President Lagard, thank you so much for joining us on Euro News at this very pivotal time for Europe. This is a transformational moment in so many ways when you look at the economy, the geopolitics, a war that is still going on in this continent and then of course many other forces like the AI which could have severe implications in the way that we live that we work. Ultimately, when you put all these factors together, where is this continent going?
It's navigating all those changes and it's doing it with an agenda of significant reforms that have to be implemented with a road map which has been designed a couple of years ago now by my predecessor Mario Draghi and Enria and where we just have to implement collectively what will make Europe more competitive and more fit for the 21st century which is as you said fragmented, different geopolitically and obviously to be transformed significantly by artificial intelligence on steroids.
What do you mean by on steroids?
I think that artificial intelligence is going through accelerated phases of development. So people will talk to you about Gen AI. They will now talk about ASI super intelligence. And I think that we all have to adapt to it. But we also have to be mindful of the goods and the bads. By good I mean improve productivity. By bad, what will be the consequences on us as a society, on the labor market in general, what impact will it have and we have to prepare for that.
On the AI, it very much reflects the conversation about the geopolitics. Many would say this is now a two-track competition: the United States and China. The EU will not be able to compete at that level. Is that a fair assessment? And I wonder, certainly in this town of Brussels, there's a lot of hype around Mistral. This is almost seen as a strategic asset. Is it wise to bet everything on a single company or do we need an ecosystem around AI?
There are two very big champions in terms of AI development and hyperscalers: the United States and China. There are countries in the European Union which are regarded as third in the race. I think the question is how you define the race and how you make sure that you are not held hostage to certain developments that are critical and that you have some leverage on elements of the supply chain. Mistral is obviously a champion in its own way and I think that if the Europeans decide that it's in their collective interest to focus on Mistral, for instance, but maybe a couple of others because you don't want to have just plan A and nothing else, but that you focus on having sovereignty over developments so that you can make sure that your clouds, for instance, is possibly of a European standing nature and that some of your artificial intelligence devices, some of the tools for instance, are critically made in Europe, invented in Europe. You bind all these components and you then have a good dialogue with those who are ahead of you in other areas. But I think it's a question of really linking, binding, and making sure that we protect some of our interests and leverage those in order to better negotiate.
And my impression is that you don't like to lose and you want Europe to win. So what is the recipe when you talk to finance ministers in Brussels? And I wonder, you mentioned Mario Draghi. I wonder if you speak frequently, if there's a regular communication with him. What is the recipe that you put on the table?
I think we share the same objective that Europe wins, that Europe is competitive, that Europe leverages its incredible potential: the market, the talent, the capital, the savings. And I think that, you know, if I had two words for the finance ministers, whom I love and I was one of them, it's action more than words and it's accelerate more than procrastinate.
Do you have to do that at 27 or can you do it at six? As the head of the European Central Bank, I presume you would like to maintain unity at all levels. That is what guides Europe. But should that change now?
We all need to move together. That's the strength. We are stronger all together. Now if it takes a smaller number of them to actually move forward and bring the others with them a little later because they will have experimented, so be it. It's a principle that can be adopted, that is anticipated by the treaty as well. So why not?
So move ahead. And to that extent, the Spanish just this week presented a plan before the Eurogroup of joint borrowing. The idea of joint debt is very political in essence in Europe. But just on the economic merit of it, they say it will create a more liquid market, it will save money, and it will be more efficient. Just on economic terms, is that something that is ahead of the European Central Bank? You say, 'Let's look at it.'
You know, it's more than just economic terms. It's also financial terms because to have a strong, vibrant, and deep capital market, which is something that we all want, at least everybody says. So we need to also have... Well, I think everybody sings from the same hymn sheet, but when it comes to implementing it, it's difficult and the devil is in the details. But it's pretty obvious that we also need to have a European asset which can, you know, parallel with the US Treasury bonds, for instance. How we go about it, how the moral hazard is addressed, how it's allocated in terms of results, to be decided. And I think it's great that a country like Spain, for instance, makes a proposal, puts it on the table for debate, and it's now for the others to say, 'Okay, we like this part, we don't like this, we can address it.' So it's good to actually move forward.
So when you hear these numbers, 800 billion euros, Mario Draghi echoed that. The Spanish seem to be putting that on the table. The French president has said in his view there are no taboos. That doesn't scare you when you hear 800 billion euros, this kind of money?
Look, remember what we did for COVID. That was the amount that was actually put on the table for joint borrowing in order to respond, fund, and to produce the recovery. And what was it, the RRF? The recovery and resilience fund. That was roughly the amount. And the commission went to market, we helped in the process because we act as an agent in that respect, and it was widely, you know, broadly subscribed, oversubscribed. So I'm not saying that this is the amount. I'm just saying that to go with a capital market, you need depth, you need liquidity. And you need to entice the savings of Europe onto that market. But we need an instrument as well. And that could be one, or an elaboration, or an iteration of that.
And what's it going to take to convince countries that would say absolutely not? Because by the same token, we said the recovery fund legally was a one-off.
Yeah, that was said in certain circumstances. I think the circumstances have changed and it should lead the leaders of the various member states to consider and to address what are their concerns. So I think an ex ante 'no, over my dead body' is not the best way to deal with it. I think the best way to deal with it is to try to analyze what is too much of a risk and how that risk can be addressed. And the world has changed because of Vladimir Putin, because of President Trump. And we've heard the criticism: the Europeans are weak, they're decaying, civilizational erasure. They say we are facing that prospect of Europe becoming a museum. Or is it also the Chinese? Is this a combination that has changed Europe now in the medium term? We got to wake up. You know, first of all, there is nothing wrong with European culture. And whether it is tourism, whether it is museum, whether it is attracting people to a place which has a vibrant culture, that says museum and the... Well, I will tell you the algorithm I wanted. I'll tell you something. If you visit a few industrial entrepreneurial centers, including in the field of artificial intelligence, including in the field of high-tech, you would be surprised that this is not a museum. This is a very, very active and rich with talent economy. But the key thing is to make sure that money goes in the right direction. Money should not necessarily leave Europe. It should stay in Europe to finance initiatives.
And ultimately, what is the biggest driving force? Is it President Trump? It seems to me when I look at NATO and the G7, the Europeans have now decided we are not going to publicize a divorce, but we understand the relationship is changing and we've got to do our own thing. And when it comes to China, is that also pushing these changes?
You know, there's a lot of criticism around concerning fragmentation and the change in the geopolitics. But if anything, it has certainly led the Europeans to look at their own forces, to look at their own weaknesses and try to address them. So I think that rather than criticizing the rest of the world or putting the blame on one or the other leaders, I think we have to really focus on us, see what strength we have, and we have a lot of those, leverage them and try to address the weaknesses. I think there are some low-hanging fruit. The capital market is one that is not such an easy one, but there are components that are low-hanging fruits and I'm delighted to see that both the commission and the Irish presidency want to move further and faster on this front.
And we've seen that this week with the digital euro. I have to ask you, it may seem a trivial question, but what is the digital euro? Because on the stance in Brussels, I've heard MEPs who say this is a way to kill cash and the head of the European Central Bank wants to control our every move.
Absolutely not. Let me first... you're not big brother. Celebrate the fact that the parliament has endorsed massively the mandate for this trilogue discussion that will take place and hopefully will be concluded by December. But let me go back to that. This piece of legislation will actually produce two results. The first one is that it will make cash and the digital euro both legal tender, which means that nowhere in Europe can anybody say to anyone, 'Sorry, I'm not taking your banknotes, I'm not taking your European coins' because now it has legal tender. It has to be honored. So cash is actually elevated to this legal tender level where nobody anywhere in Europe can say 'I'm not taking your money because it is banknotes.' No. So banknotes are secured and protected. And by the way, before the end of this year, in December 2026, we will have a set of proposals that will be the new design and the new face of our banknotes so that there is a close link between you, me, and the banknotes. So that's on the banknotes. So no, cash will not go away. Cash will be rejuvenated. Digital euro, we need to move into a digital world. You book your trips using digital. You buy your transportation ticket using digital. You buy by digital means whether you do your grocery shopping or whether you buy your clothes. We need to have also central bank money. For the moment, it's only banknotes, but we need to have it in digital form. And if it is cheaper, if it is faster, and if you can use it throughout Europe, even the better.
