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Christine Lagarde - President of the European Central Bank | Podcast | In Good Company — Transcript

by Norges Bank Investment Management · 6,211 words · 1,062 segments · language en · Watch on YouTube

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0:01Hi everyone, I'm Nicolai Tangen, the CEO
0:03of the Norwegian Sovereign Wealth Fund,
0:04and today we are in particularly good
0:06company because we are in Frankfurt with
0:08Christine Lagarde, President of the
0:10European Central Bank. Lovely to see
0:11you, Nicolai. Fantastic.
0:13>> to Frankfurt. Thank you. Now, Christine,
0:15you've been
0:16you have had a tremendous career. You
0:18were running a global law firm. You've
0:19been the Finance Minister of France. You
0:22ran the IMF for a decade, and now you
0:24are steering the monetary policy of
0:25Europe. So, thanks for seeing us.
0:28Great pleasure. I heard you recently
0:31say that the world now looks a bit like
0:331929. Mhm. What is similar? I think the
0:37analogy I made was with the '20s because
0:41it's it's a time when there were major
0:44technology breakthrough. Yeah. Um that
0:47of course we take for granted, but which
0:48were new at the time, you know, the the
0:50combustion engine,
0:52uh the manufacturing line, uh all sorts
0:54of things that just came about together.
0:58Uh at a time when fragmentation started
1:01to also
1:02um
1:03significantly change the way the world
1:06worked because it was preceded by a
1:08period of open trade and and the first
1:12globalization, if you will.
1:14And we are seeing a bit of that at the
1:16moment. Technological breakthrough,
1:18which I would, you know, associate with
1:20the development of AI and the diffusion
1:22of AI on the one hand, and
1:25fragmentation, challenges to the
1:27international world order as we have
1:29known it for decades. So, that's the
1:32analogy. And I think that we have to be
1:35informed by history
1:37and try to avoid what came after those
1:40developments in the '20s that ended up
1:42with number one, financial crisis,
1:45>> Mhm. um
1:46bankruptcies of banks in Europe, and and
1:48eventually because the matter was not
1:51handled very well at the time, a global
1:53conflict that destroyed um many of the
1:56of the advanced economies and made all
1:59of us at the time poorer and and fewer.
2:02What do you think are the implications
2:03for financial markets then? Cuz we know
2:05what happened at the end of the 20s. I
2:07think there are implications for policy
2:08makers of all stripes. Mhm. So, it means
2:12putting the onus on diplomacy rather
2:15than war,
2:16the onus on, you know, good financial
2:19management of public budgets,
2:22and being attentive to
2:25the real transformation and not so much
2:27hype. That's what I would I would see as
2:30favorable developments. The
2:32fragmentation we are seeing in the world
2:33just now, how does it impact Europe?
2:35Europe is of all advanced economies
2:37probably the most open.
2:39This is very true for some of the Nordic
2:41countries that you know well, but it's
2:43true for the whole of Europe. So, any
2:46shock to trade for instance is going to
2:48a pack impact an open economy more than
2:52an economy that, you know, is, you know,
2:55not self-sufficient, but not
2:57particularly vulnerable to to trade
2:59whether exports or import.
3:02Added to that, um,
3:05Europe has very limited,
3:08um,
3:09own resources when own energy
3:12sources
3:14with the exception of the renewable
3:16energies that we are pushing and the
3:18green transition that we are also
3:21trying to
3:23to finance as as a continent. But other
3:26than that, sources of energy are rare.
3:29Mhm. And that exposes us
3:32even more. So, it's openness on the one
3:34hand, rare fossil energy sources on the
3:39other hand, and the two combined
3:41exposes us
3:43um
3:44significantly in the current
3:46situation.
3:47>> What's the added complexity from what we
3:48are seeing in the Middle East?
3:51Well, I would I would say that the the
3:53the constrain
3:56I mean apart from the horrible drama
3:57that that afflicts the life of people
4:00the the the situation of families
4:03the
4:04the civilian population that eventually
4:06end up being the target of those wars.
4:09So putting that aside which is a big put
4:11aside
4:12it impacts the global economy in that
4:17energy sources oil gas
4:20are
4:22under threat in terms of transportation
4:25shipping the Strait of Hormuz comes to
4:27mind right away and as a result of that
4:29we see prices
4:33increasing significantly
4:35and we see a volatility that is
4:38unprecedented in in the in the last few
4:40decades where suddenly the price of oil
4:42can go up by 30% and go down by 30% in a
4:45matter of one day.
4:46So that that's what the Middle East
4:48current war development is creating for
4:52the rest of us.
4:53Disruption in shipping disruption
4:56disruption in insurance costs and
4:59obviously significant increases in the
5:01price of energy which as we know is
5:04necessary for all economies and has
5:07ripple effects
5:08in a matter of months.
5:11What's the right way of Europe to
5:12dealing with all this uncertainty? I
5:14think you have to distinguish between
5:15the short-term and the long-term.
5:17In the long-term it is in Europe's best
5:19interest to focus on that green
5:22transition that has been identified a
5:23few years ago by the European Commission
5:25and the European Council which comprises
5:28all the leaders of Europe.
5:31It's it's actually fascinating to see
5:33how only a few weeks ago
5:36this was almost put on the back burner
5:39as if it was not a priority. Clearly
5:41what's has happened in the Middle East
5:42is bringing this priority back to the
5:44front
5:45of the mind of of leaders and this green
5:49uh transition that would increase the
5:51volume of renewable energies versus the
5:55dependency on fossil energy is
5:58a long-term uh objective that has to be
6:01pursued and at an accelerated pace.
6:04Uh in the short term
6:06you know, obviously every effort should
6:08be made in order to reopen the Strait of
6:11Hormuz and facilitate the passing of
6:14this 20 25% oil traffic that goes
6:17through that particular
6:19uh strait. Mhm. Mhm.
6:21I think there is there is, you know,
6:23it's it's
6:24neither nor, but the the focus on
6:26nuclear energy is also one that we will
6:28see developing uh uh faster in Europe as
6:32well. Yeah. Now, there's been some
6:33changes in policy making in the US and
6:37we attended the same opening dinner in
6:38Davos.
6:39Uh and I you were sitting at a table
6:42uh
6:43next to where I was and you didn't seem
6:45very happy at the time. So, what went
6:48through your mind?
6:49You could see that, though. Yeah. I'm
6:51very bad at at covering up and having a,
6:53you know, a poker face. So,
6:55what I thought was not acceptable is um
7:00the fact that a a US government
7:02representative um without, you know,
7:05contradiction and without any kind of
7:07dialogue could in, you know, at the end
7:09of a dinner which was um which had the
7:12participation of many European leaders,
7:14including, you know, royalties and and
7:16and representatives of those countries,
7:19that he could just harangue and and and
7:22bash uh Europe in the way he did. And I
7:25thought, okay, well, that all opinions
7:28are are welcome as long as there is a
7:31debate, but the way in which this this
7:33came about was to me not acceptable, so
7:35I left the room. Were there some um
7:37truth in what he said? I think that
7:40every economy, every individual, every
7:43corporate has elements of
7:45vulnerabilities and of, you know, being
7:47wrong. And Europe does not escape that
7:49particular
7:51judgment passing, if you will. But to to
7:54bash
7:55the the green transition, to bash the
7:58the wind energy or the solar energy in
8:01the way it was done, I thought was just
8:04not in the cards. Do you think we can
8:06afford the type of system that we've had
8:08in Europe Mhm. for the last
8:11decades
8:13going forward? I think it's imperative
8:15for Europe and for the Europeans to
8:17appreciate, value, and vote for the
8:21value delivered by social democracies.
8:23Mhm.
8:24Does that mean that the entire
8:27social
8:28benefits
8:30can be maintained as is with the same
8:32financing and the same benefits?
8:35That is to be
8:36assessed, determined, and possibly
8:38modified over the course of time, given
8:40the demographic challenge that we are
8:42facing. Mhm. But the the the principles
8:45of democracy um
8:48the independence, the freedom of speech,
8:51the individual rights,
8:54the
8:55economic development at entrepreneurial
8:58level that it facilitates, I think those
9:01are precious precious principles that we
9:03have to secure. And if it requires, you
9:06know, reduced benefits in some areas, I
9:08think we should be prepared to consider
9:10that. If we have to
9:12referee and trade off between military
9:15expenses because we want to secure that
9:18precious
9:19treasure that has been acquired over the
9:21course of time and generations. And if
9:23we have to have less of those, you know,
9:26social benefits,
9:27that of which cost accrues and increases
9:31as the demographic changes take place in
9:34Europe, aging societies, less working
9:36population, I think we should we should
9:38face it and decide what we want
9:40collectively.
9:42So, to which extent has your job become
9:44more complicated or the job as the
9:46president of the of the ECB become more
9:49complicated with the change in
9:51geopolitics, demographics, defense
9:53spending, there are just a lot more
9:55things going into the mix than in the
9:56past, no? Well, we are lucky that we
9:58have driven we are driven by a mandate
10:01which I regard as the mission of the
10:03ECB, which is price stability. That's
10:05our duty to the people of Europe. We
10:08have to make sure that prices remain
10:10stable and that people can decide to
10:12invest, to consume, to be employed to
10:16in a landscape where prices are stable.
10:18That that's the mission. And and to
10:21deliver on that mission, we have to take
10:22into account all the developments that
10:24affect European economies. And that has
10:28internal elements and external elements.
10:32The geopolitical shocks is an external
10:34elements that has ramifications in our
10:37economies. The internal
10:40element such as demographics for
10:42instance, such as the impact of
10:43artificial intelligence, such as the
10:45rise in productivity
10:48such you know,
10:49we have to take more and more factors
10:52into account in order to determine how
10:54we deliver on the mission. That is true
10:55and it makes our life more complicated
10:57and it requires you know,
11:00a very strong focus and strong
11:02analytical skills in order to
11:06to deliver.
11:08So, do you think your background as a as
11:10a lawyer, as a finance minister, as IMF
11:12and so on has been particularly useful
11:14in putting all this together?
11:16The answer is yes.
11:18For two reasons.
11:20I think having been a lawyer
11:23has taught me how to listen.
11:27Has taught me how to
11:29separate Um,
11:31the key arguments from the vicinity, the
11:34signals from the noise translated in in
11:37economic terms.
11:38Um, and and that is
11:41very helpful.
11:43I think being a lawyer has also taught
11:45me a little bit of humility because
11:47you're only as good as you last
11:50advocacy, you last pleading. And
11:53ultimately, the magistrates will decide.
11:56I think having been a minister
11:58of trade, agriculture briefly, finance
12:01for a longer period of time has also
12:03taught me a bit of about the intricacies
12:06and the trade-off in politics. And at
12:08the end of the day,
12:10things happen as a result of political
12:12development, leaders uh taking a view,
12:16making a move, deciding a new policy,
12:19understanding how that fabrics works has
12:22been very helpful.
12:25The IMF gave me a very broad view of
12:27what is happening in the world and as
12:29you exposed me together with the years
12:31as Minister of Finance to very talented
12:34economists. So, you could argue, and I
12:36take this argument, you know, happily,
12:39that not having been an economist enough
12:41of my life,
12:43I'm vulnerable in my assessment and the
12:45decision-making that I go through. And I
12:48would challenge that because I'm
12:50surrounded and I'm so privileged to be
12:52surrounded by extremely talented
12:55economists
12:56of all stripes and colors. Do you think
12:58Do you think all the time between that?
13:00Do you think
13:01Do you think being an economist as a
13:03métier is overrated?
13:04I wouldn't say it's overrated. I'll tell
13:06you what I think is overrated. It's what
13:08I call the corridor thinking, the group
13:10think. When you put people having gone
13:13to the same schools, graduated from the
13:15same group of universities, having
13:17focused on the same issues, worked on
13:19the same models,
13:21all of them together. I think that is
13:23dangerous.
13:24>> And are they particularly susceptible to
13:26that? I think any profession is
13:28susceptible to that. If you if you bring
13:30about a group of lawyers and you leave
13:32them amongst themselves, you bring, you
13:34know, banking law experts, they can talk
13:36at nauseam about a particular thing, but
13:38they will not see the ramifications in
13:40terms of competition law, the impact on
13:42economic on economics, the financial
13:45consequences of what they do. So, I'm a
13:47very strong believer of the value of
13:49diversity of thinking, diversity of
13:52upbringing, diversity of background,
13:54diversity of gender. You know, in
13:57all my jobs,
14:00I have always tried to have
14:02one outlier in the group.
14:04And it's a difficult for the group Mhm.
14:07because you bring somebody who is, you
14:09know, different color, different gender,
14:11different background, different
14:12upbringing, different way of thinking,
14:15different way of talking.
14:17And this I mean, the group resists Okay,
14:20can be very irritating. Can be very
14:21irritating.
14:22>> but we have to welcome that irritation.
14:25Because that person is going to bring
14:26something different. He will see or she
14:29will see the world in a different way
14:31and we need to have that. Absolutely.
14:33Independence. You initiated a statement
14:35where you gave full support to the
14:37American Fed chair. Yeah.
14:40Why is it important So, naive question.
14:43Why is it important for a for a central
14:45bank to be so independent? For two
14:47reasons.
14:49One is
14:51we have a narrow mandate and we have to
14:53deliver on that mandate and we have to
14:55be accountable.
14:57But to do that, we need the level of
15:00independence is the is the best word to
15:02describe it. In other words,
15:05being exclusively focused on the mandate
15:07requires that you're not, you know, sort
15:09of
15:10vulnerable and moved around and and
15:13shaken by other imperatives that people
15:15have. So, it's to to singly focus on
15:18that,
15:19you're better off not having
15:22you know, others
15:24inserting their own
15:26um
15:27priorities, their own prejudice in what
15:29you have to deliver. Singleness of
15:30mandate, that's one.
15:32The second one is is an issue of timing.
15:36Because when we decide
15:38uh
15:39on the monetary policy front, whether
15:40you hike, whether you cut, whether you
15:42hold, whether you think that you are at
15:44such a a lower bound level that you have
15:46to use alternative tools,
15:49those decisions
15:51take time. It doesn't It doesn't deliver
15:53immediately a result. It's a matter of
15:556, 9, 12, sometimes more months.
15:59Whereas political leaders, fiscal
16:01authorities
16:03have different timing imperatives. They
16:05think about two things, the immediate
16:07effect in terms of the public opinion
16:10and they
16:11followership or their leadership or
16:13their votership
16:15and the next election.
16:17That's the the the the timing
16:19imperatives that they operate under. And
16:21there is nothing wrong with that. That's
16:23That's the way
16:24politicians operate. Mhm. But if I tell
16:27a politician who says to me, "We We need
16:29to deliver some good for the public
16:31opinion because they're concerned about
16:32this or that."
16:34I cannot do that. And I shouldn't do
16:36that because this is going to impact in
16:38a year's time. How worried have you been
16:40about the
16:42independence of the US Central Bank
16:44including also the quality of the data
16:46and so on being generated?
16:47You know, I don't want to interfere with
16:49with US domestic policy and pass
16:52judgment on on um
16:56on the current
16:57state of affairs as far as the Fed is
17:00concerned. What I was concerned about
17:02was the way in which somebody
17:06uh whom
17:07many central bankers around the the
17:09world regard as competent, independent,
17:13a beacon of integrity uh was being
17:16challenged and we thought that I thought
17:19personally that we should
17:21give him all the support that that he
17:23deserved. And I you know, I don't I
17:25don't want to interfere with the
17:27political life of the United States, but
17:29this is how we perceive him and this is
17:31how we value the independence of
17:34our central banks, including the Fed,
17:36which is the largest in the world. How
17:38is the independence of ECB different
17:40from the Fed?
17:41At the ECB, we are lucky because
17:43independence is engraved in the treaty.
17:45Yeah. And I cannot receive a call from
17:49any leader in Europe or from the
17:50president of the commission
17:53asking me to do this or suggesting that
17:55I have not done enough of that or that I
17:57have done too much of this.
17:59They cannot do it and they know they
18:00know that.
18:03The Rockies don't know, but they'll find
18:04out.
18:07Um, let's spend a bit on a bit of time
18:09on
18:10on Europe and what we're seeing here
18:12now. So, we've had
18:14uh, some
18:16quite weak numbers in terms of
18:17productivity in Europe, including
18:18recently in
18:20in Germany.
18:21Just how did we get to this point?
18:25This is not a recent phenomenon. It goes
18:27back to um,
18:29you know, I would I would say that we in
18:32Europe have missed the internet
18:34revolution.
18:35And when you you trace back the
18:38evolution of productivity between Europe
18:40and the United States, it's pretty
18:42obvious that this is where it started
18:45diverging. Where the US continued to
18:47increase productivity, not at the very
18:50fast pace, but increased, whereas we
18:52remained stable and and low.
18:56And we never caught up with that.
18:58The real question we need to ask
18:59ourselves now is
19:01is the use of artificial intelligence,
19:04not in a pioneer way as the US does
19:07because there is a a very strong
19:08concentration of data, capital,
19:12appetite,
19:13and probably expertise that is
19:16in in some parts of the United States.
19:19But the real question for us is, will
19:21the diffusion and use of that
19:24help us move our productivity up? We're
19:27beginning to see some some of that.
19:30Productivity numbers are are beginning
19:32to
19:33shake up.
19:35We'll see.
19:36Do you think we realistically can
19:38compete with the US in AI? Not in the
19:40pioneering phase. Whether you look at
19:44chips manufacturing and sophistication,
19:47whether you look at accumulation of
19:49data, whether you look at the price of
19:51energy,
19:53I think the US has a very significant
19:56advantage.
19:57But the pioneering is one thing. The
20:00diffusion is another one. And when we
20:01look at the diffusion even at SMEs
20:04levels, Europe is not lagging behind.
20:06Europe is actually a little bit ahead of
20:07the US in terms of penetration
20:11of AI in the manufacturing process, in
20:13the services elaboration,
20:15Europe is not lagging behind at the
20:17moment.
20:17>> do you think we could start to see the
20:19AI effect on productivity? Hard to say
20:22because this this AI
20:24creation, diffusion, penetration is so
20:27much faster than anything we've seen
20:29before. You know, when you compare
20:31electricity and AI,
20:34AI
20:35it new iterations and and and changes
20:39come about in 3 weeks.
20:41Well, maybe I'm exaggerating. Let's say
20:433 months.
20:44But and diffusion probably a little more
20:46than that. Let's even assume that it's 3
20:48years. Last the first chat GPT was about
20:513 years ago.
20:53If you look at my organization here,
20:55everybody has one artificial
20:57intelligence agent that it used that he
21:00or she uses all the time. Not yet in a
21:02very sophisticated way for most,
21:04although in some segments, yes, very
21:07much so, 3 years.
21:09Electricity, the diffusion of
21:10electricity, 30 years. Mhm. So, when do
21:13we see the productivity impact? How do
21:15we measure it?
21:16Probably a lot faster than what we
21:18think.
21:19How we do that?
21:21Under review. Will AI be deflationary?
21:25Wouldn't I would I wouldn't say at this
21:26point in time.
21:27It will
21:28It
21:30To the extent that it improves
21:32significantly productivity, it should.
21:36But, you know, what other factors do we
21:38need to take into account? Which ones?
21:40Energy. Well, you know, to to to teach
21:42an LLM
21:44at the at the pioneering edge where they
21:46are now, cost an absolute fortune,
21:49right?
21:50And it consumes masses of energy as
21:53well. Mhm. We're talking about 1 billion
21:56dollars at the moment, close to that.
21:58How will that impact prices? How will it
22:01be amortized depending on the business
22:03model? And depending and we circle back
22:05to the beginning of our conversation.
22:07Mhm.
22:08Fragmentation.
22:09Will fragmentation of the geopolitical
22:11world as we see it now, would that be
22:13conducive to the diffusion of AI and the
22:16leveraging of AI on a global basis,
22:18which would be necessary for those new
22:21uh
22:22LLMs
22:23to produce new artificial intelligence
22:26tools
22:27so that they can be properly amortized
22:29over the course of a big scale of users?
22:32Big question. Absolutely. There is a
22:34There is an argument that the new Fed
22:37chair has a a deep understanding of what
22:39AI will do to productivity and therefore
22:42that they will front-load interest rate
22:44cuts because of that. Do you think that
22:46argument holds?
22:47That takes us back to the Greenspan
22:49days, right?
22:50>> Yep.
22:52I think what we're seeing around the
22:53world is is going to um
22:55possibly disrupt even that theory.
22:58Uh if the price of energy is reassessed
23:01because of
23:03the vulnerabilities that we have around
23:05shipping transport transportation and
23:07insurance.
23:08>> Mhm. The limited push for uh renewable
23:12energies, I think it's it's the jury's
23:14out. Let's see. Situation is vastly
23:17different and if you look at, you know,
23:19public debt for instance, we're not in
23:21the same situation as in the Greenspan's
23:23days. We uh we touched on the
23:25productivity in Europe and we had the
23:27Draghi report, but um
23:29not so much has happened. Why is it so
23:30difficult to fix this problem? I would
23:33first of all contend that some
23:36developments have taken place.
23:37>> Okay. And it's not fast enough, it's not
23:40enough of it, but it is taking place.
23:42And there are simplification programs
23:44underway. There is a move towards uh
23:47capital markets union, which I've been
23:49talking about for such a long time and
23:50which I I I'm beginning to see the the
23:53developments of.
23:55Is it enough? Is it fast enough? No. Why
23:57is it difficult? Because of Europe.
24:00Because Europe is
24:01a club of 27 member states
24:05who in order to avoid
24:07the horrible wars that destroyed our
24:09continent decided to
24:11bring themselves together with the same
24:15objectives. But it is hard because each
24:17of them is sovereign. Each of them has
24:20its territory, its defense, its uh
24:24voting. So, you are talking about
24:28a lot of territorial aspects
24:30which are causing these changes that are
24:33necessary to happen slowly or to be
24:36delayed by what I call the gold plating
24:39that takes place at the national level.
24:41I'll give you an example.
24:42You decide
24:44through a directive that, I don't know,
24:46um
24:48supervision of financial institutions
24:51will take place in such a way.
24:53The gold plating happens because each
24:56and every national authority in charge
24:58of supervision will say, "Yeah, we'll do
25:00that, but we will also add this and we
25:02will add another little
25:04ratio here, a little buffer there." And
25:06And you end up with 27 different
25:08regimes. So, I think the objective that
25:11the European authorities hopefully will
25:13have is, "Let's implement together with
25:16regulation." Regulation you cannot mess
25:18around. You apply the regulation. Do
25:20strong labor interests in Europe hold
25:22back change? The whole labor market is
25:26under the shock of demographic
25:29evolution, right? So, working forces in
25:33most of Europe is
25:37beginning to decline,
25:40which will require new forces.
25:43I think we've exhausted the women
25:45forces, although there might be some,
25:47you know, pockets of availability.
25:50We will be employing people for a longer
25:53period of their life.
25:55So, I think we will have debates around
25:57pensions, about pension financing, about
26:00age of retirement, and we should face
26:02that. And we will have discussions,
26:06which will be difficult, about
26:07immigration because labor will probably
26:11be needed. And for those who hope that
26:13AI will substitute everything,
26:16I don't think so. Mhm. Now, will that be
26:19a force that
26:20you know, sort of withhold development,
26:23productivity, progress,
26:25entrepreneurship?
26:28I hope not. But it will require some
26:31cultural changes because at the moment
26:33the concept of vested interest, accrued
26:36rights, um
26:38delay for anything that is decided.
26:41That's an impediment to the changes that
26:44are necessary. Mhm. But it it has to be
26:46taken in the context of the entire labor
26:49market and and changes that will affect
26:51it.
26:51>> Did you have to
26:51>> also have to rethink the combined power
26:54of uh employee representative
26:58labor representative union
27:00that type of strength? Do we need to
27:03rethink what it does to uh the change in
27:05Europe? I think given the history we
27:07have
27:08uh those changes will happen if we can
27:12embrace everyone, if we include.
27:15And you know, I always keep in my mind a
27:18conversation I had with one of the
27:20Baltic uh state prime minister
27:24who went through an IMF program, and
27:27that process went extremely well, and
27:29changes took place. And I asked him, I
27:31said, "What was the recipe, and how do
27:34you
27:35where do you attribute the success?"
27:38Now, many prime ministers would have
27:40said, "Oh, it's me, you know, I did the
27:41job."
27:42>> Mhm.
27:43He was modest enough to say
27:45"One of the key reasons it happened
27:48so well in my country is because from
27:51the get-go we included the trade unions.
27:54Mhm. We shared with them
27:57the difficulties
27:59the progress we had to make the changes
28:01that had to take place and the reforms
28:03that we would have to take to
28:04parliament.
28:05And of course it wasn't 100% of what we
28:08wanted to achieve, but it was 80%, and
28:10it was 80% with the consent and the
28:13support of all forces in the nation.
28:17I think that's the only way to go. Mhm.
28:19It requires
28:21a lot of changes, but I think it's it's
28:23necessary.
28:25After COVID you have said that you were
28:27slow to see the inflationary pressure.
28:30Have you
28:31>> A bit slow. I didn't say slow.
28:33A bit slow. I would say pretty slow, but
28:35uh Pretty slow. Yeah. A bit slow.
28:38Whatever. Anyway. Have you changed uh
28:40the way ECB works so that
28:43you would have entered that situation
28:45differently now?
28:47I think
28:49history and past um
28:52decision informs
28:55the analysis that we do, the
28:56decision-making process that we will
28:58follow.
28:59And compared with that period of 22, for
29:02instance,
29:04I think we have better sensors and
29:06better analytical tools in order to
29:08really appreciate
29:09>> Mhm.
29:10how soon we have to decide. But there is
29:12a huge huge uncertainty around
29:15and a volatility that is just as I said
29:18earlier, I think unprecedented. Did you
29:20have somebody at that stage who was just
29:22the odd one out who said President
29:24Lagarde, you are wrong. This inflation
29:26is is great and we are underestimating
29:29it. Underestimated mating it.
29:31I had one, but I did not pay enough
29:33attention to that person. Right. And we
29:34should collectively have We were not the
29:36only one, by the way. So it's not
29:38consolation and you know, it doesn't it
29:41doesn't um
29:42it doesn't eliminate the regret that I
29:44have to have felt completely bound by
29:48previous forward guidance. Yeah. That's
29:49that's the the that's the regret that I
29:52have. Mhm. Why is 2% such a magic number
29:55in the central bank world?
29:57>> of all places.
29:58>> Sure, but that was a while while back.
29:59Why is it
30:01It's it's stuck. Yeah. You know, I think
30:04deviation from 2% will come after my
30:06time. I'm not I'm not I'm not going to
30:08change that.
30:10What do you think about the dollar as a
30:11reserve currency
30:13in the long term? Well, it's currently a
30:15reserve currency. It has about 60% of
30:17central bank reserves. It's about 40% of
30:20international trade invoicing and it is,
30:24you know, in in times of of high crisis,
30:26it is still a destination for
30:29capital flows. There's no doubt about
30:31that.
30:32Are we seeing the level of confidence
30:36slightly undermined by various factors?
30:39Probably so, but these things
30:42uh move over the course of time, and
30:46I see our job here at the European
30:48Central Bank as to defend the euro, to
30:50make sure that it's um
30:52available, that it's um
30:55that liquidities are there to facilitate
30:58uh the invoicing and the recourse to
31:00euros in terms of crisis, which is why
31:02we recently changed uh the regime of our
31:06uh euro repo lines in order to make it
31:08available on a much broader basis to
31:10national central banks around the world.
31:12And I think that our duty is also to
31:14make sure that our currency, the euro,
31:16is available in digital forms, because
31:19the world is going digital, and I don't
31:21see why a central bank currency would
31:23not also adopt the digital form. Why is
31:26a digital euro so important when it
31:27comes to
31:29uh making the euro an important or
31:32continue to keep euros an important uh
31:34currency?
31:35If I talk to my children and my
31:37grandchildren,
31:38do they carry banknotes?
31:41Not much. No. Do they pay digitally?
31:44Yes, so.
31:45Do I think that central bank money is
31:47critical in order to
31:49uh structure, organize, and hold the
31:52financial system? Yes. So, my conclusion
31:55from those two elements is we should
31:57have a central bank uh currency which is
32:00available in digital form. Added to
32:03which, I think that the the rail guards
32:06on which um
32:08digital currencies and digital uh assets
32:11travel
32:12is a public good, and I think that we
32:14should be building it. Does that mean
32:17that only the digital euro travels on
32:19those rail guards? No. When will we have
32:21a digital euro in volume?
32:22>> It will be in pilot phase, you know, uh
32:26parliamentary um
32:29decisions volente
32:31uh in 2027,
32:33and then complete rollout in 2029. Mhm.
32:37Mhm. I'm just wondering whether uh with
32:39with all the AI agents
32:42which I believe need
32:44stable coins and chains to transact with
32:47each other
32:49that we potentially could see a
32:51a very big uptick here.
32:53I'm not convinced of the business case
32:55of stable coins to be perfectly honest.
32:57>> Mhm.
32:58However, I'm convinced that stable coins
33:02but I think that there there is there is
33:03a market failure which stable coins have
33:06identified and that is the cross-border
33:08payment payments.
33:10So, if the financial
33:13agents and in particular the traditional
33:16banking sector can remedy that and the
33:21digital euro can be an instrument then
33:23that element of business case goes.
33:27And the rest at the moment if you look
33:28at
33:29the purpose that they serve it's
33:31essentially to facilitate the
33:34the transition between the crypto world
33:37to the fiat currency world. That's what
33:39stable coins essentially do at the
33:40moment. I'm not sure that is necessary.
33:43A single purpose that will be producing
33:46uh
33:48real outcomes and and we see it in the
33:50numbers. If you look at the progression
33:51of stable coins for instance, they have
33:53significantly increased up until last
33:55October. Since last October it's flat.
33:58Do you think quantum computing can break
34:01the chains and make these things
34:03worthless?
34:04I think quantum computing is going to be
34:06a significant
34:08enhancer of many of the work that we do
34:11in the digital world and I think in
34:13particular the capacity to compute with
34:14the lower level of energy is going to
34:17be the result of quantum computing.
34:20Moving on to leadership.
34:22Mhm.
34:24How are you as a leader?
34:25Oh, you have to ask the other people,
34:27not me.
34:29What are your What are your principles?
34:31What do you believe in?
34:32I believe in
34:35listening,
34:37in learning,
34:39in
34:40working,
34:42and ultimately in leading as a result.
34:45Mhm.
34:46But am I an inclusive leader rather than
34:49a sort of I'm on the top of the hill
34:51follow my flag? I'm more
34:54of an inclusive leader. Mhm. Are you a
34:56better
34:56>> take personal pleasure out of you know,
34:59I instruct, I order, I exercise power.
35:01This is This is not something that I
35:03find neither satisfying nor particularly
35:06productive. So, I'm more
35:08of an inclusive person. Yeah. To which
35:10extent are you a different leader now
35:11compared to when you led
35:14the law firm?
35:15Um I think I'm more impatient than I
35:17was. Oh, really? Yeah.
35:19Passing of time, you see.
35:21Right.
35:24And how does that materialize itself? I
35:26have to sometimes refrain my frustration
35:29and my annoyance with things moving too
35:32slowly.
35:33Right. That requires a big effort on
35:35myself.
35:36Is ECB moving fast enough for you? Well,
35:39we were just talking about the digital
35:40euro. I I just wish
35:43it would move faster. And this is
35:44unfortunately not in in our remit. It's
35:48external factors and external political
35:51rebalancing and balancing that are
35:53taking place outside our our
35:55institution. Forbes ranked you as the
35:57second most powerful woman in the world.
35:59Mhm. Do you reflect on that? Not at all.
36:03But the first time it happened, my
36:05youngest son
36:06said to me,
36:08"Only second? Why aren't you first?" And
36:11I thought, "Oh, wow.
36:12Holy hell, this is not bad." And he
36:14said, "Well, now you know how it felt
36:16when we brought back a B and you say why
36:18not an A?"
36:20Fair enough. So, the one who is
36:23uh number one is Ursula von der Leyen,
36:24right? And so, if you had her job, what
36:26would you have done? Probably not as
36:28well as she's doing. What is she doing
36:29particularly well? I think she's she's
36:31managing to keep 27 very sizable ego
36:35on the same plane and that is very hard.
36:39Mhm.
36:40Because of that European construction
36:42where you have 27 leaders
36:44um who are in charge of their
36:47constituency
36:49accountable to their constituents, have
36:51electoral timeline uh and and as a
36:56result of that, not because of who they
36:58are, but as a result of that lose sight
37:00of the medium to longer term horizon
37:04more often than not. Not all of them,
37:05not all the time, but I think her job is
37:08to to keep an eye on bring keeping that
37:11ship with everybody on board or as as
37:14many as possible on board and looking at
37:17the destination and keeping the eye on
37:19the destination. That's hard. But you
37:21are you are kind of doing the same
37:22thing, right? Within my mandate. Within
37:24my mandate.
37:26You talk about um when I listen to your
37:29podcast and so on, you talk about the
37:31age 16, 17 as being very formative. You
37:34lost your father when you were 16, you
37:35moved to the US, uh spent time there
37:37when you were 17. Tell me about that.
37:39It's a
37:40crucial time in anybody's life.
37:42>> Yeah. Um it's I mean your body is
37:44transforming, your social network is
37:47different, uh you suddenly uh moving
37:49very close to adulthood and all the
37:52responsibilities that go with it.
37:54And to to lose your I mean for a girl to
37:57lose her father at that point in time as
37:59I did uh was was hard.
38:02Was very unsettling and um in many ways
38:06at that point in my life I was rescued
38:09by
38:10uh that that
38:11year that I spent in the United States
38:13at the time when there was no cell
38:15phone, no emails, no
38:19fax machine and you know, in in in the
38:22scholarship that I received where there
38:24was very little money available to stay
38:26in touch with the family. So, you have
38:28to you suffer a big loss and you have to
38:30sort of strengthen up and and be a
38:33little bit
38:35yourself
38:36in a different environment. So, it
38:38shapes you as a different person. It
38:40certainly shaped me as a different
38:41person with the capital of love that I
38:44cherished but a level of attention that
38:47disappeared.
38:48What's been your driving force in life?
38:51Love. For?
38:53For all those that I love.
38:56So, it's it's it's a family circle, it's
38:59the people that I respect, that I
39:00cherish, it's
39:02what you, me, we can give to others that
39:06just helps them to rise and to and to
39:10accomplish what they can accomplish. So,
39:12love is a driving force. Big way.
39:14>> And who is going to benefit from your
39:15love now? Is it World Economic Forum or
39:18My grandchildren will be the first one.
39:20My husband would be very upset that I
39:22say that, but he he does receive a lot
39:24of it. Will you run for president? For
39:26president? Forget it. I'm president.
39:29Thank you.
39:32Um
39:33what would be your advice to young
39:34people? My advice would be um
39:37would be take risk in your life.
39:40Life is beautiful
39:42and you have to embrace it and you have
39:43to take risk and you have to give and
39:46receive love as much as you can.
39:48Beautiful place to end.
39:50Big thank you.
39:51Thank you, Nikolai.

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