:08
into one common European high tech effort in the defence
13:12
industry? Absolutely you you're spot on
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the and and I think you know what Ukraine has done, you know,
13:20
under this terrible, you know, assault is to very rapidly build
13:26
up high tech, very cheap. In fact, in in some areas, very
13:31
developed in others. There have been of course, a lot
13:34
of assistance from, from from from the American side, from the
13:38
European side, but it's it's a homegrown thing.
13:41
And I always thought that Europe, the EU membership of
13:45
Ukraine would part should part the Lily be conditioned and, and
13:50
linked up to this effort because in the end, the EU membership
13:55
and you, you may have seen the, the news of this EU light
13:59
membership and, you know, concerns about that.
14:03
What is the proposal as part of the peace deal now for Ukraine
14:06
to, to have a fast track membership?
14:09
But you know, we have to think outside the books.
14:12
You don't need need to rely on on 30 odd years of of of, you
14:18
know, installed accession process for a country which is
14:26
under threat. Let's think out-of-the-box and
14:29
let's think out-of-the-box in terms of what is really
14:32
important for Europe from Ukraine and what is important
14:35
for Ukraine from Europe and the military collaboration which
14:39
actually is happening, right? I mean, I'm not an expert, I
14:42
don't depend, but we have information on that, right?
14:46
So it's so to include into the European app directly Ukraine
14:51
and maybe put it in the in the EU accession plan.
14:55
What's wrong about that? Absolutely, the defence
14:58
integration is so important because we spend a lot of money
15:00
also in Europe on defence, but we don't have such a effective
15:04
high tech fighting force which we should have like the
15:07
Americans, the Israelis, the Ukrainians, so we need also to
15:10
unite. My understanding, yeah, exactly
15:12
My understanding is that, you know, some of the new defence
15:15
spending goes to military pensions now in some countries
15:19
now. It's of course, it's a very
15:21
versatile goal, but it would not be my priority, honestly, in
15:26
terms of economic development and, and jump start the whole,
15:30
whole whole process and high tech development and, and all
15:33
that. So, but, but the point here is
15:35
also, you know, EU membership has to be beneficial, both the
15:39
existing members and the newcomers.
15:41
And Ukraine has a, a phenomenal, you know, offer for Europe and
15:48
that is to bring this, this industry to the euro area and
15:53
have this transformation also on the economic front, as we just
15:57
discussed. I think this is a fantastic
16:01
opportunity for the EU. It's a, it's, it's a necessity
16:04
for, for Ukraine, for, for the Ukraine membership.
16:08
I know that's not what we want to discuss, but Ukraine, our EU
16:10
membership should centre on issues that are beneficial on
16:13
both sides. Professor Piroshka, I'm always
16:16
in favour of Ukraine's NATO and U membership, so we can
16:19
definitely discuss that. We'll ask you, are you in favour
16:22
of Ukrainian U NATO membership? NATO I, I, I can't speak about
16:29
this, not my area of expertise. And then the NATO itself is, you
16:32
know, changing in ways that we can't really predict, but EU
16:36
membership absolutely, absolutely.
16:39
And, and it's, it's, it's, it's, it makes all the sense.
16:43
And if it can be part of a peace plan, why not?
16:46
I mean, we've seen you know, if you think about the Diatom
16:49
agreement back that ended the the Bosnia terrible war and and
16:55
others we think about arrangement for Bosnia in terms
16:58
of monetary arrangement closer to to to our subject today in
17:02
terms of monetary arrangement for Montenegro, which both
17:06
countries you know use the euro unilateral in different
17:10
arrangements, Kosovo and Kosovo as well.
17:15
So, you know, and that was all part of the over police plan
17:21
right at the time that was part of the.
17:23
Peace plan It was also part of the peace plan to introduce the
17:26
mark, the convertible mark. That was that was the initial
17:29
9999 until 1999 and the euro, euro.
17:34
So they they just shifted so, so as a continuation.
17:39
But the bottom line is in important P span, P spans, which
17:43
are critical for for the continent.
17:47
There was always, you know, and and and enlightened thinking out
17:51
of the post thinking. So let's use that also for
17:53
Ukraine. Yes, this exactly leads to the
17:56
second part we've decided to discuss.
17:58
It's about the monetary integration parallel to the
18:01
defence integration. And there's a lot of issues they
18:04
had here. We have unfortunately your home
18:07
country Hungary, but also Poland and the Czech Republic, Romania,
18:11
which are still, you know, they're already since I think 22
18:15
years in the European Union. Now we are celebrating the big
18:18
success. All these countries are now very
18:21
economically and in all aspects of the society, very successful
18:24
country, because because U enlargement works.
18:26
But in this one aspect in the monetary unification.
18:30
And they are simply for some reasons I'm can hardly
18:33
understand and they are not really inside.
18:36
And I think it's not good for the economic development.
18:39
It hinders them to catch up with Germany and Austrian living
18:42
standards. And what's your opinion about
18:44
this, especially about your home country, Hungary?
18:49
It is indeed, as you say, a few Central European countries and
18:54
Sweden importantly, and Denmark which has an opt out, but it's
18:58
linked up to the euro anyway, so as if they were already in it,
19:01
right. So these are the countries which
19:04
are out for, for various reasons.
19:09
I think that, you know, historically countries which did
19:19
not link EU membership to euro membership from the beginning.
19:24
Of course there's a process. So it's not not a simultaneous
19:27
thing, right. First EU membership and then
19:30
although the criteria and then you get accepted like Bulgaria
19:33
not just did after so many years to the euro.
19:36
Congratulations, Bulgaria. Absolutely.
19:40
It's a, it's, it's, it's, it's a phenomenal political and
19:44
economic story. So countries which linked from
19:49
the beginning different time at the lymphond of Guinea, EU
19:53
membership to euro membership are now in the euro, right?
19:58
And why as the these, you know, Slovenia, Slovakia, the Croats
20:03
at the sample, of course the Baltics, despite all the the
20:07
problems of related to the global financial crisis, which
20:11
really hit them hard. But they persevered and and and
20:15
and a Bulgaria, but they had in their original program that was
20:19
look at and this this was part of the of the commitment of the
20:23
government succeedment, different political, you know,
20:26
inclination that but but a common overarching objective EU
20:32
membership and European membership, Euro membership
20:36
countries which didn't have this.
20:38
And these are the countries which are up are still up and
20:42
now and it's partly because, you know, you develop a vested
20:46
interest. I mean, but many reasons, but
20:49
one, I think critical and, and, and across all the countries
20:53
that you develop a vested interest in not having to join
20:57
the euro area because monetary policy, sovereignty can in
21:02
principle have some benefits. Sovereignty being outside you
21:09
can change your exchange rate as as you please.
21:13
You are not submitting yourself to a certain regulation.
21:17
So it might appear that it's, you know, it's a nice, it's a
21:20
nice sovereign rule that that governments can have.
21:24
So that's, that's, that's the positive thing.
21:26
But it this or can be seen as a positive thing or you think like
21:31
Poland that that, you know, we are a big regional country and
21:34
that, you know, we're not lining up to another regional block in
21:38
that regard. So that can be different,
21:41
different motivations. The checks are have been always
21:44
Eurosceptic in, in, in general, although they are so integrated
21:48
to, to, to Western Europe anyway.
21:53
And, and the Hungarians were were my own, you know, mother
21:56
country where I think, you know, there was an abuse of monetary
22:01
policy sovereignty. You, you can tell the central
22:04
bank what to do and the central bank does it's own thing.
22:07
There are scandals around it, in, in, in, in, in that country,
22:11
sadly, which is now being sort of more transparently exposed,
22:16
so I think. It's easy to manipulate the
22:21
exchange rate, monetary system, the supply of money to the
22:26
banking system. It's it's, it's the exchange
22:29
rate manipulation is maybe it's, you know, different cash.
22:33
I don't think that on the long term you can really manipulate
22:36
as we know the, the, the catch it real exchange rate.
22:40
But but the, the big thing, the manipulation, the, the, the
22:44
where I use this strong word abuse of monetary soil and it
22:47
comes from, from QE related activities.
22:52
So quantitative easing, central bank massive issuance, one form
22:57
of the other, it's own currency flooding the system and
23:04
directing it to your friends, you know, to your, to your, to
23:07
your favourites, to your friends.
23:09
And then then you develop this vested interest so and that, but
23:13
this. Is somehow very negative for the
23:15
taxpayer, for the savers, for the normal people in the country
23:19
when they lead this, manipulating things like that.
23:22
Well, of course. And then there is very clear
23:24
evidence. So let me let me side the
23:26
evidence. We did a very, I think a nice
23:29
joint study, Reiner Martin from the National Bank of the
23:33
Slovakia and myself. We published a study comparing
23:37
the inflation performance of four very comparable countries.
23:43
And this is relevant because we wanted to see whether being in
23:48
the Eurozone or being outside during the post COVID
23:54
inflationary shock have the country or not.
23:57
So we compared four countries whose economic structure is very
24:02
similar, so therefore comparable but under two different monetary
24:06
regimes, The Slovaks, which are already since 2009 in the euro
24:12
zone and the three countries, Poland, the Czech Republic and
24:16
Hungary, the other 3-4 Visagrad countries like this other four
24:22
who enjoy still, so to speak, monetary policy, sovereignty and
24:27
what we find. So this is evidence.
24:29
It's not blah, blah, blah, you know what or, or anecdotes of
24:34
corruption or what we find that the highest inflation very
24:38
clearly was in the three countries which which are not
24:45
members of the the the Eurozone. So the the Hungarians, the
24:50
European record holders 27% in 2023.
24:55
The pause, the Czechs were much closer to the Slovaks in terms
25:00
of performance, but still higher inflation rates as such.
25:04
And to bring down the inflation, to bring down from those high
25:08
loss inflation, they had to, to raise interest rates much more
25:14
than the Slovaks did under the, the, the eurozone system.
25:18
So in economics, we say that the sacrifice ratio, how much output
25:22
you forgo because interests are going, so you, you, you lose
25:25
some of your, your output, how much output you forgo.
25:28
The sacrifice ratio in in, in the eurozone and for Slovakia
25:34
was much, much lower than than in Poland, Hungary and the Czech
25:38
Republic. But not only that, that
25:41
inflation was better and bringing down inflation was, was
25:46
much less costlier in the eurozone.
25:50
Management of the crisis right was awesome.
25:54
Within the the eurozone itself, you have the big balance sheet
25:58
of the ECB that was for for the Slovak, They didn't have to
26:02
worry about exchange rate, short exchange shortages, exchange
26:07
rate, you know, shocks. Whereas the other countries,
26:11
these three, but also others in the region had to make recourse
26:16
as the ECB for foreign currency swaps and, and repo operations
26:21
to support at the, at the crisis points during the crisis, these
26:28
economies. So inflation wise, clear
26:32
advantages. And boy, when it came to crisis,
26:36
you had to go to the ECB, the the central Bank of the, the
26:40
eurozone for support in terms of currency swaps and, and depots.
26:45
So the lesson is very clear. The evidence is very clear that
26:48
it's much better to be within than outside the outside the
26:52
eurozone. Professor, I'm very deeply
26:55
anticipate about in Twitter I argue always for Poland to join
26:59
the Eurozone, Czech Republic, Romania and Hungary.
27:02
And I've fainted even some coins and the famous people like
27:07
WhatsApp. Klaus I put on the 2 euro coins.
27:09
Already he loved it. I'm sure he loved it.
27:11
I'm sure he loved it. That's true.
27:14
But nevertheless. No, like, jokingly.
27:18
And the situation is like this that some people in these
27:21
countries, you know, because of you and to enlargement they have
27:25
been relatively successful and rich.
27:27
Now Poland is now economic powerhouse and we are very proud
27:31
about the Czech Republic as well.
27:33
Hungary may be less. And then these elites, they say
27:36
we are now rich and we are rich because we stayed out of the
27:40
euro. And I say this is absolutely
27:43
wrong. But what's the economic facts in
27:45
your what say? What does the academia say about
27:48
this one? Yeah, obviously they are not
27:50
rich because they are certainly euro.
27:52
In fact as I was just quoting the evidence, you know they very
27:57
matters in monetary policy outcomes.
28:00
They were worse off so that just you know, they don't claim, but
28:06
it is of course true that this region the whole and it's not
28:11
whether you were in the euro or outside this region centre
28:14
Europe, the new EU members 2000 and four 2000 and seven 2013 for
28:19
Croatia. They massively benefited from
28:22
European membership. That is very clear evidence,
28:24
very nice EBRD and other research showing the gross the
28:31
premium for growth of EU accession.
28:35
So they call it EU accession premium and they show that of of
28:40
this ketchup so that these economies were growing faster
28:43
than than than the average European growth outside that
28:48
region. So the rest of the the EU, so
28:52
for this phenomenal convergent growth, a significant part
28:58
depending on the estimates 1518% of growth actually can be
29:02
explained only by the pure fact that these countries were became
29:07
members of the of the EU. So the EU accession benefit that
29:12
the euro, the adoption the euro adds to this or not, there is a
29:16
debate. There is no clear evidence
29:18
whether there is growth benefit. There is some trade creation.
29:22
Definitely it's for for citizens.
29:24
There is a lot of which you don't capture in, in the these
29:27
statistics, growth statistics. But for citizens, the ease of
29:31
travel, the connection, the the of that, that, that the payment
29:36
system offers for the firms to the, it's all, all, all, all
29:40
additional benefits. So to claim that the, you know,
29:44
they are, they're growing faster because they are the the euro is
29:49
just just, you know, doesn't this is not true.
29:52
In this professor, in this debate, I always say the only
29:56
way for these countries, which are very patriotic countries and
29:59
they're very proud because they're successful, but they're
30:02
still in the GDP per capital basis.
30:04
They're about half of Germany, half of Austria.
30:07
And you know, they are kind of jealous to us, obviously because
30:10
of history, we are competitive. And I always tell them the only
30:14
way you can catch up to Germany, my dear friends from Poland and
30:17
the Czech Republic, is inside the Euro, because convergence
30:21
will be accelerated in the same currency.
30:24
Is this true? Would you subscribe this
30:27
argument or am I too optimistic here?
30:30
I think that would be, that would be benefits not as much as
30:33
as EU membership. That was really the
30:36
transformation a big factor, but that would be clear benefits.
30:40
I mean, let's take some some easy examples.
30:43
In the Czech Republic firms, the, the, the population,
30:49
everybody is, is, you know, thinking in terms of EUR, the
30:51
firms are recording everything, you know, bookkeeping everything
30:55
is in euros. But at the end of the day they
30:57
converted back the finance is in euro, right.
31:01
So so finance, yeah, that I mean, you know, they finance the
31:04
decisions because lot of the loans are, you know, based from
31:08
that the banking sector is is is is basically owned by by by your
31:16
area based banks. So it is so correct.
31:20
So, so, but they still, you know, the rent of the day, you
31:23
know, they everything into, you know, the local currency Corona.
31:27
So you know, now it is true. And I I, I don't want to
31:31
downplay we, we, we haven't talked about it that there is of
31:34
course in in this area of, of of kind of, let me put it,
31:39
positive, positive nationalism. You know, each country first,
31:44
etcetera, etcetera. You could, that could be a kind
31:49
of a national pride to have your own little currencies historic
31:53
and, and I understand that, but we have moved.
31:56
I mean, the world has moved. We have moved and we have moved
32:00
to small countries. You know, they, you don't, we
32:03
just have to adopt to what really works for your country.
32:07
So Hungary first, Poland first, Czech Republic first, now means
32:13
that it is good to be in the euro.
32:16
It's good to be under the other. It's evidence.
32:18
It's not, you know, blah, blah. It's not preferences, you know,
32:22
if you really believe you're really patriotic, but then you
32:26
don't want to have the highest inflation in Europe, you know,
32:29
like the Hungarians did. You want to have as little as
32:32
possible to, to learn to have to be part of the, the most
32:36
powerful decision making process that there is.
32:39
I mean, in the end, you know, in a kind of very big picture,
32:43
right? So the world is moving into 3
32:45
currency areas in my, in my view.
32:47
One, of course is the the dollar area and the the dollar, the US
32:52
dollar, which is undoubtedly in any measure still the lead
32:55
currency, lead global currency, but it's kind of losing a little
33:00
bit of of its luster, partly not not partly for self Infinity
33:09
policy reasons. The second is the euro zone,
33:11
right? So and then on any measure, you
33:15
know, 2025% different what you know, you saw, you see these are
33:19
foldings, etcetera. That's a payment system, the
33:22
euro zone. And the third is the Rambini,
33:24
the Chinese currency. The world is moving to a system
33:29
of these three dominant currency areas.
33:32
Now for small open economies, small even medium sized open
33:35
economies, your choice is where do you want to belong?
33:39
Where do you belong naturally economically and where you
33:43
belong value based, right. And Central Europe is bloody
33:48
lucky. We are just next, next to to
33:53
the, you know, the, the core of, of one of the emerging global
33:57
currency areas. So I mean, it just makes sense
34:01
that do you want to belong to China and the Chinese sphere of
34:05
interest in terms of values and and also economic?
34:08
It's just to make too much sense to me.
34:11
Can you belong to the American one?
34:13
I mean the euro, it's a little bit far.
34:15
Then we see, you know, the American American policies.
34:19
So this is honestly a non brainer, but I think it would be
34:24
good to explain a little bit this to the population that
34:29
you're positive, positive transformative nationalism today
34:34
for a small open economy is that you have to make the right
34:38
choices for your country. And to my mind at least, the
34:42
right choice in the monetary sphere arrangement is very
34:46
clearly the euro area. No, of course you already has
34:50
problems. And, and allow me just to inject
34:54
because we don't want to look like we, we don't know.
34:56
Yes, it, it has issues, that has problems.
34:59
There's a very good literature. But these are all fixable
35:02
issues, issues, right? So we have to think of the big
35:06
picture and the system that is, that is fixable, that can help
35:10
us and it's beneficial for us. We are beneficial for them.
35:15
So it's a mutually beneficial sort of if you take the the
35:18
sovereign hat on both, put on the sovereign hats on both sides
35:23
and and you know that in the end don't do you join the euro area.
35:28
We had good success 10 years with the Baltic countries
35:31
joining in the Eurozone and then we had a long break.
35:34
Then came Croatia along and then now Bulgaria, which is big
35:37
success. I'm so happy about it and it's
35:39
something to celebrate. The question is which of the
35:41
eligible countries of their potential eurozone members will
35:45
be the next and will there be a next country coming up and which
35:49
is your guess and where you think is a good chance to have a
35:54
new country into the eurozone and show the world we are
35:57
stronger, we are active, we work.
36:00
The options are clear from Denmark to Sweden, from Romania.
36:04
Look, look, I mean the debate, the debate is there in, in the
36:09
region, in, in the non euro area countries.
36:13
I, I, I don't know about Denmark, they got bruised
36:17
through national preference that they have done OPA OPA.
36:20
But honestly they, they are in the system, but they completely,
36:24
you know, linked to the, to the euro.
36:27
They are not in the decision making system.
36:29
So that's, you know, that's one set of policies, but.
36:33
Consequences. It has big consequences because
36:35
Greenland, for example, which now is everybody's mind, is also
36:39
not in the euro, because Denmark is not in the euro and so they
36:43
have not the whole. Yeah, maybe maybe for Greenland,
36:46
we have other EU membership, but but you know, Sweden, Sweden is
36:52
rethinking. There is good research coming up
36:56
revisiting the the issues and, and it's very impressive, you
37:00
know, that I didn't have a referendum, but that was not in
37:03
favor, but they are revisiting. They even joined NATO three
37:07
years, surprising the world and themselves.
37:09
If we are, it's a different world.
37:11
We need European unity and and part of the year.
37:14
In the end, in the end, I mean, let's just say it in the end,
37:17
the Euro has always been as much an economic integration tool as
37:22
a political integration tool and the source of security and
37:25
unity. So today all the euro adoption
37:30
going back to the your, your, your original question or your
37:33
option is, is, is like a technical issue.
37:36
Fine, there are technical requirements, they are good,
37:40
bad, blah, blah, you know, treaty, etcetera, etcetera.
37:43
We have a set of requirements, but it's not simply a technical
37:48
issue, it's not simply the ECB issue, it's not simply I would
37:52
say the commission's issue to write a report that you know,
37:55
this countries X centimetre away from this criteria or not.
37:59
That is it's, it's an important technical groundwork.
38:04
But boy, this is a political decision.
38:08
And in Sweden, as I understand it, they are coming out with a
38:11
big study, a very substantive decisive study, which which you
38:17
know, turns the argument, looks the argument and then turns the
38:20
final judgement in favour of your adoption.
38:24
Because they are already so much linked to it, because they want
38:29
to be even further linked to the European system and they don't
38:32
like the fact that are so integrated.
38:35
They don't want to be more integrated, but they have not in
38:38
the decision making process. So policy makers, I think policy
38:44
makers know they, they want to be in the table.
38:48
I mean, you know, in the novel. It's a very proud nation and
38:52
they have a lot to offer in terms of political.
38:54
And they have a lot to offer. They offer, but but as you know,
38:57
if you talk to and, and they are really very candid and, and very
39:00
honest about these issues as well.
39:03
And, and, and they say, you know, we are not in the banking
39:06
union, but we don't have the capacity to do what, what the
39:09
ECB does as, as in the, as a, some system.
39:13
So they have just, it's so clear, the arguments are so
39:17
clear. But as you say, yes, security is
39:20
also an important element. That would be also an important
39:23
element, I believe in Poland for that matter.
39:26
Yeah, and Poland is very difficult, political toxic
39:29
debate with the nationalists. But let me ask you about
39:32
Romania, because Romania after Bulgaria would be a logical next
39:36
country to join. But they have this Maastricht
39:39
theory, of course, and they have to fulfill it.
39:42
And now with everybody having high inflation and also Romania
39:46
has increased the depth level and there is a lot of the talk
39:49
that Romania is not ready. But when you look the debt level
39:52
of France and Italy and Belgium, when you look the inflation
39:56
level of other countries, Austria are starting, but we
40:00
have really high inflation in many European countries.
40:02
So we asked the new countries to be fulfilling the criteria which
40:07
were set up in, I think in Maastricht actually in 292 or I
40:12
don't know, reconfirmed in 98 and they were very important
40:15
criterias 25 years ago. And we asked him to fulfil that.
40:19
And but now the situation is that Romania has to have much
40:22
better economic indicators than most of the eurozone members in
40:26
order to join. And in reality, it would be very
40:29
beneficial for us and for geostrategic reasons, when we
40:33
could have the whole Black Sea region in the eurozone.
40:36
And in terms of stability and global significance of the euro,
40:40
to have such a big economy like Romania and the Eurozone,
40:43
wouldn't it be wonderful? Yes, as a goal that's that's,
40:47
that should be the ambition, I agree.
40:50
But jumping when your conditions and it's not just a little bit
40:54
worse than than it's quite quite, quite, quite quite
40:59
problematic in some areas. So some technical conditions you
41:03
have to have to be able to fulfill.
41:05
I, I and I, I don't have a quarrel with that.
41:10
But what is really important is for policy makers to say again
41:15
to to their population that we would be much better off if we
41:21
were in the Eurozone, but we have to commit to that and have
41:26
the policy passed leading up to that.
41:28
And that the ECB also can help, you know, a little bit maybe
41:31
more flexibility. They they did, they have done it
41:34
in the past, but, but I would imagine they are they are open.
41:38
They would be open, but the countries cannot run, you know,
41:41
910% of GDP deficit and then join the eurozone.
41:45
That wouldn't work for them or or for the Eurozone for that
41:49
matter. So so you know, we cannot be too
41:53
volunteeristic Gunter in in in this right.
41:57
What is important is to commit to policies like Bulgaria did
42:01
from 1997 to commit and you know, through various shocks,
42:10
through I don't know how many governments of different
42:14
flavours, they stick to that, to that commitment and they let
42:18
their country to, to the Eurozone.
42:20
So jumping from, you know, hoopla and not making, you know,
42:26
the effort is, is is is is is. I don't think that would help.
42:31
But the process has to be so long.
42:33
But you can you can have a view. I think what is important today
42:38
is to commit to say as actually the opposition leaders, the
42:43
opposition party in Hungary. Tisa says that DVL Artemi join
42:50
is objective is to join the euro, but they don't say that
42:55
today we would be able to even if they reach, you know, the
42:58
expectation is that they they get to power, they turn back to
43:02
Europe, then back to Europe is the the one of the the important
43:06
political slogans of of of that opposition movement.
43:11
The hope of Europe that Peter Maggie will win the elections in
43:14
April. So, so, but that's what they
43:17
said that they said that, that, that also the euro and that's,
43:21
that's then you have to underpin with your your policies and, and
43:25
demonstrate that that you're you, you can be, you know, a
43:28
beneficial member of that thing. So jumping just just like that,
43:32
you know, Romanian, I I wouldn't be, it's not realistic.
43:36
And then I wouldn't help anybody.
43:38
But but but can I just but there is one area, but so, So what is
43:46
for these countries the important is the commitment
43:49
right sort of to say this is what we want and we have a time
43:52
schedule and as tight as possible and and get the EC BS
43:56
support and move the ECBA little bit in that regard.
43:58
But but there are countries like what we discussed in Southern
44:02
Eastern Europe, which you know as part of the EU managed peace
44:06
plan, adopted the Euro as also you know, continuation from the
44:11
Dutch market etcetera. Kosovo and Montenegro.
44:14
And they are, you know, for them.
44:17
I really think that there should be some special arrangement.
44:20
You don't have to change treaties.
44:22
They are very small countries, but they really, really, you
44:26
know, you, you, you last, they could have, you know, you know,
44:30
a half a seat at the table. So not with all the decision
44:34
making, but to understand more what's going on to bring their
44:38
point of view to the table. It's not going to, you know, but
44:42
I think symbolically it would be important that then and it's
44:45
important for Ukraine that we discussed earlier that when you
44:49
had a peaceful then you have a big political push and it's, you
44:54
know, EU membership and euro adoption is part of that, like
44:59
in the case of Montenegro. But then, you know, acknowledge
45:03
that, acknowledge that with that, you know, half seat at the
45:06
table, you know, rotating seat at the table.
45:10
Important. These things are important and,
45:12
and, and, and giving swap lines automatically to these countries
45:17
and this would make a hell of a difference.
45:20
You know, and you don't have to change treaties.
45:22
You don't you can do this. The ECB governing can, as far as
45:26
I know, I'm a no leader, but of course this is doable.
45:30
This is doable. It is, it is, it is like it is
45:33
showing the commitment of, of, of of EU leadership and, and,
45:38
and the ECB underneath to, to European integration and to
45:44
their own plans again to start to the EU peace.
45:47
Plan, Professor, also, maybe I will ask you also to explain it
45:49
a little bit. Part of joining the Eurozone
45:52
means also that your banks have to fulfil the ECB regulation for
45:56
banking supervision. You basically put your larger
45:59
banks into the supervision of the European Central Bank, as
46:02
far as I understand it. And let me ask you that some of
46:06
the prime ministers of the non euro countries are not so keen
46:10
to have too much supervision from Frankfurt on their big
46:14
banks. Yeah, and maybe that's some of
46:17
the reasons. No, that's that, that's, that's
46:19
a mute. It's it's a mute question Centre
46:23
Europe, if you allow me in support of your of your point.
46:29
Central Europe for historic reasons, Central Euro's banking
46:32
system is is basically a euro based bank hold much of it
46:38
right. This was the result of all the
46:41
the privatisation transformation efforts in the 1990s.
46:47
You know that the cheque banking system is, is is pouring on euro
46:52
by Eurozone and like even in Hungary roughly half depending
46:58
on how you calculate it, banks are still, you know, it's not
47:01
not Hungarian owned and they work very well.
47:04
They're very profitable. The most potential banks, by the
47:06
way, in Hungary, for example, Airstar and and Poland as well
47:11
has, has foreign owned banks from the EUR.
47:15
So, so that the banks are already drawn by, you know, by,
47:19
by the capital and, and, and noha of, of the Eurozone.
47:23
So why not inviting the regulator?
47:25
So the fact that they are supervised already now that is
47:29
there is there discretion within the the eurozone also I don't
47:33
want to go too technical, but there are areas which are still
47:37
national macro prudential regulations are national
47:40
importantly at least partially, but quite you know, powerfully.
47:49
So you can, you can still have national policies if you have
47:52
certain concerns, but in terms of general regulation, your
47:56
banking system is already in the euro zone.
47:59
The second question you were touching is about this swap
48:02
lines from the central bank to the national banks.
48:05
This is something more complicated.
48:06
You might have to explain it. It means that European money is
48:11
available for the banking system, for the National Bank or
48:13
what? What does that mean this support
48:15
mechanism? Yes, yes, it, it means that.
48:19
So let me be just not too technical because that's not the
48:25
point here. Global banks and European banks
48:30
are a global regional banks like you, you're talking from Vienna,
48:34
the the Austrian banks, they operate globally, they operate
48:38
as we are discussing centre Europe as as well.
48:41
So they have liquidity needs and their subsidies have, have
48:45
liquidity needs in euro as well, right.
48:50
So there is a school of thought that for global banking, you
48:57
know, swap arrangements should be very natural.
49:00
And indeed, you know that, you know, the US central bank, the
49:06
Federal Reserve, the European Central Bank, the ECB, the Bank
49:11
of England in the UK, the, the Japanese central bank,
49:18
Australia's Reserve Bank. So they all have these swap
49:22
lines because at the end of the day, because of this, you know,
49:25
big global trade and finance relations, they need currency
49:30
other than their own and they swap these regularly.
49:36
No, So this part of the, of a global life, if you wish, right,
49:40
this type of arrangement, but it's usually done among the big,
49:44
big countries. Then it comes to crisis
49:46
situations. And this is what we are
49:48
discussing. So post COVID inflation shocks
49:50
and, and, and the like, or the global financial crisis, smaller
49:55
countries, you know, can run up shortages in, in their
49:59
countries. They also, they are very open.
50:01
They, they, they have trade, they have finance in, in, in, in
50:06
foreign currency. And as the market sees sort of
50:09
the markets don't function under stress in a crisis, they they
50:15
may need liquidity in euro, in dollars, etcetera, etcetera.
50:20
So the central Bank of the euro zones that the ECB can offer
50:27
euros to or to to Poland, to the Czechs, to to Hungary, to even
50:33
Albania and and others in the in in the case of need, it is has 2
50:41
forms. You can get the currency to
50:43
currency which is the currency swap, or you can have repo
50:49
operations in which you already have to have an EU denominated
50:54
paper and I swap it against currency.
50:56
And that relates to maturity issues and certain market
51:02
segments. It's much better to have
51:04
currency swaps, be it as it may as a global currency.
51:09
As we discussed, you know, the US is a global currency.
51:12
The the euro should become, should be becoming a global
51:16
currency. And I think the them being will
51:18
be becoming one way or the other also global currency.
51:21
They, they have to have these swap lines, but it is at the
51:25
discretion of that central Bank of the federal reasonable, the
51:29
ECB or the People's Bank of China.
51:32
When and under what condition they, they give these, these
51:36
loans. And what if we're discussing
51:37
earlier is that in certain cases like say Montenegro or Kosovo,
51:41
when they need the EUR, they are only using it as part of the EU
51:46
peace plan. It's working.
51:47
The whole thing is working. An automatic swap line offer.
51:53
It's in one word, professor. It means you are part of the
51:56
European family and in case of need, the central bank will help
51:59
you. That's the short.
52:01
Version, yeah, but but also yes, yes.
52:03
And you also live up to to all what is necessary.
52:06
Obviously, Montenegro can use the euro because the policies
52:09
are aligned such that it enables them to.
52:13
So we have now come to the Western Balkans.
52:16
We have two countries which have as part of their post war
52:18
arrangements with the European Union, because they had the
52:21
German mark in the beginning. Then in 2002 they were allowed
52:24
to use the euro unilateral to the dismay of the young central
52:29
bank. But it has been extremely
52:31
beneficial for the population, for the investors, for the
52:33
stability, for the reputation of these countries.
52:37
And basically all these countries live very much from
52:39
remittances and from transfer subsidies.
52:43
So it was was a good investment for the European taxpayers, for
52:46
their own taxpayers and it was very good.
52:48
So that's basically already something we have achieved
52:51
there. There is a Bosnia, Bosnia in 96
52:54
has introduced its own currency and but they were somehow not
52:58
allowed to to join over to the euro and they are still with the
53:02
basically German mark Germany. They have a.
53:06
Mark. And but it's called convertible
53:08
mark. But it's basically a one to one
53:09
to the old German mark, and it still exists.
53:12
And in many ways, I have argued very often, it would be highly
53:16
symbolically valuable for the European future of Bosnia if
53:19
this would be also allowed to have Bosnia to adopt the euro.
53:23
But this idea never gained any traction because, I don't know,
53:27
the Serbs there may block it maybe, or the central bank
53:32
thinks that's too unconventional.
53:34
But in the bigger picture, when we come to a very small economy,
53:37
which Bosnia ultimately is already back to the euro,
53:41
wouldn't it be with some kind of feeling that we are in a big
53:44
crisis now with Russia and economically under pressure,
53:48
some generosity and allow Bosnia to adopt the euro as a symbolic
53:54
gesture to move more closer to Europe and for economic
53:57
unification? Would it not be meaningful?
54:02
You know, a country can under certain conditions, but can
54:06
always adopt the, the euro unilaterally.
54:10
You know, Hungary could could just, you know, buy it's all
54:13
monetary base, replace it with EUR and introduce the euro.
54:17
So you can kind of do that. The question is the
54:20
consequences, how you deal with that.
54:23
And, and I, I am not familiar enough with the Bosnia
54:28
Herzegovina situation to, to, to say that, but it is important
54:34
to, to look at all these, all these aspects.
54:39
So unilateral adoption of the euro is, is, is of course, in
54:43
theory it's possible if you have enough euros to replace your own
54:46
currency and then then you manage your economy according.
54:48
I mean, this, it has happened as well in the world.
54:51
But, but there are certain circumstances and the decision
54:54
making in the Bosnia cases, as we know, it's just, it's very
54:57
complex. It's as you alluded, it's
55:00
politically throat So but but but in in kind of in a very big
55:06
picture based on objective and as discussed earlier, Bosnia is,
55:12
is one of the small countries where obviously you know,
55:17
ultimately getting to the you know, using the Europe would
55:20
would make sense. Absolutely.
55:22
We have also in North Macedonia a fixed currency regime since 30
55:27
years actually, or something like 25 years since Bulgaria I
55:30
think as well, they have a fixed currency.
55:32
And also since 2012, more or less Serbia has a fixed currency
55:36
regime towards the euro. And also recently Moldova has
55:40
also decided to do that. And there's actually only one
55:44
country left in the Western Balkans, Albania, which has
55:47
another phenomenon. They are not decreasing their
55:50
currency, but it's increasing the currency towards the euro
55:54
regularly and it makes everything very expensive there
55:57
like. Tourists.
55:58
You mean Appreciate it? Yeah.
55:59
Appreciate it. Yeah, it's getting more
56:00
expensive. And I lived in Albania, it was
56:03
130 lakes to the euro and now it's 100 to 1.
56:07
So it has really considerable increase of the lake and that
56:11
makes it very expensive to export.
56:14
And tourism is also getting really expensive actually
56:17
despite its beauty. And that's also one of the
56:19
phenomenon which is happening in the currency area and Europe.
56:22
And it has also negative impact. And I'm obviously arguing for
56:28
Albania to also back to the euro, but.
56:32
You know, long term and policy commitment, that's what matters.
56:38
Albania is, is is is is a wonderful country.
56:41
I, I, I, I was fortunate enough to, to be there member and, and
56:46
be member of the, the IMF membership negotiations when
56:50
they, they opened up in 19 ninety 19/19/1991.
56:54
And since then I've been returning there.
56:57
It's it's a wonderful country with with with wonderful people,
57:03
but there are specific reasons why, of course, you know, the
57:06
currency is appreciating and and I trust the central bank there
57:12
actually that policies they are pretty good at what they do.
57:16
But you know, going away a little bit perhaps from country
57:20
case by case, I think the important thing and you know, in
57:24
terms of, you know, the message that that we we have to hammer
57:28
in that is that what's important is that that countries work,
57:34
commit openly to euro adoption and things should fall out
57:39
policy wise. And then the ECB should be a
57:42
little bit maybe more flexibly support that process.
57:45
And that includes of course, you know, swap lines arrangements if
57:48
the policies are good as, as, as an acknowledgement of the
57:53
progress they are they are making.
57:56
Again, of course these countries are not in the EU and that's it
58:02
has a sequencing problem. There are some proposals
58:06
actually to to reverse the sequencing as as you are
58:09
suggesting and you just adopt the euro and then then do the EU
58:13
later. So.
58:16
You know, you know, you know. Yes, yes I did.
58:26
At the conference, because our next topic is Ukraine obviously,
58:31
and I ask for Ukraine Euro adoption at the conference and
58:34
the whole room went silent. And I understand it's a
58:38
difficult question because you know, Albania is very small,
58:41
Kosovo is very small, Macedonia is also very small monetary
58:45
volume. But of course, Ukraine in all
58:47
dimensions is the one big, big country.
58:51
It has a big monetary system, it has a considerable GDP.
58:54
And of course, the cost for reconstruction, the cost for
58:57
winning the war, the cost of subsidizing Ukraine during the
59:00
war until victory. Now we have 90 billion were
59:04
decided in the last council now in December to make a loan
59:08
together and to keep Ukraine in the war financially as well for
59:12
two years. So all these things are
59:14
happening and all these things are extremely expensive.
59:17
They're really, really expensive and will stay very expensive for
59:20
the Eurozone, for the European system and of course for Ukraine
59:23
in terms of blood, of course. But now we are discussing more
59:26
about the currency and the financial cost.
59:28
So the situation is what to do in terms of currency situation
59:33
with Ukraine and what are the academic considerations?
59:37
Where's the status of discussion at the moment?
59:40
What's your consideration in terms of monetary future for
59:43
Ukraine because it's the biggest issue around?
59:49
Right. So just in, in full
59:52
transparency, so I'm an external member of, of an Advisory Board
59:57
to the Kiev School of Economy. She's she's doing a fantastic
1:00:01
job in, in, in the harshest conditions.
1:00:05
And whenever I have the chance to say I, I, I, I, I sent. 2
1:00:10
messages. Your communication is important.
1:00:12
You have to focus. You are very good at that.
1:00:14
You focus on your message. So for the Ukrainians, there are
1:00:17
two messages and we touched upon that earlier in the
1:00:19
conversation. One is align your military
1:00:23
objective with the EU, make them really interested in your EU
1:00:26
memberships through that Channel.
1:00:28
And the other is that when you think about EU membership from
1:00:32
the beginning, you have to think about your own membership.
1:00:35
It is happy your economy with all the reasons that you you
1:00:39
eliminated. I'm not going to lose it.
1:00:41
But all the reconstruction, everything.
1:00:43
It will be European lad and and supported, but also you want to
1:00:50
build institutions that's supportive of that process.
1:00:54
You want to build a political consensus.
1:00:57
Imagine the Russia propaganda effort against the euro euro
1:01:05
idea for Ukraine, but they've done also in Bulgaria and
1:01:10
elsewhere in that area. So how strong that would be in
1:01:14
the in the in the in post war Ukraine.
1:01:18
So build the understanding of of the population, explain that
1:01:23
that and and adjust your policies.
1:01:25
That's the objective from the beginning.
1:01:27
If you don't do that, if you don't do that, you will end up
1:01:30
like my home mother country. You develop vested interest in,
1:01:36
in the opposite in, in, in, you know, monetary sovereignty,
1:01:40
which in certain instances can be beneficial, but on the long
1:01:44
run it doesn't help you, it hurts you.
1:01:46
And it it serves the, the elitist interest in, in many
1:01:50
respects. So even for pure governance
1:01:54
reasons, I don't know nobody don't say that it Ukraine from
1:02:00
the beginning, you know, defence EU membership with euro
1:02:04
membership, it technically will be not synchronized.
1:02:08
We know that blah, blah, but that's the plan.
1:02:10
And this this should what should drive policy?
1:02:14
This should but what should drive collaboration on both
1:02:17
sides, right. So also the EU shouldn't think
1:02:20
that, you know, we do it EUEU light, but the euro will be, you
1:02:24
know, down the road, you know, whenever they are ready.
1:02:27
No, the plan is to be to become European, European in the EU
1:02:33
sense and European in the, the, the, the monetary sense.
1:02:37
Because in the end, as we said, you know, the euro is also a
1:02:42
political integration tool as any, you know, big empire if you
1:02:48
wish. And it's a benevolent empire,
1:02:50
but it's a good empire. We love it.
1:02:51
We, we believe in it. It's about any empire.
1:02:55
Money is always a political project always.
1:02:58
So let's not pretend that it's a technical issue.
1:03:00
It's not simply it has technical conditions you can discuss.
1:03:04
I mean, you, you have certain views the other side.
1:03:06
Well, you can, but but in terms of the objective, the desire and
1:03:11
what should say policies that should be, you know, Euro
1:03:15
membership and that should be very clear.
1:03:17
When I was working as advisor in Ukraine in the field of
1:03:21
economics for a new project, I had a lot of consultation with
1:03:24
SMEs and they told me that they had issues because their savings
1:03:29
was going in Rivner. That's the currency of Ukraine.
1:03:33
And famously there was this kind of link which under this corrupt
1:03:36
President Yanukovych, he had still promised to have 8 to the
1:03:41
dollar. That was his campaign slogan.
1:03:43
He will keep her the currency at 8 to the dollar.
1:03:46
That was in 2012 or 10 somewhere in that direction.
1:03:50
And then now when I lived there in the years during the Ahmadan
1:03:55
after the reform effort, 2016 to 20, I remember it was always
1:04:00
around 30 to the euro. So that's a bit of an exchange
1:04:03
between dollar and euro, but nevertheless it has already
1:04:06
significantly the lost value in sense to the euro.
1:04:11
And now recently I've been in March, I've been in Leverf for
1:04:17
one visit, I've conference at the Catholic University.
1:04:20
And then I saw that Rivner is now already close to 50, as far
1:04:24
as I understand. So we are coming from the area
1:04:28
of 678 now to 50 actually in terms of relation approximately.
1:04:35
And The thing is for the people, they were really crying because
1:04:39
that means when you have savings, you lose them and you
1:04:42
have all these situations and there was a frozen banking
1:04:46
crisis in 2015 and all these things.
1:04:49
And you know, there were people, not only these military shocks,
1:04:52
which we all know, and not only the bombs, which are extremely
1:04:55
hard already, also their their financial history of the last 20
1:05:00
years goes through so many shocks which the families and
1:05:04
the companies had to absorb. I really started to cry when I
1:05:07
learned about all these things. And stability is also, it's not
1:05:11
only the visibility of the euro, but the stability of the euro
1:05:15
that you're saying things are safe, that you have credibility
1:05:18
in your currency. Yes, but you know, but but
1:05:22
Gunther, this is a poor economy. It's a war economy.
1:05:26
That's the that's the number one, number two, number three
1:05:28
problem. So, so that's has to be resolved
1:05:31
in a war economy. Show me one.
1:05:34
You know, I mean, they are holding it together
1:05:36
macroeconomically as as much as possible, but it's a war
1:05:40
economy. So that's the fundamental
1:05:42
problem. So I just, if you overnight you
1:05:46
introduce the euro for, you know, it wouldn't solve problems
1:05:49
because your underlying problems are still there.
1:05:52
And and that's the war has to end.
1:05:55
Russia has to withdraw, Ukraine has to leave, has to be become
1:06:00
member of the EU. And as committing from the
1:06:04
beginning to the introduction, the euro also worked over the
1:06:07
system, which then makes it sustainably an important member
1:06:12
of the of the eurozone family as well.
1:06:16
I will forward this interview as well to my Ukrainian friends to
1:06:19
see the direction to the euro. A very powerful statement from
1:06:23
your side, Professor. I'm very grateful for that.
1:06:26
Yes, we have discussed the euro, we have discussed the unity of
1:06:30
Europe, we have discussed also the defence industry, how
1:06:33
important it is to build up our defenses and to have a strong,
1:06:37
successful Europe in the future. Also for Ukraine to win the war.
1:06:42
Professor, would you like to say some closing statement?
1:06:46
What's your vision for Europe in 2026?
1:06:49
What are the most important reforms you think and that you
1:06:53
would recommend to policymakers? We have still three years to the
1:06:57
next European elections. This year in Europe will be the
1:07:00
year of reforms. We have in Germany a lot of
1:07:03
reforms on the agenda. We have also love underlined
1:07:06
with a full reform agenda ahead and we hopefully as well in
1:07:10
Ukraine and in all these places we are really working with full
1:07:13
speed ahead. What is your wish when you would
1:07:16
like to say the focus in terms of European reform and what you
1:07:22
want to see happen until I interview you the next time by
1:07:26
the beginning of 2027, where we will hopefully see already the.
1:07:30
Implementation of your wishes. Can I, can I say something
1:07:35
slightly, you know, controversial that you know,
1:07:39
make Europe great again? That's, I think it's, it's a
1:07:42
good, good slogan. I I I, I, I don't dislike the
1:07:45
make America great again in principle.
1:07:48
We all have to strive for the best that is possible under, you
1:07:53
know, the conditions that we have we face.
1:07:56
And that means build up the military, link it to your high
1:08:03
tech development, sensitivize your people.
1:08:07
Europe has to do it, you know, by itself, it has allies in the
1:08:11
world. And I think America is still,
1:08:13
you know, somewhere there, but it has other, you know, value
1:08:20
based systems to, to which it it is called take.
1:08:24
But for that, I think what, what, what really is, is still
1:08:29
missing is, you know, we have to think a little bit over Europe
1:08:35
and, and, and, and the Confederation, which takes into
1:08:41
account more certain sovereign interests in leadership and
1:08:46
honestly, the, the governance, this everybody's equal.
1:08:50
And it's very nice. It's very familiarized, but it
1:08:53
doesn't work in real life. So I'm happy to see Germany
1:08:58
taking the lead and the, the chancellor taking the lead.
1:09:02
I'm happy to see Italy take the lead.
1:09:04
Very formidable woman, right? And France and let them lead.
1:09:09
Let them lead and, and stand up, stand up to this challenge.
1:09:15
Challenges. I mean, we are talking about
1:09:18
Europe, right? Sort of.
1:09:19
And that's, you know, that's leadership.
1:09:21
Figure that bloody thing out. You know, we are just pure
1:09:24
economists here. We have some ideas.
1:09:27
Some of it is, you know, it's just feeling that it's, it's,
1:09:32
it's the time for unity, time for strong leadership, time to
1:09:36
stand up for, for European values and, and yeah, make
1:09:41
compromises than needed. But they, you know, that that's
1:09:44
that's that's what's needed on some.
1:09:49
You know, if I think about the mantra for Europe, if you're
1:09:52
having this, you know, also, you know, speed over perfection.
1:10:00
Sometimes I feel that we we do the processes, we do these, but
1:10:05
because we want to comply with this regulation and the debt
1:10:08
expectation and all that leadership and speed over
1:10:11
perfection for a unified Europe that stands up the economically
1:10:15
strong and stands stands up to to the military bully on the
1:10:20
Easter shore. And that is a very powerful
1:10:23
closing statement. Professor Piroshka, I'm very
1:10:26
happy that you took time. Thanks for your very pleasure
1:10:30
and positive statement. Make Europe great again by more
1:10:34
unity in the Europe, by strong defense industry, by support for
1:10:37
Ukraine and by victory and liberation of Ukraine and come
1:10:41
in objectives and leadership by Uzola von der Leyen and her team
1:10:46
like they have done it in Macosur.
1:10:48
Now it's time to make a good performance for 2026.
1:10:52
Professor was very good interview.
1:10:54
Thanks a lot for that and best regards and to you.
1:10:57
And maybe next year in January, I will invite you again and
1:11:01
we'll discuss about what has happened and where we stand with
1:11:05
the Euro. And thanks a lot for your
1:11:07
support. Pleasure, pleasure.
1:11:09
Thank you for the opportunity.