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Martim Cabral: Mr. Juncker, thank you for being with us, first of all. You have been around for a long time. You have seen the beginning of the Euro, you saw the Lisbon Treaty. What happened? Why did we get into this situation?
Is it that the Euro was badly devised, is it that, as you yourself referred, the European Union institutions didn’t keep a close eye on European nations? Is it an Anglo-Saxon conspiracy, as some people say?
Jean-Claude Juncker: It’s a mix of all this. No, I don’t think that it is a conspiracy, it looks like it, but I don’t think that others as skilful as we think that they could be, they are not.
I have been involved in this business since the beginning of the 1990s, because I was heading the intergovernmental conference leading us to the Maastricht Treaty, and to the main element of the Maastricht Treaty, that’s the Economic and Monetary Union. And when we were discussing the basic architecture of the Economic and Monetary Union, we were focussing on the monetary side of the Economic and Monetary Union, and we were giving less importance to the economic dimension of EMU, which does mean not only monetary union, but Economic and Monetary Union.
And we were, according to my views, underestimating the need, we were supposed to have seen, of a closer economic cooperation, a stronger coordination of economic policies.
What is the problem of Greece and the problem of Portugal, the problem of Ireland? Although these three countries have to be seen with nuances, because there is no comparison possible between Greece, for instance, and Portugal. Portugal is by far in a better situation than Greece will ever be.
The problem is that these countries have been losing competitiveness, since the starting moment of the Euro. And we were giving insufficient attention to this. We were not sufficiently insisting, when talking to our Portuguese and Greek friends on the [interruption]
Martim Cabral: It was badly designed, the Euro?
Jean-Claude Juncker: It was not badly designed, but we didn’t apply to rules in the way we should have applied them. Because we agreed in 1991, when the whole thing was launched, that we should have a strong coordination of economic policies. But we never were able to put this into deeds.
I was trying, as chairman of the Eurogroup, to have colleagues discussing, and in a controversial manner, the different competitiveness issues, but I never succeeded to have a real birth of the willingness to consider that, having a common currency, we are not free to do whatever we like to do, and want to do in our national [inaudible]
Nuno Rogeiro: The new head of the European Central Bank said recently, that there are no provisions for any country to leave the Euro. There is not a treaty, there is not an article etc. So, people are now discussing for you to leave the Euro, it means also that you have to apply maybe the article 50 of the European Treaty, and to leave the European Union altogether. Do you share this kind of nightmarish scenario?
Jean-Claude Juncker: No, I don’t think that our common ambition should be to eject a country, or two countries, or three countries, or even more than that from Euro-area. It’s our common fate which is at stake, and I don’t think that it could be a good idea to try to [interrupted]
Martim Cabral: But together [inaudible] considered.
Jean-Claude Juncker: No, that is a different case. In the case of Greece, days ago, we were saying that, if you want, you, Greek government, to go for referendum, we have to know that the real question is not the programme we are submitting you, but the real question is, do you want to stay or to leave the Euro-area.
Never would we have had the possibility to eject Greece from Euro-area, but if Greece would have told us that the Greek people would no longer be willing to apply the programme we agreed upon, then, of course, it would have been the decision taken by the Greeks themselves to leave the Euro-area.
But we don’t have any treaty possibility to eject a country.
But, given the fact that we cannot eject a country, the countries nevertheless have to know, that they have to apply the rules. The fact that you cannot be ejected, is not allowing you to divert from the commonly agreed line.
Nuno Rogeiro: An American diplomat, an ex-American diplomat, said recently, that when the United States doesn’t have cash or liquidity, they just print notes. Could this be a solution for Europe, so called quantitative easing?
Jean-Claude Juncker: The ECB has introduced a system of quantitative easing, but the European Central Bank, given the Treaty, is not allowed to print money. And I will never be part of a group inviting the European Central Bank to divert from its treaty obligations.
Nuno Rogeiro: The Treaty will be reviewed?
Jean-Claude Juncker: Treaties can be reviewed, but the Treaty has not been reviewed, and it will not be reviewed as fast. This mission description of the European Central Bank is [inaudible]
Martim Cabral: The European Central Bank is apparently not supposed to buy sovereign debt. People are clamouring for it to do, so to be the lender of last resort. But it isn’t doing so. It’s rather confusing, it isn’t?
Jean-Claude Juncker: It is confusing, but only for a certain moment in history, as governments had no tools in their hand to intervene on the primary and the secondary market. We’ll have these tools in a few weeks from now.
The ECB had no other choice than to take the entire responsibility on its shoulders. I am not criticizing the ECB for the initiatives the ECB has taken, because there was nobody else who would have been in the position to take initiatives of that kind. It was vitally necessary to have the ECB playing the role the ECB has played, because the governments were not able to play that role.
But now that the governments will have these tools and this material in their hands, the ECB probably will stop the interventions the ECB is undertaking for the time being.
Nuno Rogeiro: You are the Prime Minister of a small country, but you have a [interrupted]
Jean-Claude Juncker: No, of a Grand-Duchy.
Nuno Rogeiro: Of a great country [interrupted]
Martim Cabral: A Grand Duchy.
Jean-Claude Juncker: A Grand-Duchy, surrounded by small republics and small kingdoms.
Martim Cabral: With lots of Portuguese.
Jean-Claude Juncker: Of course, 20% of our inhabitants are Portuguese, and we are proud of them.
Nuno Rogeiro: Great country but a small territory. But, with great influence over Europe.
The question is, people are saying that Germany and France, big countries, are directing the European policy. Some people even don’t talk any more over directory; they call it an oligopoly of France and Germany. Is this a fair assessment?
Jean-Claude Juncker: I’m less impressed. But as you know, if you are a Luxembourger, you are very modest when it comes to geography and demography.
Demography is a very relative concept. Whenever I’m sitting together with my Chinese counterpart, the Chinese Prime Minister, who is a good friend of mine ¬– two or three times a year I have a meeting on monetary issues and other issues with the Chinese Prime Minister – I’m always taking him by his shoulders, and I say: “Just imagine, you and myself, we are representing one third of the humankind.�? And he doesn’t disagree. So, it’s really a relative concept.
And if Mrs. Merkel would take him by his shoulders, saying the same thing to him, he would not laugh, it would be exactly the same thing.
This is to tell you, that although there is a huge difference between Germany, Portugal and Luxembourg, in the worldwide context of course, there is not one single European nation who could claim a role as a leading great nation. Worldwide we are nothing without our implication in the framework of the European Union.
And we have 17 countries in the Euro-area. The Euro-area is not led, although we are given sometimes this impression, only by the Germans and the French. I’m at a place in this Euro-system where I can tell you, they are giving that impression, but this impression is wrong.
Martim Cabral: Mr. Prime Minister, the Germans and the French, you say, are not leading this activity, this fight back against the crisis, but they call for decisive action, because the question is who is leading? Everybody is calling for decisive action. Mrs. Merkel, Barroso, every one, the Americans, the Chinese, everybody is calling for decisive action. And we wonder, A) what is decisive action, and B) who is going to take it?
Jean-Claude Juncker: You know, we are in, how could I say, in a fight, in a battle with and against the financial markets. The financial markets, of course, they don’t have to take into account a democratically anchored decision-making process.
We are living in 17 democracies. The democratic decision-making process is asking for time. We have to make sure that we are not abandoned by our national parliaments, we have to make sure that we have the support of our public opinions. We have to explain and to re-explain. I have to explain in Luxembourg what Portugal is about. I have to explain in Luxembourg what Greece is about – there is no comparison possible between the two countries.
Martim Cabral: Is it possible to function like that?
Jean-Claude Juncker: Democracies need time. Financial markets don’t have this consideration to bear in mind.
So, whenever we are saying that we have to be before the curve, and not behind the curve of the financial market, that’s fine to me. But democracies need time, and the financial markets don’t have time. They are taking decisions in between two [interrupted]
Martim Cabral: So, it’s an unequal battle?
Jean-Claude Juncker: It’s an unequal battle. But that’s not a reason to abandon the democratic systems we are living in.
Nuno Rogeiro: Let me just return to your scene of you putting your hands over the shoulder of Mr. Wen Jiabao. Some people say, we are in the wrong track, the good thing is the Chinese model. Do you think that China’s model could be an alternative to the European model?
Jean-Claude Juncker: I don’t have an impression, that the Chinese model is overwhelmingly democratic. I’m happy to live in a monetary and political area, where democracies – China is not a democracy in the Western sense of the world. It’s maybe a good model for China, I don’t think that it would be wise for Europeans to lecture China day after day. China is China and the European Union is the European Union.
I don’t feel any kind of attractiveness of the Chinese model. I don’t want the Chinese model being introduced in Europe, and I would hope that, in a few decades from now, European decision-making processes could enter the Chinese system, not the opposite.
Martim Cabral: Back to the unequal fight. The stock markets are crashing daily around us, clamouring for an answer. How could you assure us, that the Euro will survive? This pressure seems to be overwhelming. The contagion now apparently spreading to France, that’s the news we hear [interrupted]
Jean-Claude Juncker: When we started this trip to the Monetary Union, when we tried, and we were successful, to have a merger between 17 national currencies, leading to a similar currency, nobody believed it. We were successful [interrupted]
Martim Cabral: For a short period of time.
Jean-Claude Juncker: Not for a short period, for the main part of the period. For the 12 first years of Monetary Union, we were able to keep the average inflation below 2%. The Euro has proven to be more stable than the German Mark ever was.
We were able to create 14 million of new jobs, whereas during the same period the US were only able to create 8 million jobs. We have interest rates of 1,25% now. We had interest rates of 9%, 10% in the 1980s and in the 1990s. So we were successful [interrupted]
Martim Cabral: But now we have a crisis.
Jean-Claude Juncker: And now we have a crisis.
Martim Cabral: A big crisis.
Jean-Claude Juncker: All the currencies of this world went through crisis periods.
We have a crisis, we have to deal that crisis, but I don’t think that the survival of the Euro is at stake.
We don’t have a Euro-crisis. We do have a crisis of public debt of some of our member states. And these member states are fighting against this debt crisis with courage and determination. And they will be successful.
Mainly Portugal will of course be successful, because the Portuguese are down to earth people who know what is at stake, and they will prove that the place of Portugal is in the Euro-area. I cannot imagine a European Union, or a Euro-area without Portugal. We would be incomplete without Portugal.
Martim Cabral: Mr. Prime Minister, thank you very much. It was a pleasure to talk to you. I’m sorry that we couldn’t speak a little bit longer, but maybe we have another opportunity, I hope so, at a different time.
Jean-Claude Juncker: Obrigado.
Martim Cabral: Obrigado.
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