CNBC Exclusive Interview: Jeroen Dijsselbloem, President, Eurogroup
WHEN: CNBC EXCLUSIVE, today, Thursday, 5th June
WHERE: CNBC's Worldwide Exchange
Following is the unofficial transcript of a CNBC exclusive interview with Jeroen Dijsselbloem, President, Eurogroup. Following is a link to an embeddable clip to the interview on CNBC.com http://www.cnbc.com/id/101733560.
All references must be sourced to a 'CNBC exclusive interview'.
CNBC's Carolin Roth (CR): Your call for governments to cut taxes, do you actually believe in the economic effectiveness of that or is this really just a political comment after the EU elections?
Jeroen Dijsselbloem (JD): Well actually if you look at the strengths and weaknesses of the Euro Zone one of the key issues that keeps coming back is the high tax wedge on labour. Compared to the OECD average all the European countries are on the wrong side of that average and it would certainly help the labour markets functioning, it would certainly bring down the costs for producers to bring in more labour if we could bring down that tax wedge. Of course it means political choice because you have to open up the space in your budget to do that but I think we really after this election have to look at what we can do more instead of doing less.
CR: With the outcome of the European elections which saw a major drop for the pro Europe parties, how do you stump up the cash? How would that be politically feasible?
JD: Well after the crisis we put up the emergency instruments in place which we can still use also in the future. We have the crisis fund and after this summer we will look at Greece, we will look at their debt sustainability which of course for Greece the key issue. They have improved on many issues, growth has returned to Greece and tourism is picking up but the question is as a sovereign whether they will be able to fund themselves already and I think that might be too early, but let's see after the summer.
CR: First time it was the tax payers who paid the bill, second time it was the private sector, third time is it going to be the official sector – are they on board?
JD: You're talking about debt relief and how to deal with that.
JD: It's too early to say, we'll do that calculation on what that debt sustainability looks like, it very much depends on growth, potential in Greece which is there but has to be opened up by further reforms. And other measures and we can look at interests on debt, we can look at the time given to the Greeks to repay their debt, those are the key factors that we can use.
CR: You said countries run the risk of being complacent about the drop in yields, do you still think this is the case and are they still relying on action from the ECB?
JD: The ECB help is welcome, let's see what the bring us today. But the countries cannot just lean back and look at the ECB. Countries are still in the lead where macro-economic policy is concerned and where economic reforms are concerned. And we need those, we need to become more competitive. Tax regimes is one thing but opening up the labour markets, the service markets need to be opened up, international trade has many opportunities for Europe so a lot of work has to be done and we cannot just rely on the ECB.
CR: What's the right mix, 50/50?
JD: I would say more emphasis on national policies. There are more measures to be taken I realise that after this election. The worst outcome after this election would be for us to be a little hesitant or scared to do more. I think we need to do more to get the result the electorate really wants.
CR: What exactly do you want to see from the ECB today that would avert the risk of dis-inflation or deflation?
JD: First of all on the risk of deflation I think we have to be careful of this becoming a self-fulfilling prophecy. As you know the more we talk about it the more people will become reluctant to invest or to spend and it can become a self-fulfilling prophecy. The ECB has a clear mandate, they have to make sure that in the mid-term the inflation has to stay close to the 2% target. It's not going in that direction so there seems to be ground to act. So we'll just wait for today and see what they do within their mandate. I mean I don't want to open up a whole new debate which is not very productive at this stage about the ECB's role.
CR: But don't you think that whatever's coming from the ECB today or over the next couple of months is simply too little too late?
JD: If you listen to some of the expectations that some of the commentators have shown over the last couple of days, they will probably be disappointed anyway because no way can you deliver such big results in such short time. What the ECB can do will help I'm sure but it cannot just come from the ECB. National governments and joint co-operation in the euro group has to stay strong to do the work that we have to do – we ministers.
CR: But is the Euro too high? Countries like Spain and Germany they're doing very, very well in terms of their export sect0or. Maybe the strong Euro is just an excuse for the lack of competitiveness in countries like France?
JD: Certainly we have to work on competitiveness whatever the exchange rate is. I think exchange rates should reflect the true economic strength of a region. At the moment we are exporting region and hopefully we will remain so and that will be reflected in our currency. So let's not focus too much one exchange rates, let's do what we can do in order to improve that competitiveness which has to be brought up to a higher level throughout Europe.
CR: Over the weekend we heard that BNP could be slapped with over an $10bn fine, this morning we're getting comments from the finance minister saying this could be unreasonable and could endanger the stability of the financial system in France. What are your thoughts? Do you agree with him or do you think that yes a fine of this size is justifiable?
JD: Well I do think that the sizes of the fines especially coming from the States are very, very high and much higher than traditionally in the European countries you'll see. So I do think we have to look at that and find a grounds for international harmonisation of the level of the fines. If a bank has messed up they should be fined, don't get me wrong, but the height of the fine seems to be over excessive and it's not helping the recovery of the banks, that's the kind of figures we're now talking about.
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