In this episode of Shaping Finance we are joined by Jean-Claude Juncker, the former Prime Minister of Luxembourg and former President of the European Commission. Mr. Juncker shares with us his insights on the future of the European Union, the success of the so called Juncker Plan, but also on current topics such as the future relationship between the European Union and the UK.
Welcome to the podcast that shares the views of high-level leaders in the European and global financial services industry.
Welcome to Shaping Finance, a podcast which offers a platform to high-level decision makers and shapers in international finance. My name is Nicolas Mackel. I’m the CEO of Luxembourg for Finance and the host of this podcast.
I’m joined today by Jean-Claude Juncker, a man who certainly doesn’t need much of an introduction as he is probably the most widely known Luxemburger.
Mr. Juncker was the President of the European Commission from December 2014 until 2019. Before that he had been Prime Minister of Luxemburg for a whopping 18 and a half years. He’s also widely considered as one of the fathers of the Euro as he was one of the architects of the Maastricht Treaty.
It was thus not astonishing that he was chosen as the first elected chairman of the Euro Group, a position he held from 2005 until 2013. His political life spanned several crises, in particular, the Global Financial Crisis. Thank you, Mr. Juncker, for taking the time to share your views with our audience. What lessons do you think need to be drawn from the current crisis?
I would say all the lessons which have to be drawn, should be drawn. Not in decades or half centuries, but immediately, in the short run. The crisis we are facing is a polycrisis because it’s a health crisis, of course. It’s a pandemic crisis, yes. It’s an economic crisis, having been entailed by the health crisis.
And it’s a political and social crisis if we cannot bring together all the elements we need to deliver a proper answer when it comes to the social consequences, because unemployment is still going upwards. We were able, in the year during my mandate in Brussels, to bring the unemployment down from, I don’t know how much, to the lowest level we have ever registered since the figures are collected. So we have to address all these issues.
At the very beginning of the crisis, the action of the European Union was quite weak, modest, unambitious, because the reactions were nation-driven and did not take into account the entity we are in, that means the European Union. And the commission has taken the reaction building in its hands.
And now things are going better because the European Commission has been asked to order the vaccine on the European level, which is quite a step. Which had to be taken by difference to deteriorate the actions the European Union has shown at the very beginning of the crisis. So, this will be a multifold answer.
And more generally, Europe has always made most progress in times of crisis. Will Europe progress during this crisis and what will be the milestones achieved with this crisis? Will we ever see a fiscal union in the European Union?
No, no. I know that people are very often saying and proving, that progress needs a crisis to be fight it. And it is true that’s European Union progresses from crisis to crisis. The fact is, that since I’m trying to be active on the European level, that was started by the end of 82, European Union was always in crisis. I don’t remember a day without a real crisis or a crisis mood or a crisis atmosphere. So, we are used to that.
Now in the margin of this crisis or at the heart of this crisis, still to be seen, the European Union recently during the December summit, has progressed as far as the fiscal union is concerned because the heads of state and government were putting into place a system of collective shouldering of the consequences of the crisis, this famous recovery fund, 750 billions, which is quite a figure. But which is less impressive than it seems if you are comparing this to previous efforts, which had to be delivered.
It’s huge, yes, but it’s not as huge as that, but it is sufficient because I think that in this recovery package on the condition, the money, which is at our disposal, will be distributed in a proper way, which is not for sure. The total amount is sufficient.
And it’s, to some extent, a step without president because for the very first time that is seen as nothing worse, but is seen as something positive. If the money is distributed in a proper way, that means dedicated to future oriented investments and to bring to an end the already existing weaknesses we do see in Europe. Because we don’t spend enough on research and development.
I’m sad that the proposals of my own commission, going back to 2018, have not been taken into account for the total amount we had foreseen as far as research and development is concerned, they were reduced. Funds were reduced as far as public health is concerned, which is amazing at this period in time. Money dedicated to defense has been reduced. All the future undertakings, which will write the history of the future, have been treated, I have to say, with a kind of future benign neglect.
Talking about the future, you, yourself had launched the Juncker Plan several years ago. And this plan has shown the importance of finance as a force for growth. Is it a success? And with the turn towards green finance and social finance, do you believe finance can even be a force for good?
I think that so-called Juncker Plan was a success because it’s nearing a total investment amount, investment generated by the so-called Juncker Plan of roundabout 600 billion. Which has to be compared with the 750 billions of the recovery plan.
And the amazing thing was that only small amounts coming from European budget have been mobilised. The rest, remaining part, is private investment. That was the starting point. Not enhancing, not augmenting public debt and deficit in Europe, but combining small amounts of the European budget together with the creativity of the private sector. It was a success.
The proof is that it is no longer called Juncker Plan, but now it’s the European Fund for Strategic Investments. Those who thought it would be total failure at the very beginning in November, 2014, agreed amongst themselves to call this instrument the Juncker Plan because they thought it would be a total failure.
Now, it has been a success so it has changed its name. But not its destination and not the underlying reasons which led the European Union to launch this investment plan. Now, the modern tempo is pointing to direction of green, and to a small extent to social. I would think that greening European investments is the right choice to be made and to take better into account the social elements of what the European future will be about, is the right thing to be done.
Let us change subjects. With the election of Joe Biden, will that bring calm to the tensions between the US and China? And how should Europe position itself in this triangle?
We ran through a difficult transatlantic period during Donald Trump’s time in office. I had good relations with him by the way. But in Europe I was amongst the only ones who were able to build up a trust relation with Donald Trump, which allowed me to stop, as the French would say, this droit de guerre, in the trade area, because he abandoned his ideas to impose tariffs on European cars and things like that.
But anyway, the European Union and part some individual countries, like Hungary and so on and so forth, the result was perceived to be without any kind of deep disappointment because the atmosphere will improve. I know Joe Biden from the past, when he was a Vice President. I met him several times during his time as Vice President and later on in my capacity as President of the Commission. Now the atmosphere has changed.
Biden is a multilateralist. He’s not cold shouldering multilateralism as Donald Trump did. So, at the beginning of this new relation between the States and the European Union, things are in place to see these relations developing in the best way possible.
But we should not make the mistake to consider that now we are going back to good old times. This will not happen in the relations between the US and China. Nothing dramatic will change because Biden was always very skeptical of when it came to the trade relations between US and China.
I don’t think that he will change the US attitude, at least in the short term, towards Russia. He likes the European Union. He understands how the European Union is working. Although this is very difficult to be honest too, but this is totally unexplainable to those who are not living inside the European Union, even to those who are living inside the European Union. But okay, we have a new chance and I think that this chance has to be used by both sides and by the US and by the European Union in the best interest of the two partners, both sides of the Atlantic.
By the time that this podcast will air early January, Brexit will have become a reality. But only a couple of days before, when we record, we don’t know yet which way it will go.
Will our future relations continue to be defined by the animosities that characterised the last four and a half years? Do you believe Britain will come knocking at the EU’s door? And if so, in how many years, and what message do you have for British listeners?
Independently from the final outcome of what we call the trade agreement between Britain and the European Union, Brexit is a reality. It’s a reality in our minds. It’s a reality in our undertakings. And so, whatever will happen, Britain will be a third state when it comes to its relations with the European Union.
I think that nevertheless, we should not react as European Union on the basis of, how could I say? Revenge. The British have taken their responsibility. It’s a wrong decision, it’s a historic decision. Whereas others are knocking at our doors to become members, Britain is leaving the European Union. And the fact that the referendum turned out at the cut was of no surprise to me. Because since the British are there, they never felt at ease inside the reality and the atmosphere of the European Union. They joined for strictly economic reasons.
That’s the reason why they were pushing for enlargement as soon as possible. That’s the reason why they did not introduce traditional periods when it came to the freedom of movement of workers. But they never felt at ease and they let us know, not only from time to time, but on a permanent basis. So, nobody should have been surprised if you are telling your people that the European Union in fact is bad. A little bit in the trend where European Union has invented against us.
As Donald Trump was saying, the British where saying the European Union has not been invented for us. And they’d never played a constructive role in the way that they tried always to escape to any kind of further integration of the European countries inside the framework of the European Union.
I don’t think that the British will knock at the door of the European Union in the next two or three decades, because this feeling not at ease in European Union will stay as a rooted element of the British attitude towards the European Union.
But I don’t like the decision of the British, but they have taken their decision. Did they know what responsibility they were taking? I don’t think so. Because the outcome of all this will be at a higher cost for Britain than for the European Union. We will suffer, there will be damage on the level of the European Union, but not to an extent and the one the British would experience in the next coming 10 or 15 years.
And before we conclude, let me ask one question on populism, which has defined much of this decade. Do you see it as a direct consequence of the Global Financial Crisis? If so, should we expect a continuation or even a rise of populism as a result of the current crisis?
Difficult to say. I don’t think that the populism we had to face during the last decade is only related to the financial crisis, to all of this global crisis we were going through. What was happening as far as the whole world is concerning, Poland and then Hungary had no relation at all with the financial crisis. The financial crisis didn’t create an impact on Poland and Hungary in a way that populism should have been developing as it was.
So, there were reason for populism independently from what is happening in the economic field, I mean. The fact that people didn’t understand the financial and economic crisis of the eighth, ninth, 10th of this century. The fact that nobody did really understand what was happening in Greece and how the European Union tried to react to the so-called Greek crisis. The fact that the pandemic crisis was adding uncertainty to already existing uncertainties, relations with the US, they were bad. Difficult events on the immediate borders, in the direct periphery of the European Union, Russia, Turkey and others.
All these uncertainties, of course, are creating an atmosphere and the reality where populists, who are putting sometimes without questions, without delivering proper responses to that, is explaining populism. And the fact is that traditional parties from all the areas, left and right combined, very often had a tendency to imitate populists, to say exactly the same things, instead of saying exactly the opposite to when there was sufficient room for saying the opposite, is explaining why the theories of mainly the extreme right were more and more welcomed by peoples confronted with growing uncertainty.
So it will take some time. But those who are in favour of the European Union and those who are representing traditional political tenant is, they have it in their hands not to imitate the populists and the extreme right, but to block them. And to stop them.
And then, last question. As you are somebody who loves to read and is surrounded by books, what book have you recently read that you would like to recommend to our listeners?
I’m a curious guy, curious reader guy if I can explain myself that way around. Because I’m reading in parallel, more than one book. But I’m mainly focusing now on the Memoirs of Jean Monnet. Why? I had read them years ago, but now I wanted to rediscover his attitude towards Britain because he was living in Britain. He was very British, friendly.
He was defending the membership of Britain. He’s committee for the union of the European people was always in favour of the British accession to the then economic European community. But he said, that’s exactly the point where I have arrived right now, He didn’t say don’t ask to them, but he said, be careful there because one half of the British are joining a club. They want this club to play with their rules and they are only seeking their own interests. It has been proven in recent years.
Thank you very much, Mr. Juncker, for sharing your insights with our audience. Thanks also to our listeners who have tuned in again to our podcast. In our next episode, I will have the honor of speaking to Cynthia Tobiano, deputy CEO of Banque privée Edmond de Rothschild. To stay up to date with our podcast. Please feel free to subscribe on iTunes, Spotify or Google. You can also find more information on our website, luxembourgforfinance.com.