New French Government and a Conversation on the Draghi Report with Federico Steinberg

[Music] hi I'm Max Bergman and I'm Dess and this is the Euro file a podcast where we look at Europe through a Washington lens welcome back to the euro file September is here we are back to school first we'll discuss the formation of a new French government after mcon picked former Chief brexit negotiator Michelle barer as prime minister then we'll briefly discuss two Regional elections in East Germany in the outline of Ursula Vance new European commission which should be decided very soon and by the time this podcast comes out we should have her proposed lineup and then we'll turn to a conversation with Federico Steinberg visiting fellow with the csis Europe Russia Eurasia program and Senior Analyst at elano about the long- awaited drogy report on the European unions competitiveness we hope you enjoy the show Max how's your summer been it's over I went to Europe's version of Maine I.E Sweden it was quite wonderful we've come back from vacation we played on our softball team this week where we have an annual csis competition where it's the geezers versus The Whipper Snappers and the natian and I are both on the Geyers and the as as a new American citizen is played the whole game and the Geyers won so it was required for my citizenship actually yeah to to play softball you may not know this Europeans but you actually have to learn the rules of baseball softball is basically a version of baseball but over the summer a lot was happening in in French politics that I had a hard time following and understanding now you went to Belgium right so you're close enough so what what was going on how was your summer well my summer was good I was during the French election I was in Tunisia so I was on the basically the right time zone to be watching the debates on TV in between the two rounds it was pendemonium on TV set with the pundits and last time I did go to Belgium we were just waiting after the results of the election we waited until now 51 days for maon to appoint a new prime minister and let's just say people are not super happy with this result now we should say the French are often unhappy however the core issue at hand here is that mcon appointed Michel barer who hails for this is only the fifth largest party in Parliament coming out of the elections in July which means in the former historic center right party correct which is now rightwing and M himself who had run in the Republican presidential primary a few years ago is pretty right-wing on immigration on the economy and a series of issues like this when we know that the leftwing Coalition got the most votes not per each party inside of it but overall and we also know that a lot of leftwing Voters held their nose as they say to vote for a right-wing party if it meant keeping the far rights outside of seats in the parliament so overall it just I think for a lot of people on the left and in the center feels like a slap in the face elab has a survey out very recently that shows that 74% of people pulled think that M disregarded the results of the election 74% that's not nothing 55% believe it was stolen I think we've all heard this discourse before none of this is good for democracy and maon has just waited and waited to appoint somebody that he thought would be more palatable to himself and probably to maintain or let's be honest I think to keep alive some of the reforms that he passed on pensions for example isn't macron's defense here that the left was also really uncompromising as well and basically came forth and said that they had won the election which you could argue they did but it was still sort of one third one third 13d and weren't really making the compromises necessary that you would have to sort of put together a coalition and maybe mcon wasn't receptive but that's a criticism of the laugh that I've seen what do you what do you think about that that's of course going to be macon's defense is that they were not compromising enough however they all agreed on a couple different names that he rejected each time because he didn't want anybody from M's party to be prime minister so I don't know that this holds that much to be perfectly honest and he waited and waited I think you can also argue that he picked someone who would be palatable to the far right and they have said we will abstain from the vote basically we'll let him go through barer and each time we have to make a decision on a important law probably they'll try to extract some kind of concession so he he has presented this big election as a way to keep the far-right out of power yet he engineered a situation with a prime minister who is closer to them in policy positions than anyone else the left could have put forward so the argument that he's putting I just think there's a little bit of it doesn't make a lot of sense to me the decisions that he's been making and I think that's a sign that he probably feels a little desperate politically at this point trying to retain as much power as he can while still adting that he's going to need the prime minister to have a good chunk of power now too now I've seen that there's some talk that this may not last that there may be a total political deadlock and the only thing that would really resolve it is if macron were to actually resign I sort of doubt that will happen but to me one of the major questions is what does this mean for you know future French presidential elections what does this mean for a Leen candidacy because I think the major outlier here or major problem or concern especially for Europe or for the United States is if Le Pen could really come to office the only way I actually now see that possible is if you have a really fractured political landscape where the two top political parties are from the far right and the far left and so if it's Leen and melan sha and I think the danger of what macron has done is that is the center to fractur to actually figure out and have like a single candidate but the left then is energized melanon gets from like 20% to like 25% maybe in the next first round and maybe that's where you know Leen is as well and you kind of have the the center sort of all fractured you know then you're having an anti-establishment party win the next presidential election because I think if it's either one of those and someone from one of the center left or you to the center right Spectrum which is rather large then I think you have a situation where that's the person most likely to win no I think that makes sense but I also in addition to having fractured the center I think mol's challenge he has also diluted the meaning of Center for a lot of French voters the only way they find a real contrast in policy positions now is by going to the far left or by going to the far right and everything in the middle because maon collided all of these positions in his first government because his original party when he came on the scene in 2017 was a combination of socialists of center right and some right-wing people all coming together you create this Big Blob that two people no longer longer represents the political Center it just represents maon and they don't really know what that means politically anymore so they'll go to the wings of that and to the extremes of the spectrum I'll just add one last thing which is you say Leen I don't know that in 2027 it's her Jordan bardel has done a ton of work to make the party more palatable especially to a lot of younger people and I think if you get to that it might be him I mean he's facing some investigation around fake jobs in the European Parliament which seems to be a brand for the but I think that's something to consider as well which will be another blow to the center because this is a very young energetic person who can present a new vision of that party and it's not looking great I think for M the moment I think that's a good segue to talk about from another depressing one basket case to another basket case which so happens to be the two biggest countries in Europe yeah everything's fine everything's fine German Regional elections what happened those two Regional elections one in Thia the other one in Saxony which in Eastern Germany saw the if day which is the farri party get its best results ever and the best result of fire Rite party in Germany has won since World War II obviously this brings together very concerning and painful memories not just in Germany to be honest across Europe as well I think if my grandmother saw these results she would be really really concerned as well but basically I won over 30% of the vote in Thia and just about 30 1% or so in Saxony and this is just a concerning result let's say not entirely surprising the polls were not that wrong we could see the I day Rising there and it's been growing for the last few years as well it's just the problem is the political ramifications that that creates and what that means for political stability at the federal level in germanies yeah on the one hand I think we can sort of overread these elections because there are two states particularly Thia is quite small but they're two states in Eastern Germany which is where the afd does the best so it's not necessarily pretending you know the afd to kind of win national elections I think that's something you first of all people should understand this is a bit like having an election in the American South and then trying to project out Nationwide what it would mean that said I think it sort of further demonstrates that the political suicide PCT that is this German Coalition is a a huge problem and and when I look ahead at the German elections next year I think the basic political problem and this in some ways I think is also reflected in France and macron where macron sort of occupied the center and so the only way to have an opposition is on the far right and far left there are basically four political parties in Germany that have been governing over the last forever right which is the CDU which is the opposition party now but that was angal merel's party which you know she governed for 16 years then you have the Coalition of the sdp so the Socialists the fdp the Liberals and the greens and the problem is the Coalition is a disaster and everyone's unhappy within the Coalition and the country's unhappy with the Coalition but it's not like the CDU is really the opposition because CDU has been governing the country for 16 of the last 20 years and a lot of the policies that are now sort of coming home to roost whether it's on energy whether it's our relations with Russia you name it the Seas of those were actually done during the CDU control so you have a situation where the opposition is the afd where those that are sort of saying this is a total mess and a total disaster we need like real change are coming from the afd but and now also this sort of Lefty conservative upstart party which is very sort of pro-russian anti-immigrant yet trying to steal yet sort of pro- worker kind of a Marxist fashion so that I think is the fundamental problem the one thing that sort of gives me some hope is when I look ahead at the German elections I do think that once you get these sort of political parties particularly in Coalition Unshackled from the Coalition they are going to rip the Coalition and I think try really try to differentiate themselves but it's currently a real political Challenge and I also would be sort of concerned if I was the CDU because Fredick MZ is really pulling ahead it looks like he's going to be the next Chancellor but if he wins who's he going to govern with and there really needs to be like a second major party so either the SPD or the greens or the fdp need to emerge as kind of an ascendant party I can't really see it with the fdp frankly because Christian Lindner who is opposed to all spending and loves the debt break which is now an economic albatross around Germany's neck I just saw completely coming out strongly against migration and immigration which okay fine from a political point but but that means your part is the liberal party that and that means that fdp's platform is the cdu's platform right so he has no leg to stand on right it feels very vacuous while on the other hand being very ideologically Hardline when it comes to economics it just doesn't really feel fit for the moment the greens they've tried this before with CDU yeah the greens I think they're the party that once Unshackled will really rip the Coalition and try to sort of reestablish themselves as really articulating a new line but Robert hobc who is now going to be their Chancellor candidate most likely he was pushing everyone to get rid of gas boilers or so that the the right-wing press in Germany sort of described it as and then you have Schultz who I don't think we should underestimate politically and could sort of revive the SPD but then does the SPD want to enter into government with the CDU again so yeah but Schultz comes out of this quite wounded as well his image is really really hurt at this point very wounded I think as a leader that really hasn't set a direction and I think the Coalition is part of that but also that is part of like schults themselves so I think the danger is is that you have a CDU afd with the CDU trying to struggle with with it's Cordon Senate around not cooperating with the afd and it's uncertain in these Regional elections what how do you create a a working governing majority if you're not going to work with the party that won the most votes in the afd or the second most votes or the left conservative party that the CDU also disagrees with so political mess in Germany and that could have real implications maybe to our final topic which is the EU and what I think is actually a very exciting period right now in what's going on in Brussels at time of recording we're waiting for ursela under Lions cabinet announcement so the College of Commissioners and that is 26 positions separate from hers each member state gets one commissioner that's kind of the Super Bowl of EU positions because some portfolios are a little less important we'll be honest but some are really important and member states are vying to get the big ones because we're at an inflection point in the European Union on defense on economic competitiveness we'll talk to feder Rico about the dry report about competitiveness and making sure that the EU is on a sustainable economic path because growth has been just really lagered so she's building basically her team of Avengers to push forward really important policy files potentially a lot of big reforms as well if she can make that work but she has to juggle a lot of things we've talked about top jobs before but just as a brief reminder there's geographical diversity there's gender diversity you need to also make sure that someone who's coming into the portfolio has some vague inkling of what they're about to cover ideally understand the EU institutions just a little bit as well and have the clout to push forward big files maybe just to put this in sort of clear context for some of the American listeners I mean this is what happens between presidential election you know after an election who's going to be in the cabinet except it's as if like Hawaii got to put forth like who is going to be their cabinet member and you put that person as like SE def or as the head of the Department of Education in this case there's far more agencies and far more departments because they had to invent some in order to you know meet the requirements of having every country being represented but it's a lot of political jockeying happening right now yes and a lot of portfolios are set but they can be changed so we've talked a lot about this idea of a defense commissioner for example and changing the trade portfolio making it a little less important so that the budget one is a lot more important because there's a lot of questions around Investments coming in the next few years so there's important figures to put forward there I'll just say I think it's important also to remember that she's probably also going to try to put some let's say problem children Commissioners in portfolios that are less problematic we've seen like the Hungarian Commission of Ari has been at enlargement for the last however many years we've seen where that stands at the time where there's a lot of conversations around Ukraine joining the European Union moving forward on the Balkans finally there needs to be someone who can really have that impulse and she has a lot of calculations to do there and important is she can't just name them they have to be approved by the parliament so we're about to see not just a really important list of names but also a ton of political jockeying in the parliament because there will be hearings for each commissioner and the Parliament has killed nominations like this before and the balance of power has changed yeah maybe to just take a step back I mean the way I sort of see this is that it's not simply you know right now there's a lot of jocking over positions but what's also happening is figuring out what is the what's the plan what's the governing agenda you know this whole election cycle works different than in American elections although sometimes our presidential elections are not the most substantive but what we just saw this week was Mario Drogi you know who came out with this big report long- awaited report on European competitiveness and it's really an astonishing and what I think is really significant about this is it strikes me not simply as you know an economist went off and sort of thought deep thoughts about like the future of the eu's economy and through out some like you know bold reforms that will never happen or bold proposals that will sort of never happen this strikes me really as a governing agenda it strikes me as sort of project 2025 for the EU in that sense but different content different content to be clear because what's in there is something that each of these portfolios these new Commissioners can pick up and the European Parliament and this can form the basis of of future legislation and embedded in it is sort of a bold New Economic strategy for the EU and the fact that it was sort of unveiled in a press conference in Brussels in September middle of September but with verion sort of really hugging it I think is really impactful and maybe just another thought about this commission is that we know who the high representative for foreign and security policy that's Kaya kalis an Eastern European you know someone who speaks very boldly and strongly about Russia a bold voice I think this is a commission that is going to come forth with some big ideas and going to be very bold I think Von feels empowered was re elected or reappointed with a quite a strong support actually in the end you know despite the fears of the farri gaining European parliamentary elections it looks like the European Parliament has a clear governing majority to support a lot of the Bold things on climate investment other things the big obstacles are going to be can you move Berlin to support some of these topics and maybe some other countries as well but if I had do bet I would say we look back 5 years from now and say this was I think a really impactful commission at least the way I see it now it's being set up to be yeah and the last thing I'll be looking for also in in these announcements is since we're talking biger picture and you mentioned Kaya Callas is there a shift in the balance of power with the Commissioners coming from Central and Eastern Europe which kind of portfolios are they going to get because we've talked a lot about Poland now being in a reinvigorated role I think that'll be really interesting to look at as well it's like in this crucial institution is Eastern Europe going to rise to the challenge and is it finally going to be given more decision power yeah and a final thought on that I think there's been a lot of talk about power shifting Eastward in Europe and that's often times greed in the United States of like okay we need to engage these states more and I think that's true but really what does Powers shifting East mean well Powers shifting East within Brussels so right now you have a new polish government Pro euu with Donald Tusk you know you have kayak kalis There's an opportunity for Eastern Europe to more proactively shape the EU agenda and I think that's the powers shifting East it's within the EU at Brussels and I think that sort of past network of frugals that we saw since the 2008 financial crisis really emerged to block EU action to me I think that's fractured and States like Germany and maybe the Netherlands are going to be somewhat isolated at when it comes to opposing sort of Big Ideas to ramp the European economy because I think there's clear that bold action is needed and I think with that that's a great segue to actually get in the weeds in the details of the Dragon Report with Federico Steinberg we are joined with Federico Steinberg Federico of course is a familiar guest here on the Euro file he's a resident visiting fellow here at csis and he he is also uh with the elano Institute Federico is an economist and sort of the perfect person to talk to about the dragy report which has just come out from the former Italian Prime Minister Mario dragi and former head of the European Central Bank Federico this seems like a really big deal this report at least in as I see it it was released in Monday morning in Brussels in middle of September at the beginning of a new commission cycle with vandine just sort of being reappointed for a second term and it's an incredibly detailed 400 page report that to me at least looks like a governing agenda I'm curious how you see the report and its significance and then maybe react to that and we we can get into the the weeds of the report somewhat sure thank you for having me here at the podcast again and you're right I mean dragy is a huge political figure in the European Union basically he saved the euro in 2012 by you know this famous words do whatever it takes to save the Europe and then he went on to be prime minister of Italy and he's a well respected figure there for particularly economic issues and and here the main problem is that the EU is lagging behind in terms of productivity income per capita Visa the US Innovation the problems of adapting to the New Economic reality and dragy had been giving some speeches in the last years talking about the need for a radical change uh basically the European commission asked him to do this report more than six months ago basically it was about competitiveness but as you said it covers a wide range of issues and it goes to defense Economic Security the ways of financing that we'll talk about it in a minute and this is complimentary also to the Leta report on the single Market the reform of the single Market Leta another Italian former prime minister who got this mandate from the European Council so we have these two reports but you're totally right the importance of this report is basically that Mario dragy who's been everywhere in the European Union institutions is sending a number of very clear messages to the political Elites to do things and as we'll discuss many of the content has been under discussion for several months I would say actually we publish a nice paper at csis Europe fiscal Crossroads where we basically follow the same structure right challenges need for financing sectors what to do but I think therefore that this is going to have an important impact and the problems are going to be within member states basically because the the report argues for a big push in European integration common financing etc etc as you just said the report argues for a range of changes a range of issues just for our listeners awareness the three big areas that at least the forward presents to try to bucket things is the Innovation Gap decarbonization and competitiveness and increasing security and decreasing dependencies that's a pretty tall order which is probably why the report is 400 pages but it comes at a very particular time which we can take this in order I definitely want to hear from you on those three buckets of work what are the big recommendations that the report puts forward and are they as ambitious as we expected them to be when we thought the report was going to come in June and at the same time I also would be really curious for your take about how it's being received because some of these changes we're wondering you does it require a treaty change are some member states going to B completely and is that a report that is is therefore going to be completely sheld not that it's been released yes absolutely for many of us that we like the European project you know we we all hope that these recommendations will be taken seriously of course and the report does a very good job in combining you know the urgencies of the international political scene which is basically the big external shock that the EU is having to try to rethink many of its policies because remember that the EU was basically a project that was looking inside Europe it was about peace integration but not very much about what was going on in the rest of the world so the report starts with a diagnosis which is well known here here in Washington about you know the the crisis of multilateralism of the liberal economic order of the trusted institutions the the great power rivalries and goes very fast to argue that in these elements Europe is finding it difficult to adapt on the technological side the big message is of course the EU is lagging behind in Innovation but it has an optimistic take in part of the report about the Technologies in which the EU still has not lost basically ground and he encourages big Investments on those areas whereas maybe in others you just have to accept that the EU has has lacked behind basically there's an issue of artificial intelligence but for instance the traditional industrial capacity of Europe is there he argues that it needs to be reexamined to ensure that industrial policy technological policy environmental policy and also foreign and security policy and defense are more integrated and then there's a big message on financing throughout the report and here again the big discussion is about how far can you go and how the member states are going to receive it basically he is not shy here he has been arguing for basically the need for Euro bonds he starts with this very clear idea the EU benefit reped for many years from cheap energy from Russia exports to China that made countries like Germany prosperous and the security umbrella of the United States this can no longer be taken for granted any of these three clearly not Russian gas problems with China and let's see what happens with the transatlantic relationship so here he argues for a clear need to reduce energy costs in Europe which is a basic input for everything else and then we can talk about more the climate and the security but the other key element is that there is a need to finance some European public goods so this would be infrastructures energy greets a common policy the clean tech sector Innovation and technology in key sectors and also things that have to do with economic security and for that you are going to need common financing at the European level because if you don't do that you are going to be benefiting some countries over others the ones that have more fiscal capacity but also he makes the point that we also need to revisit competition policy in the European Union and this is kind of very very radical coming from him because this has been one of the things that many member states don't want to get into this right the idea is that you have 11 playing field you have the state a rules system you have to ensure competition and not necessarily create European Champions and here the idea is maybe we have to rethink this and create European Champions by promoting CrossCountry merges of companies to have companies as large as in the US or in China and to leverage on the single Market that's also quite radical I would say on that he's quite critical of Germany and France they've gotten some exceptions to provide State support to their own domestic Industries but then of course if you're don't have that same fiscal capacity say as Germany if you're Spain or another Slovenia you can't necessarily do that to the same degree I think that criticism is is particularly interesting particular of how things have gone the last few years I mean the other aspect of this is really pointing to the lack of a declining amount of investment going into the European economies and both from private sources that he points out that after the 2008 economic crash that private investment really rebounded in the United States much faster than it did in Europe and that there was such Focus I think on limiting spending on sort of austerity policies that Europe sort of developed these surpluses but now has underinvested and if you look at the German rail infrastructure and other things like that there's a real sense of lack of investment and he talks about mobilizing money and creating a European safe asset maybe you could talk a little bit about that is that become sort of par the course everyone sort of understands that's the case or is this represent kind of a new way of thinking about the European economy or is it charting a new course here economically for Europe this case for common financing and common risk fre asset has been discussed widely in technocratic economic circles in Brussels and in frankurt for a long time it has political problems from an economic perspective it makes perfect sense right so basically here the idea is you have a number of things you need to finance and you can think about the history of the United States right so over time you have things that you have to pay for and then you create a federal instrument to be able to finance that federal debt you don't go state by state looking at who has more savings or not right so here we're in the same situation the the European budget is very small this 1% of GDP and basically the investment needs for the EU have been calculated by your report at around 5% of European GDP so you would need basically around $800 billion per year of investment or four points more of GDP on a European budget or something similar right by the way this is more or less the figure you and I came out with in this report so everybody's talking about same numbers it's a huge increase but is perfectly doable right now how do you finance that well basically you can issue common debt as was done with the Next Generation EU funds you could have more contributions from member states to the European budget or you can have European taxes right green taxes or a financial transaction tax or transfer part of vat anything you want to put in the center and that that would make it more coherent that would eliminate the problem you mentioned between countries that have more money and others that have less Germany versus Italy for example and then the issue of the risk-free asset for him is very important because he was conducting monetary policy it's a bit technical but basically here the idea is that in international financial markets you have the US treasury bill that's the key asset of the world financial system and that's considered a risk-free asset because the US is not going to default right it has other issues with the Deb ceiling Etc but basically it has the money to pay back in Europe you have German bonds French bonds Italian bonds Spanish bonds with different ratings and it's a bit complex and it would be much much better to have a European Bond actually that would allow the international role of the euro to grow as well and that also would be very functional in terms of the conduct of monetary policy which is something dragy likes a lot so basically that's the technocratic part it makes perfect sense now the problem comes with okay Germany are you willing to accept more joint depth more money in common more contributions to the budget and that's where things become a bit more complicated that gets to sort of the political problem which you sort of skirted over uh to some degree that this sort of cuts against where Berlin has been historically very opposed to sort of common joint debt but not just Berlin I'm looking at our producer AO from Denmark the quote unquote Frugal and so there's going to be a big political fight here I guess the one thought is that what may make this time sort of different is that you have maybe not an economic crisis in Germany but a real need for an economic revamp or rethinking about what's the strategy here and in particularly in a world of more geopolitical competition large industrial policy especially here in the United States but also in China that there's kind of this need for for Europe to also do something to ensure that its companies that its economy is being invested in by a big state level entity whether that's the member states or the EU so maybe there is perhaps we're in a slightly different moment that you could probably make some Headway what do you think think of the politics of this yes I agree with you that if there's a moment where this should move forward is probably now right so between the defense issues defense spending needs of the member state but basically of the EU which you know needs to proceed and the case in the drag report makes the case by for some common you know joint purchase of different things from gas to military equipment right that also requires coordination even if you're not going to have this big jump in the financing at least that member states coordinate but yes absolutely you have problem in which there's a clear recognition and this was also in the lettera report that the Europeans save a lot but most of these savings end up in startups in London in New York in Silicon Valley or in Tel Aviv right so this is basically a very well diagnosed problem and perhaps you need precisely to have this public investment and then the private sector will follow that's a main idea and this is an old idea in Economic Development by the way you put some money from the public sector than that has traction over the private sector and I think the problem and you mentioned this very well in this context of the German government was really the Finance Minister uh Linder and the Liberals position Germany is in a in a position of weakness I would say at this point France a bit less so but let's see what happens with the new government Michelle barer so yes I think there's a window of opportunity at least to try to remove all these situations of you know we stay with the status quo we are not going to do anything different because the message is is very clear now then the details are going to be very complicated and probably as always in the European Union we're going to see small steps that if you look at them over time basically can represent important changes as we saw through covid but I don't expect you know tomorrow the European commission pushing for Euro bonds and the council accepting them basically again we're going to have a big fight here between member states some more than others and then the more Federalist European commission that's going to start in in November with a clear mandate to move forward these things I think a third option worth considering here is that there're wouldn't be a political fight because everybody shoves the report away I'm not saying that's what's going to happen but I think it's something we need to consider vallion has already talked about some of the ideas that are in the report as something she wants to integrate other things are going to be really sensitive at a time where she's trying to manage a coalition that will vote her new Commissioners that she'll announce by the time this podcast comes out it will have been announced so she has a very fragile Coalition of political forces she needs to get together the political orientation of all of these member states is going in all kinds of directions so there could also be an option where everybody says Thank You Mario Super interesting we'll talk to you in 5 years I'm not saying that's important that's that's what's going to happen or that's preferable it obviously isn't because as we were saying this is the time to make those big changes I think a quote from him that is really relevant here is we should abandon the illusion that only procrastination can preserve consensus but that's the Dilemma we're in is at a time where the EU really really needs to start putting down the steps that would improve economic sustainability and Innovation Etc is the hardest time for it to take those decisions because the member states just don't want to do it so this is me just raining on everyone's parades but I just it's it's it's something to consider you're right I mean if you look back the last 20 years I remember for example the Lisbon strategy 2000 that was going to make the European economy the most competitive and knowledge-based economy of the World by 2010 this of course ended up basically I don't know where but then you had the the Monty report another important Italian europeanist uh and those uh recommendations were taking a little bit more seriously but yes I agree there's going to be a strong tendency for particularly F Lion on some delicate aspects especially in these first months to leave that aside and also we have to take into account that the report pushes very hard for deeper integration you have a the rise of extreme right populism anti-european integration all across Europe so this is going to be very tricky but having said that I think that the window of opportunity precisely comes from for example the emphasis on we need to cut energy cost and for that there are a number of proposals like decoupling the price of gas with the way you calculate electricity prices some of the Investments on the greed some joint financing and then see he calls for an energy Union well I think that with the situation with Russia as it stands today there's a clear case to to move forward on that and then finally on the relationship on the economic security trade and relationship with China it's also interesting that the report takes a position that does not align with the US economic security strategy for example he he says that it's interesting to take into account that in some areas where the European industry is lagging behind maybe it's a good idea to have Chinese Imports that are very cheap in sectors that at the end of the day the Europeans are no longer going to be able to compete because that would facilitate climate transition whereas in others like their electric vehicles which is much more tricky there's a paragraph a full paragraph of recommendations but overall drug is an economist and economists look at these issues with be very careful with decoupling the cost of protection Neo protectionism neomercantilism are dangerous because you start putting a couple of tariffs here and there and then you end up reducing the global pie of welfare you know on whether this report just is is sort of a door stop or actually gets implemented I do think the political backing that V has shown I think to the report is really impactful and there's a lot in there that even if you have these kind of big fights over issues that need consensus such as issuing new debt expanding the EU budget there's a lot that you can do legislatively that doesn't perhaps require the same consensus that will be passed through qmv because this is you know domestic and economic issues that I think will get implemented we're going to see I think this sort of provides a pretty clear governing agenda well maybe just a couple quick thoughts on the defense industry side because there's a really interesting chapter on this that sort of reflects and builds off of the EU defense industrial strategy but there are some lines in there that are going to totally you know raise the eyebrows of many in the American defense industry because it really highlights that like the EU is shipping all this money abroad in buying foreign weapons when it could be producing more domestically I think that makes a lot of sense to me the significance here is that it's drogy writing this it's an economist writing this it's not just me or some other foreign defense policy W that has been in the weeds of the European Defense fund or or whatever other EU program this is sort of breaking this issue out of The Silo of the fact that European Defense industrial landscape is completely fragmented is a total disaster in elevating that to Economist level and when economist look at it they look at it very bluntly and I think that is going to have an impact now I don't think it's going to necessarily dramatically change things overnight but I think it's another step to sort of mainstreaming that there has to be reform in this area that most politicians don't understand and just sort of defer to their defense Ministries who then speak at them with acronyms and they sort of move on politically so this has put this on the political agenda and I think that means that the direction of travel is pretty clear here in europeanizing defense maybe not as rapidly as suggested in this report but I think I think that's coming yes I would agree going back to dona's question there's no case for treaty reforms we're not talking about that but in defense you can do many many things before you get there and also defense is clearly intergovernmental so it's basically out of that area and it member states coordinating and also all member states are increasing defense spending by themselves so this these strategies make sense the coordination the common purchases Etc and also the next commission is very likely that it's going to be defense is going to be one of the key elements just as climate change was the the key issue in the previous commission so I would be relatively optimistic on that as well indeed well Federico thank you so much for joining us and we'll be paying close attention to what happens with this report that's it for today's episode as always if you enjoyed the show Please Subscribe and leave us a review wherever you get your podcast you may also be interested in our sister podcast Russian Roulette which covers the latest on Vladimir Putin's Russia and the ongoing war in Ukraine please also check out a new report from our program titled power plays Europe's response to the energy crisis examining the energy shock caused by Russia's invasion of Ukraine it's a fantastic report it's a great overview of everything that's happened over the last few years in Europe when it comes to energy you should check it out and you can find a link to the report in the episode description our thanks to our producer Sean faul and to Otto senson for coordinating and researching this episode we'll be back soon with another assessment of Europe through a Washington lens until next time