CNBC Interview with Luxembourg’s Finance Minister Pierre Gramegna from the World Economic Forum 2018

Following are excerpts from a CNBC interview with Pierre Gramegna, Luxembourg's Finance Minister, and CNBC's Akiko Fujita and Geoff Cutmore from the World Economic Forum 2018.

GC: So, let's see where we go from here. Pierre Gramenga joins us, the Finance Minister of Luxembourg, good to see you, Pierre.

PG: Hello.

GC: Do you buy in to this? That-, that Europe has got over its problems, and we are now back to growth?

PG: Yes, we are back to growth, I think the word 'renaissance' is probably a very good choice, because it's been ten years that there were institutional problems, there were financial and economic problems, no growth, and since last year, we've seen a 2% growth average in most every countries, 4% in Luxembourg since three years, so, Europe is back. Maybe the most important thing is, investment is starting to grow. And what does it tell us? It tells us that confidence is back. And there was already available money there, there were projects, but the confidence wasn't there, and I think that's a game changer, and we see it also in the fact that unemployment has gone down 1% in the last three years, and we are now around 9%. So, it's more or less the same level as prior to the crisis, so that's very encouraging.

GC: One of the problems, though, is who speaks for Europe, at this event, and on the global stage? We are all here discussing Donald Trump's imminent arrival, his trade tariffs, his policy on immigration, the Mexican wall, and so on and so forth. We don't have a European leader who is out there, front and center, at the moment, robustly arguing back the case for free and open markets. As Mr. Gentiloni said to me, economically, we are a giant. Politically Europe is a pigmy right now.

PG: Well, it's a criticism that has been done for a long time. We have a division of labor inside the European Union that lacks visibility, but it's because it's a compromise. We are a union that is more economical than political. We are growing, we are getting more credible. I think that today, though, the European Union is viewed as the area in the world that is most favoring open trade. Interestingly, last year, in Davos, Xi Jinping, the Chinese President, made himself the new advocate for free trade and global markets. I think that Europe is very credible in that position, because it's something that is at the heart of the inception of the European Union, decades ago.

AF: You talk about Xi Jinping's speech last year, really pushing for globalization, that was seen as an answer to the-, the rhetoric we've been hearing from Washington, about America First. The thinking was that China would be ready to fill a vacuum left by the US. It seems like they've been a bit reluctant. Do you think Europe is prepared to move in there?

PG: Well, I think everybody needs to be credible in this field. You cannot do cherry-picking in a global market, I think that is key. Everybody loves investment from abroad, and doesn't like investment outward. Well, the world is such that you need to have both, and there are countries like-, like mine, Luxembourg, I would say, Benelux, a few countries-, and the United Kingdom, that have had that tradition for a long time. Let's not build walls, neither around European Union, neither around other markets, because it will be to the benefit of all.

AF: Mm. Let me see if I can shift the attention here, because one of the conversations that's been happening here on the ground is that of 'techlash'. Are these big tech companies becoming too big, too anti-competitive? I know here in Europe there's been discussion about whether these companies should be taxed on where they generate their profits, instead of the jurisdictions that have lower tax rates. You have said that push isn't necessarily something that you would support. How do you try to level the playing field?

PG: Well, in fact, you used the right word. What Luxembourg is asking for is a level playing field. So, what we should avoid is having national decisions in how we tax these tech firms. Let's do it in-, in a harmonized manner. The OECD is coming out, in three months with a report, how to tax e-companies, how to tax these fintech companies, and we should have a solution that is at least OECD-wide, because then we have the level playing field, and we avoid distortion. And so, Luxembourg is in favor of having a harmonized tax, because it is obvious that many of these companies pay very little taxes, or no taxes, and this is shocking to many people, so we have to find a global solution.

GC: Just briefly, on Brexit, you've been one of those voices out there saying this is not a time to punish the UK, and any action that restricts financial services activity in Europe is a negative action. Is anybody actually listening, on the EU negotiating side? Because, at the moment, it seems to me, punishing the UK is very much the approach.

PG: I agree with you, there are many people out there who are trying to punish the United Kingdom without saying it. If you ask them, they will deny it. Let's try to be more positive, let's try to de-dramatize the whole negotiation. And I had a meeting, yesterday, with Philip Hammond, the Finance Minister of the United Kingdom, and I said to him, 'We need to bring those arguments to the public.' Example. Weakening London as a financial center, to make sure that it will not be the first financial center in the world anymore, is weakening Europe. Let's not have London drift in to the Atlantic. And let's make sure that we have a working relationship with London, all European financial centers, because it's to the whole benefit of Europe. There are specialties in London that nobody else can do, so let's work together-,

AF: Mm. Yes. Mm.

PG: And I said to Philip Hammond, 'You should be also an advocate of that.' He is of that-,

GC: Yes-,

PG: We might not hear it enough-,

GC: Yes. We've got to wrap you up, unfortunately, but thank you, I think you got the point across very well.

PG: Thank you.

GC: The Finance Minister of Luxembourg.

ENDS