good morning ladies and gentlemen my name is federico rampini i'm a correspondent of la repubblica in the us and i'm here to introduce and if i still have time at the end ask a question so to the general secretary of the oecd who needs no introduction especially so in trento as the organization that he is the secretary general of has an important branch office here in trento and they deal with strategic issues as the opening to emerging countries and is celebrating the 10th anniversary of the oecd office again in trento oecd means the organization for cooperation and economic development and it has long been the club of industrialized countries it has its headquarters in paris and over time uh especially because of the thrust of this organization has changed a lot in that in that it widened its membership the number of countries that our members do it and that happened for obvious reasons at the beginning we see the included in only the truly industrialized the country is accounting for 80 percent of the global gdp and and now it covers only 60 percent of the world gde be indeed china is not a member i believe that they are observers within the oecd in china and anchor hurria is extremely competent and has an important background in managing this growth of the oecd as it comes from mexico he was a foreign minister and finance minister in mexico and by the way if i may have like to open the parenthesis there in europe we are a bit parochial so much so that whenever you think about mexico you think about beaches beaches in acapulco and yucatan or drug traffic in the u.s where i live the image of mexico changed importantly recently president obama visited mexico and the whole of the u.s journalists who talked about mexico as a new emerging country with a very strong and powerful economy another brazil as it were an economic important country so i think that we should update our knowledge on mexico korea is covering presently this is second mandate he was appointed in 2006 and his mandate has been redeemed in 2010 and again his main task has been that are widening the oecd today he's going to talk about inequalities and having said as much i'd like to give him the floor and i hope i'll have time to ask him questions thank you very much for your kind introduction and thank you also for what you said about mexico as a matter of fact you should indeed update your knowledge on mexico and latin america as it were at the oecd mexico has promoted the inclusion of colombia and in 2015 also costa rica is going to become a member and maybe at least even peru may join oecd also latvia and lithuania are potential members i've also been asked to get in touch with people in southeast southeast asia so that the oecd can actually represent a global set of nations ladies and gentlemen it is a great pleasure for me to be involved in the eighth edition of the festival of the economy and the fact of us celebrating the eighth edition implies that this is a very important festival the subject for this year sovereignty in conflict is at the same time a bit of a provocation and a bit uh and also a very important subject as in the world as the one we live in the rule of governor of governance and the ruling classes is becoming ever more complex i'd like to grasp this opportunity to share with you what we think when it comes to global inequalities and potential solutions to the problem two days ago the yearly week of the oecd meeting was completed the forum of oecd was held in paris together with a meeting of the council a ministerial council of oecd the subject for today's meeting was it's all about people jobs quality and trust and i'm very pleased to say that one of the most important challenges we should come up against i.e the growing inequalities is once again the top priority of politicians of inequalities let me start with some facts on this very delicate issue over the past two decades the oecd has carefully documented the evolution of income inequality actually in 2008 we produced a big document called growing unequal but with a question mark unfortunately we have removed the question mark this document called divided we stand has a subtitle called why inequality keeps rising now this the study confirmed that growing inequalities are in a way taking consolidating and identify the main drivers also behind the trains let me share with you some striking facts income inequality increased in the first three years of the crisis up to 2010 more than it had in the previous 12 years so we this means inequality was already growing before the crisis but nothing like a good crisis to get inequality just going through the roof in three years inequality grew more than in the last than in the previous 12 years in 2010 the richest 10 percent of the population in the oecd countries which are the more prosperous countries in the world they earned about nine times the income of the poorest ten percent so nine to one ratio but you say well so what well the problem is that one generation ago 25 years ago the ratio was six to seven times this means this has increased by 30 to 40 percent in one generation clearly it is moving in the wrong direction at high speed and even for those countries whose inequalities have decreased chile we are decreasing inequality big success our ratio is not nine to one is 27 to one brazil 50 to 1. and they are improving also so here in italy is 10 to 1. so you're close to the average united states 14 to 1. it gives you any consolation so this is a systemic problem this is not just a problem of the poorest or even of the richest it's all over the place why has this happened well untangling the complex factors behind the widespread increase of income inequality is what will ultimately lead us to reversing the trend we have to understand what is happening let me highlight four factors that we consider crucial in explaining the phenomenon one the single most important driver has been greater inequality in wages that means the greatest sorts of inequality is in the labor market of course when you have no labor inequality gets you know this is no surprise among the working age population in most oecd countries earnings from work make up about three quarters of the total household revenues so obviously the sources come of inequality come from there second globalization technological changes policy reforms they have also driven profound labor market transformations in other countries relatively high skilled workers have enjoyed significant earnings significant income gains while workers with low or no skills have been left behind in two ways one lower wages but in many cases in this period of high unemployment out of the labor market altogether the most affected in the crisis are young male low skilled these are the millions of the victims that have been increasing the army of the shomash of the unemployed today now the third element policy and regulatory reforms have also affected labor markets by promoting productivity eco and economic growth these reforms have brought more people into work and in particular many women and low-paid workers this is good this led to a rise in part-time and low-paid workers but this widened the distribution of wages it made the distances higher i have to say uh normally you you take a look at part-time work as if it were some kind of inferior but it is the secret of the success of many countries because this is a way to bring in the women this is the way to bring in the elderly this is the way to bring in a more of the young people rather than having very rigid nine-hour shifts or or seven-hour shifts in the case country where we come from um not mexico but france yes now for last but not least tax benefit systems have become less effective at redistribution incomes the main reason of this is that is on the benefit side levels of benefits have been cut and eligibility rules have been tightened to contain social spending as a response to the crisis to the budgetary problems so transfers to the lowest income groups have failed to keep pace with the earnings growth so you have before you have high inequality you add taxes you add social security and you end up much much lower inequality here the tax system and the social security system is now less effective at reducing inequality this is what this says so once we have identified the roots of the problem what do we do what do we do how do we reverse the trend well today more than ever the key to reversing the inequality trend lies clearly in improving the employment situation unemployment during the crisis has reached unprecedented levels we currently have close to 49 million people unemployed in the oecd area only of course at the world level it's about more than 200 million but it's very difficult to calculate because in india 90 percent of the workforce is informal even in brazil or mexico 60 percent of the workforce is in formal streets it's very difficult to track unemployment as such because you don't have unemployment benefits and you don't have the statistics etc but only on the oecd where we do have the tracking systems where we can follow the numbers you are talking about 49 million people now is this high or low because you're talking about 34 countries you're talking about 60 world gdp well the problem is this 14 million more than before the crisis that gives you an idea of the severity the young have been particularly affected they represent sixteen and a half percent sixteen and a half percent of them of the young are out of work well because the average in the oecd is eight this does not sound so bad eight of course this heights average euro area twelve point two percent twelve point three percent united states seven and a half improving japan always has very low levels it's about five percent a little lower so the average is obscures the reality but for the young everywhere double triple quadruple the average of the country this is invaluable whether it's united states whether it's spain whether it's turkey whether it's mexico so now greece and spain i was saying 50 percent in italy your unemployment rate is 11 and a half this is the average again this masks the fact that your youth unemployment now is about 38.4 three times more not the usual double but three times we need to urgently focus on creating more and better jobs and on offering real career prospects for these young people we must for example focus on upskilling the workforce removing barriers to higher labor force participation of the women strengthening gender equality and focusing on the question of employability not only on employment but employability because the skills are portable whether the job is not so portable in fact in europe you have very little mobility of the labor force because of the housing situation because you know typically you live in the united states it used to be it's not no longer the case but it used to be until before the crisis that you change job you sell the house then you go to cincinnati you buy the house in there you you you go to the new to the new job two years later you get a job offer in chicago you sell the job the house in cincinnati you move to chicago this is what's the way this it's a culture it's a party in the market it's allowed it's a housing market but also the job market whereas in europe the mobility is very very little sometimes you have very good job of opportunities and maybe sometimes even you are in trenton and the opportunities are in venice and you you don't move very short distance uh even more now there's a little bit more mobility forced by the crisis across borders but this is not typical this is another problem now the provision of public services such as education and health is also essential in reducing inequality improving the quality of these services particularly i would say education health is therefore crucial in the pisa the pisa is something we organize every three years 70 countries in the world now include china india et cetera is a program for international student assessment this is the most recognized system to compare the relative effectiveness of education systems in the world the oecd provides a powerful tool to assess the quality of education in the experience of 34 oecd member states yes but also 37 other non-member states we call member states that participate and it suggests uh which and how are the finer points and why regardless of whether it is china or finland or canada or korea with completely different governance political issues cultural issues there are certain common trends to the successful systems to the ones that are at the top even if they're very different in nature so again let's take a hard look there are elements we have the way to take a look at the x-ray you know actually from the x-ray we're passing to the pet scan we can now have very very defined very specific look inside this phenomenon the the reform of tax and benefit policies also very central to our role to our goals over the last two decades many countries moved away from highly progressive income tax rates and net wealth taxes viable and effective policy avenues do exist raising some marginal tax rates certainly on the highest income brackets just don't overdo it because then you lose your your citizens and some people want to go to russia for some reason improving tax compliance eliminating tax exemption reassessing the rules of uh things like property taxes in fact today you say what do you do what do you do the tax policy you're talking about eliminating the inequalities etc what what is tax policy today generally happening in the world basically saying reduce the tax on labor and that includes tax directly on labor on the wage earners but also on the companies but also reduce the social security contribution why because if you make it more expensive in europe in many countries it's you take away almost 50 percent of the workers wages in different charges it's so expensive to create a new job result nobody wants to create new jobs you take away the appetite uh prelim predatory you know to create a new job but then lower the wages lower the taxes on the companies they say but guria please you know we are trying to square the balance on you you're talking about reducing the taxes it's just it's it's almost the counter logic we say yes but what are they doing to compensate increasing the the value added this is not a message to anybody anywhere in the government here or anything like that i'm just saying what the world is doing increasing the taxes on property again this message we have delivered directly to the government only a few days ago so it's not in order to be provocative here but in the third is to increase the taxes on emissions the green taxes this is the way you compensate by the loss of the revenue on companies and on labor to incentivate the creation of more investment and more jobs in order to get greater equality now the oecd is actively engaged in supporting its member and partner countries in addressing the high levels of inequality and promoting equality of opportunities last week our ministerial endorsed a youth action plan it contains concrete actions to increase job opportunities and the employability of the youth by improving education vocational education training systems as well as ensuring better transition from the school to the work sometimes now you never give that step you always stay in the school and then you go to unemployed which of course is a tragedy is part of this problem of losing a whole generation and obviously unacceptable as a proposition economic moral ethical political absolutely unacceptable and unsustainable we are developing a strategy for inclusive growth the word inclusive is of the essence which focuses not only on income and wealth but also non-monetary dimensions jobs education health social connection civic engagement institutions we actually are the institution that has created the tool to measure the better life index the beyond gdp the the non-gdp related dimensions of the quality of life precisely to be able to provide this this input on the policy side not intuitive not you know creative but basically measuring and benchmarking we're also focusing on gender equality last year we launched a report closing the gender gap act now this report identifies the main trends behind the gender gaps and provides policy options to close them and during our ministerial of two days ago we adopted the recommendation on gender equality focusing on the three e's education employment and entrepreneurship again this is to reduce the inequalities so um obviously here measuring is critical but evaluation as we go along is also very important lastly let me highlight an ambitious multifaceted initiative we have embarked on we call it new approaches to economic challenges nike sometimes people think we are making publicity to some tennis shoes or something like that but it's not uh tennis shoes this is uh and it's it's policy oriented which means we did not call it new economic thinking because it's not only about thinking it's policy oriented it's about telling governments what policies to embark on and it's basically also a culpa because mostly you the youngest here you have to understand we at the international organization do not feel very proud of our role in the crisis we were discussing we were talking and there was a a train a freight train coming down the line going you know it was very clear the train was coming and we were oh we were playing cards in the rails and then of course and then everybody's kind of waking up we are still in the crisis we did not talk enough among ourselves the imf was told by shareholders dedicate yourself to the external sector the financial crisis and the world bank was told to dedicate to fight against poverty and the oecd was told to dedicate to structural issues in the ilo to talk only about labor and the wto to talk only about the dog around or not to talk around or the non-dog around whatever he goes so we did not cross-pollinate we did not cross-fertilize enough and of course we could not become a formidable choir with a united voice to tell our shareholders watch it the train is coming you know do whatever it takes we at least could have avoided the very serious damages so we have to organize ourselves better this is new approaches to economic challenges it's a challenge to look at self in the mirror naked and of course we don't like it very much and then see okay how can we do better so again this is about the governance of the world of economic policies not only about the question of one sector or the other sector or one individual institution this is something that has to be corrected signore signori again are uh rejecting the strength of social compact it's important to trigger growth and create jobs and this is obviously our major priorities which need to be developed in a sustainable and inclusive manner and i was being asked by the press for example when we launched the economic report about italy to mr leita in rome uh in two to three weeks ago i mean they had been selected only maybe a couple of days before and we we gave them the most important recommendation for italy and the act and and and the answer is that action action action implementation it's absolutely necessary to implement make sure you don't go back but at the same time of course continue with the reforms continue to the reforms reforms are not the one time con reforms are a state of mind reforms you know society has to be ready constantly to be discussing and promoting and supporting reforms in order to attain such goal we need to guarantee a safe job to young people as they deserve it which is thanks to our fiscal policies all taxpayers will have to pay their taxes and then gender equality should never be discussed at the workplace and everybody should draw benefit from an economic growth in the future the oecd is making all possible efforts to help member states and partners to reach such objectives thank you thank you to angel guria thank you very much as this applause demonstrates one of the advantages of having latin blood in one's own veins is that you can talk about very serious stuff very important things even dramatic ones with with a lot of passion which actually conveys the concepts easily besides the very good pronunciation of our language we should force the general secretary of the oecd to speak italian at all times but anyway in preparing my first question i simply would like to transfer ourselves to a different historical era because a debate on the same issue i.e inequalities and globalization had we discussed this say 15 years ago or maybe even 10 years years ago but certainly 15 years ago we would have followed a totally different path i mean probably i'm referring here to a very specific time when between 1999 and the year 2000 i don't know whether this reminds me of something the birth of the world the trade organization or clashes in seattle against globalization for example i that time was an observer as i was a journalist based in california and i was following u.s delegations going to china for the latest phases of negotiations to allow china to become part of the wto and the idea then was that globalization would have widened inequalities between nations between north and the south rather than within each single nation and many chinese managers were convinced about this in the the chinese leadership there was a very very lively debate because parts of the party say the leftists of the people's uh republic's party in china thought that you know the chinese would be colonized by the americans you know they would have been devoured by the us that the rich countries would win over everybody else and today instead we find ourselves with the same issue and this topic inequalities and globalization is mainly meant as inequalities within each single nation because many emerging countries in fact got closer to us and divergences between the north and the south in fact decreased sometimes it's useless to make a step back and think about the fact that we had a totally different view of the world and things then move differently but this is basically an issue you've already tackled during your report but i'd like to go back to one aspect of it because you explained how globalization can be a factor to worsen inequalities within our countries and more specifically you said that it has a very strong impact on the labor force which are obviously more prone to suffering from competition this is obvious if a worker works in a sector that can be outsourced in china the risk for his salary to be cut or the risk for him to lose his job obviously increases but i mean today we have counter examples germany for example he's one of the european countries with the lowest unemployment rate and in fact with a lower youth unemployment rate very very low in fact youth unemployment rate in germany is even lower than in the us and its trade balance is active is vagina so it's a country which is in fact thriving with globalization with high salaries high wages i mean you would you wouldn't say that it is unavoidable for globalization to lead to a weakening of the or the weak impoverishing the workers because some in fact avoided this germany for example this is probably the most important consideration of the process of globalization first of all globalization is not an option globalization is a reality which you can get on or be run over by so it's better maybe intuitively to be inside looking through the window than under the rail no is it it's not going to stop uh because somebody is not prepared the ones who are better prepared are going to profit from the broader cake there's a bigger reward out there because of globalization but it's not going to be shared in the same way as wealth today you mentioned correctly there are several phenomena one is shifting wealth okay oxy was 80 of the world gdp when we were created and we added membership today the same membership if we stay in 20 or 30 years time will probably be less than half of the world gdp because they're shifting wealth in china and india and brazil and the the the the developing countries are going to take a larger and larger africa is growing much faster etc but the problem is the following how do you take advantage of globalization and you mentioned germany everybody talks about germany in different ways but it's it's an interesting example what creates competitiveness well let me tell you that we recently pierced a very distinguished italian here and who is the deputy secretary general a chief economist he created a very famous graph which we call the crocodile because it has unit labor cost what is you need level because it simplifies cost of labor cost of labor you know uh but also uh it it includes the time that you work and how much you produce per hour etc so it's a measure of relative cost of labor last 12 years it's a long period italy from 100 to maybe hundred thirty hundred forty france greece even higher um ireland portugal etc thirty hundred forty percent germany united states what is the difference not only that it is more expensive but that productivity was lower in these countries than the cost of the labor in these countries productivity was higher than the cost of the labor so even if they have good wages they are still gaining productivity they are gaining competitiveness because they produce more every hour even regarding the fact that they get paid better this is like well they produce more and they get paid better my god it sounds good because if you continue to be paid better and better and better but you produce less or less than the increase in your salary your products are going to be more and more expensive especially if you are expressed in the same currency and also because the americans are going almost in the opposite direction they the wages the relative wages in the united states are falling and productivity is more flexible so this is a world that we have to compete in so where do the inequalities come from you say well inside each country yes because some because of the globalization those that are more skilled that are better prepared but also in those sectors and in the areas which are actually where the productivity is growing faster than the wages and technology can help very much by applying technology by applying knowledge by by having more skilled labor force they can actually reduce the relative unit cost of labor and increase the productivity and then make it more competitive so this is what is happening now but what is happening now i just want to leave you guys here very worried this is my intention spain already unique cost of labor converging greece converging okay portugal converging and france and italy still like johnny walker you know still going strong so this is going to create a gap what is the result this month spain has surplus in the trade and surplus in the current account now let me tell you something we cannot all be germans and we cannot all be spanish we're italian okay so we have to solve our own issues but these are examples and we cannot ignore them especially if we are bound by the same currency by the same rules of investment and trade and by the same central bank you know so this is where they come from so it's a productivity it's a competitive is the labor market is keeping your place in a highly competitive world and just let me finish by saying the post-crisis world is going to be cutthroat world the competition is going to be fierce because everybody is going to try to recover the law's competitiveness the lost exports the lost well-being the lost jobs so we just have to do better a so what do you think that italy should do as soon as possible to tackle the two sides of the problem i.e competitivity and inequalities to start some place uh to move with the rest of the world means two things first of all you want to get the the objective that means you got to get the revenue because here you have a double problem less growth means less revenue but more people unemployed means you have to make more more unemployment benefits that means you have a what you call double whammy it's a pincer from two sides you increase the expenses or you reduce revenue increase expenses so deficit tends to go up the second problem is that is a question of competitiveness if the others are moving in this direction if they are low in corporate taxes they are lowering taxes on on labor it's difficult to remain an island isolated or having a very original tax system which is not competitive with the rest so this is one thing uh public services this is another way where you can redistribute some of the services equal access to public services but uh but let me tell you something many times this question of of equalizing the worst place to play god with a social policy is with the taxes tax everybody the same or you know reasonably the same and then you take that and give whatever is needed to the poorest but the problem is that you have all these privileges exemptions exceptions the so-called tax expenses in the united states the tax niche in france etc and they were put in the books 10 years ago 20 years ago 30 years ago you have to review whether they're still relevant or even fair or even necessary that's another question and there's a lot of money even before you start to cut expenses or increase the taxes there's a lot in there in the books already today that is not justified and we have to take a hard look at that but then i'm afraid to say you have to take a look at all fashion structural policies what do you say to a country like italy well monetary policy well that's done in frankfurt in frankly you're running out of room you know united states is almost at zero uh uk is almost at zero the japanese are at zero and mario has just brought it down to 0.5 from 0.75 and also reduce the rates of the central banks even more not really okay you can buy some bonds but what do you do with for example then the alternative fiscal policy oh well let me tell you we already used that when you say oh why well because we had a crisis you remember a crisis in 2008 2009 in many countries minus three minus five minus seven minus ten percent in estonia and the baltics minus twenty percent fall in gdp and what did we do appropriately we used expenses deficit to get out of the hole appropriately it was the only way to go but unfortunately we have added 40 percent of the debt to the gdp ratio so right now we don't want more cheese we want to get out of the mousetrap so no monetary policy room no fiscal policy room what do you do what do you advise to the italians well we actually gave him a whole book mr letter only recently two two weeks ago and it basically said take a hard look at your education system as to whether it is updated whether it is producing the right supply for the next for the demand that we're seeing we have a paradox millions of young people unemployed and companies saying i cannot find the talent i cannot find the right people then they go and import some people from other places in the world some engineers from india or china because they can't find the right talent my god it's a tragedy we rea maybe we're producing too many economies or too many lawyers i don't know we need more engineers more chemists more scientists more people who can really help the productivity this is education innovation do we invest enough in modernizing but not only inventions but also modern innovation in the government systems innovation the relationship between research centers basic research centers and the companies and the markets and the recovery and the investment in order to get started all over again in many of the european countries a researcher that works for the government would never be seen with a private sector person in the lab i think it's a scene because there's a certain logic that we grew up with for generations that were separate and now of course if you don't go together the companies and the governments the companies are no longer able to afford the billions that you need to develop a new drug or a new this or knew that and the government's of course a very tight budget so if you don't go together it won't work and also because in the market the signals the governments have to be looking at things that are going to be relevant for the companies that are going to take it to the market so that you're looking at relevance in terms of the the type of demand that is out there that you want to satisfy competition competition can you have a haircut on a monday luna deal and this is this is a very modest a bit cynical example but doesn't mean is the market open here here europe here united states here mexico here turkey here japan can you invest freely is it competition that is driving the best inventions the best investments the best management capital flows but mostly is it benefiting consumers who have the option of getting the the best products with the highest quality the greater number of choice it is part of democratic life if we do not provide consumers with a choice is like restricting democracy you know they do not have a choice the the democratic in in the consumption and we have i come from a country that has you know which progress has been curtailed for many decades because precisely of the lack of of competition in many many sectors and and but the same paradoxically is true in the most developed countries so in education innovation competition flexibility in the labor markets flexibility in the product markets in the services how about the tax structure we have talked about what's going on in the world are we adapting fast enough in the tax structure is it business friendly is it labor friendly is it investment friendly how about the health system the single most important expense and at the same time this the single fastest growing expense is that being well managed so that you don't have abuses but that you have at the same time cover quality of the service but also value for money at a time when you have these budget constraints that are so serious so talk about the way we finance infrastructure of course governments can no longer finance infrastructure large infrastructure works because of the budgetary constraint how do you put together the packages to make it attractive for the private sector to come but how do you give signals pricing signals and assurances so that the private sector can come and join deregulation or regulation i remember former minister brunetta he was a very very good client of the oecd he took the question of deregulation very seriously also mr monty and his and his uh transition government they took this deregulation we actually uh participated very much in the simplification decree you know we also participated in the labor italia in the creche italia and all these decrees but is i remember once i was invited said we have eliminated 7 000 regulations or 10 000 regulations and i said that's fantastic so i was invited to a bonfire they say what what's that about he said we are going to burn the regulations and i said well you know i think it's a wonderful idea to eliminate the regulations but the idea of burning books does not look very well you know it brings back memories of all their time so let's not do the bonfire maybe you know we can only only eliminate eliminate the regulation that's okay that's okay but this regulatory these things are the problem with this is you say long term well ladies and gentlemen we have maybe run out of the short term typical maybe today the best short-term recommendations are long-term policies but if we explain them well to the people to you if the media help us the universities help us if the politicians are eloquent transparent and good communicators and good educators they can make people understand that these things are not going to take a risk produce results tomorrow but that they will happen and that because of this italy or whatever country takes the the decisions are going to be better going to be more competitive are going to be in a better place so i'd say go structural i say go social because there are too many victims of the crisis out there i'd say go green because we are on a coalition course with nature and we have an intergenerational responsibility to change the course and go into a more sustainable world and last but not least we have to do some revamping of the institutions so that would be the fourth leg of what i would call the new approach to the economic situation of today we only have a few minutes because we've got to be absolutely right on time but one last very last question uh is still possible and i'll try and be brief and i'll also invite you to give me a short answer austerity now there is a classic criticism against austerity which has already been very much debated during this conference during this festival and it comes from tunisian economists it comes also from the obama administration they're still in europe you're making a mistake austerity policies should not be carried out during a recession you are actually worsening your conditions but leaving this macroeconomic criticism aside for a moment because we'll probably hear it again and again and we'll hear it uh pronounced by obama in his meeting with mrs merkel in berlin or in the g8 meeting to actually focus on another point you talked about when you talked about inequalities the austerity policies for what they actually are for how they are applied in reality rather on paper run the risk of moving in the opposite direction to your recommendations and by this i mean redistribution effects of fiscal policies well difficult to be seen because if we try and tax the rich more the perdue goes to russia and goes goes and live with putin apple goes to ireland where its real tax pressure is 0.05 by obviously gaining profit out of this and and the rich you know disappear if we tax them so in the end uh tax burden doesn't really have the redistribution effect which was desired on the other hand austerity spending cuts often in fact weaken those policies you think are crucial to be able to contrast the structural causes of inequalities we take away funds to schooling vocational training all those policies which instead should make our youth more similar to german youth for example in terms of professional talent are workers who have lost their jobs more re-qualified for the jobs of the future i mean all these policies which in europe are public policies sponsored by public authorities are suffering from the austerity so doesn't austerity run the risk of actually pushing us all in the opposite direction to what you're saying i think this question of austerity against growth is a false dilemma and i think it's money can you know it's good for discussions and for articles uh uh editorials or or good for seminars but that's not the way reality works some countries had to focus on reducing their deficits why because when you get to 160 of debt to gdp even if you don't agree with reinhardt and and rogoff clearly there's something wrong with that and the markets start losing the confidence it's not a theoretical or academic issue if the you have been there here in italy you have had spreads of 500 percent when you started with spreads of 35 or or or 40 cents and it was because the markets lost the confidence they lost the confidence in your capacity to decide and then you started deciding things they were doubtful about the capacity on the right things but then what has happened you have been taking tough decisions and where is the spread today well it is less than half okay much more realistic in terms of the relative risks so the market is sometimes uh blind sometimes stupid sometimes shoots itself in the foot but is not so completely blind or stupid eventually things kind of get you know more logical and to that to those who do the work there is always reward not always immediately and this is the case of italy now but that should be for the case of italy a a great stimulus to continue to do more work and more reform because you can see that this is going to have a very specific result in in savings in the budget which can be then dedicated to something else but let me tell you something also about austerity um it's not a policy reducing the deficit is like what we do at home it's what you do in a company and it's also what you do in a country because you have to finance the difference of what you spend and what you uh and what you receive and and the problem is well when you have 30 percent of debt to gdp 50 60 70 italy is 120. italy is a relatively high level italy really had no choice but to embark on a clear path of consolidation does this mean forgetting about the social aspect no the question is the mix the question is the signals if you have to be given one more year or two more years like a number of countries have done including italy to get to the target this is absolutely fine pierre carlo was the first one to say this two or three years ago for his recommend to the european commission why because the reality on which you produced the program has changed you produce a program based on certain growth assumptions the growth is not happening then you cannot have the same program if the context is not the same so you have to wait a little longer but you don't change the target you tell to the market to the investors to the bondholders i am going to get to the same place i'm going to take a little longer you have to understand if the germans are not buying it the french are not buying the americans are going to buy the japanese and even the japanese even the chinese are buying less i cannot grow at the same speed but i'm going to get there and then to be even more creative and more ambitious in the structural changes and all these things that we have said that normally are identified with long-term now but you again mentioned germany the young in germany what happened in germany why does germany today have less unemployment than before the crisis where everybody else is growing 12 and a half percent 20 percent 30 the youth unemployment in germany is is is a perhaps uh eight or ten percent it's also double by the way of the average it's maybe in germany's double digit for the young single digit for the average but it's also double but why are they well because they have a culture first moderation in the wages for 20 years low or increases in wages lower than the productivity increase this gains competitiveness which means german companies continue to produce and continue to sell because in the alternative their products are good quality but also the price maybe more competitive but what happens with the people who had to be fired well they were not fired this is what happens they stayed in the work courts are bite they were not fired they worked less hours they contributed a certain reduction in their income the employer contributed a certain contribution to that cost by absorbing part and the government also contributed because in the one hour two hours that they were working less they were being trained they were being retrained so it's not only kurt's arbite it is what you were doing in that arbite site in the time of the work that you were not using they were being retrained they are going to become a formidable power because they are going to be not only competitive but they are going to have more skills and where does this come from it comes from a culture of cooperation and dialogue between the unions and the private sector and the government and that is not reinvented from one day to the next i was invited by the government to here in italy to go and speak to the partners the social partners there was a table whether you have the unions and you have the private sector and you have the government etc clearly many not all but some of the unions were acting as if this were a confrontational table when basically you were trying to find ways some of the private sector firms or leaders were acting as if this you and us you know and and and even the government was kind of going into like the referee into a fight where basically you were trying to solve a common problem uh a common problem that had to be solved by definition by everybody chipping in in mexico we have this game you know when you go you you blow you move the top and then it comes and say you put one or you put two or and then one one of the sides when it falls on the side said everybody put everybody has to contribute well this is the only game when everybody has to contribute and and this is what was happening wage moderation and much greater public dialogue oh my god well maybe or maybe then it's not so mysterious what is happening in germany and maybe it's something which we can do also last but not least i don't think anybody in the u.s can come and tell the europeans that they should get their act together because i have to say something at least the europeans chose the present course it may be right or wrong but they chose it in the united states economic policy is being dictated by lack of agreement not by perhaps the wrong decisions and you don't know if it's the wrong decisions right decisions that are being corrected in the united states we are subject to a mechanical set of formulae which were put in there precisely not to be used and unfortunately because of the polarization of the politics in the united states is now being applied mechanically in producing one to one half percent less growth than would have been the case if we had been able to pace the question uh you know more appropriately so i don't think anybody can blame their put their finger on anybody else we all have to focus on fixing our own problems but of course hopefully through the oecd you can take a look at the best practices what has worked better in some places what has not worked in others and we're willing to help to make that happen thank you that's it thank you thank you to angel guria thanks to you all for the attention i know it's going to be a busy day today there's a lot of meetings everywhere in the city so have a nice day you