Karel De Gucht - European Commissioner for Trade HARDtalk


Karel De Gucht - European Commissioner for Trade

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died in 2004 -- to be exhumed. Now on BBC News, it is time for

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Europe's politicians resemble the cast of a third raged disaster

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movie, trapped in a eurozone crisis from which there is no obvious

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means of escape -- third rate. Can the Continent's leaders stay calm?

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All will rising panic consumed L? One member of the Brussels elite is

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here today, Karel De Gucht -- all will rising panic consume them? --

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Commissioner Karel De Gucht, welcome to HARDtalk. Good morning.

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Let me at start with something you said two months ago, you told a

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Belgian newspaper that the endgame had begun, how it will finish, you

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do not know. Are you any more confident now that you know where

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this crisis is going? Yes. But that is not what I meant, that I feared

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it would be a disaster. What I meant is how we were going to

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resolve it, what will be the procedures, the means and so on. I

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have always been very confident we will sort it out. There's no

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alternative. Maybe you don't... your population don't completely

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understand this. But the European Monetary Union is not only about

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monetary affairs, economic Affairs, it is a political project. It would

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mean the end of the European Union, it would mean the end of deep

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political projects of our era. There's no alternative. We will

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sort it out whatever it takes. keep saying there's no alternative,

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but of course the financial markets create their own dynamic, don't

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they? They look at every attempt by European leaders to solve the

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problem, or to offer a long-term solution. They examine it for a few

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days and then they decide it is not credible. That is what we have seen

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again in the last week. We have seen the interest rates on debt in

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Spain and Italy belong to be on 7% again in Spain's case, because the

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markets don't believe in any solution the Union is offering.

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can offer a short answer, the markets will be exhausted before

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politicians are exhausted. Looking into Spain, we have been deciding a

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couple of weeks ago that we would lend directly to the Spanish banks,

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up to EUR100 billion for recapitalising their financial

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institutions. We decided last evening that we would send the

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first EUR30 billion before the end of the month. This makes sense.

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What we really have to do is split the sovereign debt crisis from the

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banking crisis. By recapitalising directly the banking system in

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Spain we are doing the right thing. But the problem is every single

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step taken involves massive dispute, argument, within the European Union.

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You talk about the clear political direction. Tell that to the Germans,

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the Finns, many northern Europeans who are increasingly determined

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that whatever outcome is achieved, it will not involve debt

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mutualisation, the prosperous northern countries guaranteeing the

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debt of the southern countries, unless there is a full political

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and fiscal union. That will probably take decades to sort out.

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Some of these economies can't survive for decades in their

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current state. Obviously not, but that is also not what Europe is

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saying, not watch Germany and others are saying. What they are

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saying is if you are doing this then we need to be sure these

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countries put order in their house, that is why we have this very tough

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programme with a country like Greece, and you have recently seen

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in the elections that those who took the defence of those measures,

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nevertheless won the elections, have now been making a pledge to

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continue the programme. It is a quid pro quo. I understand these

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countries cannot carry on without guarantees that they are going to

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be served. But there is tremendous sense of solidarity in Europe.

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job is to tell you that I look around Europe, and I look at public

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opinion in Germany, and I read senior commentators who say a

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crucial point has been reached in Germany. One has said an important

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threshold has been reached in Germany. A narrow majority is in

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favour of the euro but a clear majority is now against further

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rescues, further bail-outs. I am not a commentator. He is a very

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intelligent man but he is a commentator. I am a politician, I

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have responsibilities. Looking at Germany, I would not say a tiny

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majority because a couple days ago there was a two-thirds majority for

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the rescue fund, a new rescue fund, the European safeguard mechanism.

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That was a two-thirds majority in the German parliament. At the same

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time as Angela Merkel was telling her people, whatever you hear in

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the rest of Europe, they will not not be a debt mutualisation. --

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their will. What she said is that she is not going to put into danger

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her own population. I think that is her right to do so. What you also

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have to take into consideration is that happily so we are a democracy.

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We are 27 democracies. By the way, you are one of the 27. When we have

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to decide we have to decide it in a democratic way, which means you

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have to take into account Parliament thinking about it, you

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also have to take into account what the German constitutional court is

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thinking about. There's a lot of cases before the constitutional

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court, whether or not this is in line with the treaty of Lisbon.

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There are questions about this, but the determination to sort it out

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will overcome all of these. How can you say that with such certainty

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when you just told me it is ultimately a democratically driven

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process? You are a member of a political elite, you have always

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believed in this process and you desperately want it to work. But in

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the end you have to be held to account by voters. If they want to

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go in a different direction in countries like Germany you will

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have to accept that. That is the task of a politician to convince

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Parliament. Sure. Mrs Merkel got a two-thirds majority for the

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assembly. My point is a larger one. It seems the elites in Brussels

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still insists there is no alternative. But of course you can

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fail. You yourself realise that there was Amy Chua to be a bit more

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honest about the potentially difficult outcomes -- there was a

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need to be. You said a few months ago that you were making

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contingency plans for the departure of Greece from the eurozone. You

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got stamped on from a great height by others in Brussels for saying

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that. But it is the truth, you have to make plans for the potential

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breakdown of the eurozone. First I don't like the word elite. If we

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are on a hill looking downwards to the population, I don't like that.

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We are citizens that have taken up responsibilities and we try to sort

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out the problems, that is what we are, not the elite. Secondly, when

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you are quitting what I have been saying, I think it is a task and

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the duty of for politicians to be prepared for everything that could

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happen. That is what I have been saying. But on the other hand we

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have no plans for Greece at all. We are happy that the outcome of the

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elections has meant we can continue with the programme in Greece.

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Surely you should have a plan B. What have you been doing for the

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past few months, when you have said that there are officials in the ECB

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and the European Commission, who are working on scenarios, in your

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words, in case Greece has to leave the eurozone. We need to have a

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scenario for everything. There is no plan B. Our plan is the plan to

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keep Greece in the European Monetary Union. They are scenarios

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in which that does not happen, though. -- there are. You said "The

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Greek exit does not mean the end of the Euro" so you have imagined what

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could happen. We need to prepare for all possibilities. That is the

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task and the duty of a politician. On the other hand we have also a

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policy, and our policy is that Greece remains in the eurozone. I

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think also the Greek population has understood this because they got a

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majority for the parliament... from the parliament for a government

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that is going to support his plan. Let's look at this from the

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perspective of your own particular responsibility in the commission as

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a member of Trade, it seems to me that it is a very striking and

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ambitious notion that Europe can create this single economic space.

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Economic monetary union involving everything that goes with it,

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including of course completely open and free trade within that space.

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But if you are creek and looking at the way the European economy works

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today, it hasn't really worked in a way that makes sense to the Greeks.

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One tiny example, right now Greece imports literally thousands of tons

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of fresh tomatoes from northern Europe. Too many Greeks that makes

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no sense at all because they need grows some of the best tastiest

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tomatoes in all of Europe. But they can't do it as cheaply and in as

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sufficiently industrialised way as you can do it in Belgium or Germany.

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Surely it would be much more sensible if they ate their own

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tomatoes and did not get them from Bell Belgium? It makes a lot of

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sense because they taste better, yes. The real problem with Greece,

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it is about competition, and not having invested properly in the

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last decade. They should have invested in producing tomatoes in a

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way where they can be competitive with the rest of Europe. They have

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much better tools to the competitive introducing tomatoes

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because they have the sun, they don't have the sun in Belgium!

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seems like a trivial argument but it gets to a very important point.

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They grew tomatoes in a smaller scale in Greece, either locally

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with small farmers, or locally with small plots of land people have.

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Therefore the cost per tomato is much higher. They may be better

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tomatoes but the way in which the eurozone has worked... It must not

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have anything to do with the eurozone. -- does not. The reasons

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why Germans and Belgians' tomatos are so cheap is because Greece's

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currency has been fixed for so long, it is worth far more than it should

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be in real terms. You are really not understanding what the European

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monetary union means, you know? Even if we still had the drachma,

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Greece would have a competition problem for its tomatoes because

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they are not changing their production methods. They would get

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less unless money for their tomatoes. The idea in the market is

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you get a good price. If you're at your production methods, you could

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do it better. -- If you adapt. It seems right now because Europe

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seems to be dysfunctional... yellow it is not dysfunctional. The Greeks

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have not been investing in a proper way. You know the disbursements of

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the European budget to Greece under the funds, it is about 4% of Greek

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GDP, which is quite a lot. It is quite as much as the Marshall Plan.

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But they have not invested properly -- twice as much. There is a huge

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responsibility with the Greek political class for this, for the

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Socialists and for the neo- Democrats, they have to do their

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homework. If they do their homework there's no reason why they can't be

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:13:35.:13:38.

It seems to me, when one looks at the vast differences within the

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European economic Space, between Germany draw example, which has a

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surplus of billions of euros, and then countries like the United

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Kingdom, which have a 120 billion euros deficit, you have again, come

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in the end. De deux --. By there is this Economics base that is

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supposed to be uniting all of Europe, and the easy not -- not

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uniting. And the union is not have been in.

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It is really not accurate that you would play in Europe, -- play in

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Europe, that your country has a deficit on your balance of payments.

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You have to adapt to that. Whatever space you are living in.Not a

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member of the economic monetary union.

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Of course we are not, but it gets to the heart of the issue. He was

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saying that in the economic monetary union, we're showing

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solidarity with countries. Your central bank has been putting in a

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lot of money into the in -- economic machinery, to get going. A

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lot. When we look a Europe today, there are many European politicians

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who are appearing to be toying with the idea of protectionism. You, as

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Trade Commissioner, Goran the world and tried to persuade the rest of

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the world to open up its world tour European goods. But when Uribe is

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talking protectionism, you have a problem. We are by far the most

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open, the economy in the world. And by the way, we are the biggest

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economy, the biggest traders in the world and we're not losing market

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share. We have a big trade surplus on goods of 250 billion. We have a

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surplus on services, of more than 50 billion. We have a balance in

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our outcome in the end, because we need to export a lot of minerals

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and energy, so we are healthy as a block. But there are a number of

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differences in compare to give s Inside Europe. -- competitiveness.

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But as a block, we're very strong. We are a very attractive market for

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example, China and the United States. But my point is that there

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are some in Europe than while looking at the way in which you are

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opening to all of their exporters and they are wondering whether it

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is time to change policy. For example, we have had proposals

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before the commission to bar foreign companies from winning

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contracts with public sector organisations across Europe, in an

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effort to retaliate for what is seen as the barring of European

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countries entering, whether it be the United States, Japanese or

:16:52.:17:02.
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public sector markets. It is a proposal by myself, and when a

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country is in a systematic way, banning European companies from its

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public procurement markets, that we can take measures against that

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country, by, for example, forbidding a sector of our public

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procurement market to that country. So er, it is retaliatory. I am a

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very convincing free-marketeer, but I'm not naive. And I can assure you

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:17:38.:17:39.

that in the other places, beat the United States. It is not that you

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can afford to be naive. So who is being naive? Are some people being

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naive, is it time for Europe to change tack in its bilateral trade

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with China? We need to show strength and make it clear to

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whatever partner that we're working with that we're not naive people.

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What does that mean in real terms? In trading relations with China,

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they have this massive trade surplus, with pretty much every

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other trading bloc in the world. Are you saying to the Chinese, this

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has got to stop and if so, how are you going to stop it? I am saying

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that they should respect the level playing field. That means that they

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should start subsidising, they should stop giving excessive export

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credit up to their companies, cheap loans and so on. That is what I am

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doing. But if they are buyers in Europe for the Chinese Braques, and

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they are produced in a fair way, there is no reason to cap this.

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Germans are somewhat worried about the tone that you are not striking

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-- that you are striking. The Germans are suggesting that this

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clause that you are talking about, that you have been discussing when

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it comes to public sector contracts, could send quite - a protection a

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single around the world and create an impression of Fortress Europe.

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am not sure what document you are citing, of course there will be

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commence. I'm a politician and I'm not a commentator or journalist. I

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am taking responsibility. I think that politicians should lead and

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make sure that they are followed. Very clearly, they need to draw the

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line as to what we have to do. People around the world will be

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watching this, not least in China, when you say - we will no longer be

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naive and draw lines, tell me specifically, what the EU, in trade

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terms, is going to change about the relationship with China. We have

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been doing a lot. We have gone to the WTO together with the United

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States. And we're getting raw materials. And they are trying to

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keep them for themselves. A couple of months ago, we won a benchmark

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case against them on a raw materials and as such, we have a

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new agreement. We are pushing them to start negotiations with us on a

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market access for companies and China. We had a very active

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dialogue with them. They have to understand that they must reckon

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with us. He must reckon with them. And one is the nation's tax that

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the European Union is imposing and not least on aviation. The Chinese

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have frozen a deal with Airbus to buy billions and billions of

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dollars worth of Airbus planes, because they are so infuriated

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about the EU's determination to tax Chinese planes that come into the

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European Union. Are you going to back down on that? This is a

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European legislation. And I'm not going to go into the details of

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that the decision making machine of Europe. But it is a decision that

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has been taken unanimously by the member states of the European Union,

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which means also, by your own government. And we are the

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executive, the commission is the executive. We must s -- execute

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what has been decided by the legislator. If people would like to

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do so, we cannot change anything about it. It is European

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legislation. And that has been employed at -- implemented by your

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own country for all stop the British Airways chief Willie Walsh

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has said that the commission has pursued this arrogantly and it

:21:41.:21:45.

would be crazy to pursue a trade war over emissions at this

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particularly difficult economic times. She will Lee has a point? No,

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not at all. We have always said that we want is to be resolved by

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the international civil over -- Aviation Organisation. And because

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we have got nowhere, we have taken this European legislation, decided

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by the member states, and now we must put this into practice and we

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hope that we can convince, not only the Chinese but also the English

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and the Russians. But the EU has neither the right nor the power to

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enforce its laws on non-European countries. This could escalate to

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the point where there are tit-for- tat sanctions. How far can this go?

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The vast majority of airline companies are respecting this. But

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what we continue to say and where the -- what I say wherever I go

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ease, we should find a multilateral solution within the international

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Civil Aviation Organisation. And we are still in favour of that. But we

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must also implement what has been decided by the legislature.

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Before the end, you made a point in this into the wall saying that

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Europe remains one of the biggest, perhaps the biggest trading bloc in

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the world. Almost 20% of world trade derives from the European

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Union. And it has been stable over the last decade. By a look forward

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to the next decade. It will not stay at 20% of world trade, will

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it? I don't know. Look at the trains around the world. Look at

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the way that the world is trading - - changing. Trade is Grade --

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growing exponentially. We have states that have been stable over

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the last decade, although there was a big push by the Chinese, they

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will certainly come down in the next decade. So I don't see why you

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would go down. The United States stayed stable. You say that

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everything that has happened in Europe and the eurozone are the

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last few months and years does not represent dysfunctional relations

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in Europe. Would you accept that the crisis is doing damage, it is

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doing damage to the way to Europe and its economy is perceived in the

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rest of the world? I would of course refer to that as

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a crisis. But what I am nominated for is to tackle the crisis and to

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find ways out of the crisis and I'm trying to do this in my job, which

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is being the Trade Commissioner and making sure that you can export

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