Unlocking Europe's Potential

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Roula Khalaf: Potential, if there was ever a time when we needed to talk about unlocking Europe's potential, it is today. Let me introduce your panellists today, Christine Lagarde, of course, President of the European Central Bank, Nicola Hieronymus, CEO of L'Oreal, Robert Habeck, Vice-Chancellor and Minister for Economic Affairs and Climate Action of Germany, and Belén Ghericho, Chair of the executive board and CEO of Merck in Germany. Welcome to the panel. At DFT, we like facts and we like figures. So I'm going to start by quoting a few facts from an important report that was delivered last year by Mario Draghi. And it paints a rather unforgiving picture of the state and the vulnerabilities of the EU economy. On a per capita basis, real disposable income has grown almost twice as much in the US as in the EU since the year 2000. Two, only four of the world's top 50 tech companies are European. Three, if the EU were to maintain its average productivity growth rate since 2015, it would only be enough to keep GDP constant until 2050. There is no fork. There is no EU company with a market cap over 100 billion euros that has been set up from scratch in the last 50 years, while all six US companies with a valuation above one trillion euros have been created in this period. I'm going to stop there. I could go on and on and but I suspect many of you have actually read the report or read about the report. I'm going to start with you, President Lagarde. Do you agree that Europe faces an existential crisis?

Christine Lagarde: Been too pessimistic? No, you're not pessimistic. I think we all have to be at this point in time realistic about the moment we're facing. And thank you for quoting my predecessor, the European Central Bank Mario Draghi. He drew a very solid diagnosis of where we are, what the weaknesses are. He also identifies a few areas for strength, which are rarely quoted by anyone, but it's in there and in the report. And I would say that I agree with the existential moment that we're going through because there has been, number one, a good, solid diagnosis, an indication of what we should do, and we are now getting this huge, big push because another big player in the global economy is organising things in a different way and is threatening some of the partners and the players with which that country was used to operate. And I think that's a second significant wake-up call. Which can then bring the Europeans to do things differently, to act. And I would contend, Rola, that we have the talent, we have money, and we have ideas. But in terms of action and doing what is required, we need the push, we need to shift. And I'm happy to expand on the push and the shift, if you want.

Roula Khalaf: I think there are times when Europe has acted, and we'll get into some of that with Minister Habeck in a second, but there are time when Europe acts very effectively and very fast. Do you think that the election of Donald Trump is such a moment? And does this wake-up call constitute sufficient pressure for Europe?

Christine Lagarde: I respectfully think that it does. And I think that, of course, we have to act. We have to add together. And we have play not just defence, but be forward, if I use football terminology. And making sure that we leverage the strength and the assets that we have. You like numbers, Rula. So I prepared a couple of numbers for you because... Here is one. The European Union turns out almost as many STEM graduates as the United States per million inhabitants. So that's one. Today we have 3.5 million Europeans in European tech. So I think that's my point about we have the talent. Another figure for you as well. When I say we have the money. The Europeans are saving, they're saving massively. 15% of GDP is into saving. Where is the money going? Every year, 300 billion euros are invested in the United States. So, that's my point about we have the talent, we have money, we have ideas. In areas which actually matter for the future, we file as many patents as the United states. I'm not trying to be in a race or compete with, but I'm just saying that we have a lot of assets. But we are shooting ourselves in the foot many times because we don't complete the work that we were set out to do. Look at the single market, which is a point not made by so much Mario Draghi, but by Enrico Letta. If we had a real single market we would eliminate about 40% of equivalent custom duties amongst ourselves, the European, and about 110% custom duties on services amongst ourselves. So charity begins at home. We can do more than a decent job if we were to remove, fast, fast some of the barriers that we have just let history, you know, laziness, bureaucracy build and stand in the way of what we have. So I'm trying to be realistic and a little optimistic. I want to come.

Roula Khalaf: Back to the question of talent, because I think there is an issue of fragmentation that is not allowing Europe to actually take as much advantage of this talent. But Minister, Germany's economic vulnerabilities are structural, relying on reliance on an old heavy manufacturing industries and exports to China. Do you agree that the model itself needs overhaul?

Robert Habeck: Yes, I agree, and I agree also with what President Lagarde has said, both with the description of the situation, but also with pointing out that we have opportunities in Europe, also in Germany, but in Europe and we are not using them wisely enough. One point you just mentioned is, I would say, my daily experience. We have huge numbers of new companies, start-up scene is developing fine, but when it comes to the scale-up phase, European money is lacking. It's very risk-averse. So they're running around and find money, give us mostly in the US, and that means, of course, that the revenues are not going to Europe, but to the US. So they become stronger by the day, and in the end, sometimes the young companies, they're not so young anymore, are moving to the US because it's easier and the market is bigger. So this is, we are not using our powers wisely, and I'm coming back to the German situation in a moment, but also, I mean, there's a lot of debate about... What the Trump election and the new government will do and how our relationship will develop. But from Germany's point, one part of the vulnerability is also an advantage. We're having a trade surplus with the US of about 60 billion. That means we are producing goods now. So this is not coming from nowhere. We have techniques, we have goods that we bring over the Atlantic and to the world. That mean we have also lots of data. The- The- German industries, the industries, two of them we have here, they have the data. We have a fine portfolio to develop our own AI systems and complexities, but we are not using it as for the talents. Well, and for Germany, you're right, you said it just in the sentence, and I hope everyone has heard it, and every German politician has understood it, it's a structural crisis we're in. And I admit... I had to learn it myself because we tend to look at the short term, the election period is only four years and you look on the annual figures and then we the Germans thought that COVID-19, the economy was going down. And then we had a, we had an. We had better figures and we are going up again and then there was the energy crisis due to Russian aggression and we're going down and we kind of oversaw that this is not a short-term circular crisis, but a structural crisis. We are not, our economy is not growing since 2018, our growth potential is going down since one and a half decade. That means we have to reinvent our business model because our business model now plain to see for everyone relies on two factors mainly or relied on two factors mainly cheap gas from Russia or cheap and fossil energy from Russia. But that's gone and I guess it won't come again. And open markets half of our GDP growth half of our GDP gross is coming from exports. I mean we are only 80 million Germans little bit more And we are the third biggest... Economy in the world. How have we done it? By trading, meaning we have making full use of the advantage of a globalised world. But of course, that is now part of our vulnerability. China is pushing heavily into the markets, also in markets where we thought we have the best techniques. It's not true anymore. And they are using subsidies and are very aggressive. I think everyone is knowing what I'm talking about. And the U.S. At least tend to close the markets. And we see this tendency everywhere. So yes, we have to do better at home in Germany and in Europe. And doing better means, yeah, sorry.

Roula Khalaf: I'm just wondering, how do you help the German car industry? The German car industries? Yeah, to be more competitive. Because it's also in crisis.

Robert Habeck: That is now a funny question because normally I'm criticised for helping the industries too much. So when you ask the financial, not financial times actually, but your sisters in mind, the German newspapers that are monitoring the economy, they are always complaining that now for semiconductors or for green steel or for batteries, we have the upside projects from the European Union. So, helping the car industry now means, I guess, that they have to produce cheap electric vehicles themselves. That is something we can't do, but of course we can invent better circumstances for the I would say the best idea is using the batteries in the cars as part of the energy system. So, you earn money by having an electric vehicle and you use it as a storage capacity in the grid. This is a regulatory framework, we are on the way, but as a lot of things I have found when I became in this, little bit behind the wave. I would guess the best way for electric vehicles is making energy cheap, electricity cheap. This is now for me easy to say because now we are up to 60 percent renewable energy in the system, but the. Permitting processes beyond that. So we are on our way to 70 percent. So I can say we have made the energy green or climate neutral. Now we can make it cheap and really cheap. So putting out of the energy prices all the tariffs and the grid fees that are making the prices higher, which means, of course, we have to find or invent new ways of financing our grid infrastructure. This is now the question debated in the German election campaign.

Roula Khalaf: I'm going to come back to Germany in a second. But Belen, everything we hear from the US, well, it's only been three days, although it feels like quite a bit more, is deregulation, cutting taxes, a huge focus on growing the economy. There has been a problem in Europe of over-regulation.

Belen Garijo: Hasn't there? Definitely, you know, the issues that we have in Europe are not related to the recent elections in the US. We have been talking about European competitiveness and how do we boost European competitiveness for the last, you name it, three to five years, right? So part of the problem is over regulation, but this is not the only problem, you We are falling behind. On certain technologies like artificial intelligence, and this is because of big fragmentation and lack of investment. And unless we fill the gap in those areas and catch up on the market share we have lost in artificial intelligence for example, since 2000, we risk to lose, I'm going to give some figures as well. Three to four trillion of our GDP by 2040, right? And I think this is, you know, the U.S. Is only another wake-up call to accelerate everything we said we are going to do, right. And I can tell you at the private sector, we have step up as much as we can. We continue to invest in Europe because we do believe that we have the opportunity to turn the ship around. If we address not only the regulatory environment, which in the case of science and technology for a company like ours is very clear, very clear very predictable and should be completely focused on supporting innovation. We cannot at this time of the game start questioning regulatory data protection for example and shortening that when we want to create a rich growth. An industry which is generating a significant contribution to our GDP in Europe.

Roula Khalaf: Of foundation model companies in Europe, but there is also a view that LLMs are now being commoditized and therefore Europe needs to think of other areas or what you can build over LLM's. What areas do you think Europe could be competitive if you look at sort of if you segment the tech.

Belen Garijo: Industry a bit more look I think I think we have tremendous talent great industrial tissue and and and extremely extremely competent academic institution great scientists so I think that

Roula Khalaf: That's also fragmented, isn't it?

Belen Garijo: Yeah, the university sector itself is fragmented. Definitely we lack, as Madame Lagarde was mentioning before, the opportunity to invest on certain... Technologies that are at an earlier stage, unless, you know, we have these capital market unions that is now being promised by the president of the commission. So we have to act on this to continue to develop our biotechnology innovation in Europe, but this is possible, right? We just need to make it happen.

Roula Khalaf: And there are European leaders in some sectors, which brings me to Nicholas, because you've got a better story to tell. In fact, your challenge right now is in China, isn't it?

Nicolas Hieronimus: Well, it's true that I am lucky to to run a company that's the worldwide leader and that is European that was born. So it indeed it has a market cap above a hundred million. But it is a hundred and fifteen year old. So, it is true that it's not a recent start up.

Roula Khalaf: Cherry picking data.

Nicolas Hieronimus: Yeah, we know.

Nicolas Hieronimus: But, you know, it's true that the beauty industry is probably the only sector, if you take the top seven companies in the world, five are European. And something we should be proud of, and it's a demonstration that, indeed, as President Lagalle says, we have the talents, we the ideas, and when we do invest innovation, we can win. You know, I'm, my mother was one of the leaders of the European Space Agency, and I was raised in the. In the development of Ariane, I saw the air adventure, and Europe also brought mRNA vaccine, so we can do things. The only thing is that we have to be innovators rather than regulators. And if I build on President Lagarde's metaphor about football, I think Team Europe has to play together, and that's not the case, it's not always the case. And indeed, it has to defend its, play on its strength, and we have a lot of strong companies. And indeed, I think they should feel supported, rather than hindered in their innovation capacity. And then should choose a few sectors we can lead the way, just to build on what Belen said. Bioengineering, biotechnologies, are clearly an area where we can combine innovation, sustainability, and that a company like L'Oreal, which has pledged to eliminate petrochemicals from its formulas, would definitely be a very good customer of these technologies. So I think it is. Possible, but as you said, it's time to wake up and it's time to shift the focus of the Commission from creating rules to incentivizing innovation.

Roula Khalaf: I know that the intention is there now when you listen to the president of the commission. But there are so many layers of regulation. And you know, Belen, as you said, are you going to go back and simplify GDPR? I'm just thinking, are there specific areas that should be focused on? For example, a lot of companies tell me that climate... And environmental regulations, that the burden is huge on companies. Is that something that the Commission should be focused on? Because just saying also, you know, let's not regulate as much, I'm not sure that, you know... Part of Brussels raison d'etre is regulation. You know, we love that Europe is a standard and regulation setter. I don't have any...

Belen Garijo: Of any of you can comment on this? Yeah I mean I can comment on CSRD for example which is one of the topics that have created a revolution in terms of reporting and writing reports of hundreds and hundreds of pages why doubt anyone is going to read sorry to be so blunt but but you know that the question is is this is this bringing any value? I can tell you, in our company we have deployed more than 50 people to be able to report on only think of those SMEs that have to report exactly the same as any big company. But this is just an example. We shouldn't take regulation as the only example because to me, creating a real united Europe is as important as regulation. We need to ask the countries. We have our own problems in Germany. The vice chancellor mentioned where we are. But above all, if there is anything that is going to move the needle, is acting with sense of urgency and with great connectivity between the Brussels level and the country level.

Nicolas Hieronimus: Look, I think, you know, when I heard President Vandeleil yesterday, she mentioned a 28th regime, she mention the cutting red tape, there's been lots of talk about this omnibus that would reassess some of the regulations or reporting. And I think it's a very important, you now, commitment which Europe has to deliver upon, because it's true that reporting is a... Is a topic but a number of regulations have to be reassessed. I will give you, can give you one example which is something that's a worry of mine which is called the Urban Wastewater Treatment Directive. Which is something which says, which I'm totally in line with that the polluter has to pay for the pollution of water. Yes. 100% agree Who is that? By some sort of magic. The conclusion is that two sectors are responsible for 100% of the pollution, pharmaceuticals and cosmetics. And that's we, when we analyse the data from Europe, we assess that beauty represents less than 1% of the pollutants found in water, but we would have to pay for 26%. And I'm not commenting on all the other sectors, which by the way, are led by American or non-European companies, detergents, food, drinks, whatever, that are excluded from this. And yet, we would have to pay for 26%. So typically, that's an example where you have a winning industry that exports 26 billion euros outside of Europe. But we would to pay as the sole culprits of something we agree with, but that has not scientifically been made. So that's example of the absurdities. And I don't want to waste everybody's time here, with a half. Two, three, four example, alcohol may be banned because it's carcinogenic if we drink it, but it may be bound for cosmetics or hydro-alcoholic gels that were used during the COVID, but it would remain in alcoholic drinks because they are exempted from the chemicals and cosmetics regulations, so it's.

Roula Khalaf: I feel like the representative of the government here wants to come in.

Robert Habeck: You wanna stop?

Roula Khalaf: We'll get you started.

Robert Habeck: Well, first of all, I agree that you, I would say everything that has to be decided should be decided fast and not long. It takes too long. And I can give you examples all over place, how these, in some cases, ridiculous. Measures to not to give one advantage to one country leads to four years of decision-making until one steel company or whatever gets any form of state subsidies while they are doing on the American side tax credits and that's just you invest and then you got the money back. That's very, very easy. But still, I would connect this discussion to the Draghi report and to the day. After the day of Trump's inauguration speech. So, yes, we have to do better, we have to be faster, and I would completely agree with the Draghi report. You know, there was a tendency in Germany not to read it because it was written by an Italian in the end, and he was always asking for more money. So nobody has to read. Every German should have read it. And not every German, but every decision maker, because it's really, really blunt in a way. It's tame. And this is now the connection to what I'm trying to say is that we have in the end also a democracy problem if we are not acting better and faster and more decisive. Because we are now complaining that Elon Musk technique is maybe destroying our way of communication and maybe TikTok is doing harm to the communication of our kids. But where's our own answer? I mean we can regulate that technique whereas our. Where's the German or the European Google or Amazon? It's not there, it's not that. And this is why this is so important, that we now invent more of the new techniques in Europe and in Germany, because if we are not doing it, or Germany, forget Germany, it's only because I'm in the election campaign in Germany that I'm always saying Germany. So in Europe, I'm completely for Team Europe, yeah? And I think that Germany has to do more for the Team Europe. But... If the attraction of the authoritarian governments, both on the Chinese side and very different on the American side, but in a way authoritarian, both of them, is becoming bigger and bigger, then we're losing the European way of life. And therefore I would say deregulation and making things faster and cutting red tape are right. And I can give you lots of examples out of the energy sector where we can move if we have to. If we're having this sense of urgency... Has proven again and again that it can be fast and strong, but my point is that we should not mix this up with the, I call it now for lack of better words, the value discussion. Because I think that climate action is necessary and drill baby, drill means burn, planet burn. I'm not agreeing with the aim of this. And if we're saying... Individual rights, minority rights should be forgotten, I'm out. So being faster means to defend the European way of life, our democracy, our social economy. So, but this means defending, not only saying we have to regulate that technique, we have do it here in Europe and we have it do it now. We don't have much time. It's now the next...

Roula Khalaf: Approach.

Robert Habeck: Two or four years, so.

Roula Khalaf: Of course, you've touched on something that's very relevant, and that is the politics. We have Germany facing an election and, you know, in France, how do I describe the current situation? Complicated. It's complicated. And so, you know, the two sort of engines of Europe are very busy, occupied with themselves.

Robert Habeck: That's a real big problem. Therefore, when the German government broke down ten weeks ago, I was, I mean, this was a very unpopular government and I became also unpopular to the German people in this unpopular Government. So in a way everyone was fine with now we are having an election campaign. But it felt not right that way because now again also Germany and France and Austria and Belgium. Are looking inside themselves. So Europe is discussing with themselves what the others are going for, what they are not waiting for us. So all the political power is now in Germany going into the political internal debate, not helping Europe. I mean, the day has only 24 hours also for Ferdich Merz, Olaf Scholz and me. And what we are doing is standing on stages and convincing the people that we are the right ones, not going to Brussels and helping, cutting red tape and not doing... Governmental work so much, and not the same is true for France, if we are blunt, and Austria is a mess, I would say.

Roula Khalaf: You can keep going.

Robert Habeck: Yes, so you see, but I think that, I think the election of Donald Trump has to make a change. It's up to us if we understand and read the signs rightly. If we are saying, oh well, this goes over and we fall back to our own laziness, and I can say maybe the German laziness. We're doing it all wrong. That is one last sentence, sorry, because I read it in Applebaum's book. And I think this is a remarkable sentence. Democracies tend to think that they are unbeatable because we have the higher moral ground. We think because we are standing for freedom and for individual rights, we will ever win this race about the political value systems. And that's not true. We tend to have a blind spot in our own system. And the blind spot must not be that we... Can achieve the next level of economic welfare by doing it the old way. It's not possible. And I hope everyone has understood it now.

Roula Khalaf: I'm going to come to the audience in one minute, but President Lagarde, last year I remember moderating a panel where at the end you said, capital markets union, this is the year. Where are we?

Christine Lagarde: I was talking about 25, right? You were talking about 24. I don't want to take any credit for anything. What matters to me is that there is now, I think, a really broad consensus across political parties, across countries, with the exception of two or three that have their vested interests and their little turf that they're trying to protect, to agree that we need a capital market union, to agreed that we have to manage more money inside Europe and make that the money travels to the VCs, the funds, and the... Equity holders and managers that will actually facilitate the expansion of those many startups in Germany, in France, in Italy, in many countries around Europe. And they are there. They don't scale up because they don't access the money. So there is that consensus at the moment, as I said, with the exception of two or three countries in the 27. And they will have to be dealt with, not threatening them, not excluding them, but just saying, you know, you have your vested territory. We can do something to protect you and help you, but let's transition to a capital market union that everybody joins. So that's good, number one. Number two, I heard Ursula yesterday as well. I'm delighted that she used the words of three letters, CMU, capital market Union. Now, what I hope she can do is go back to the commission, go back Maria-Louise Albuquerque and a few others to say, you've got a to-do list, You've got a plan. You've got a deadline, you've got who does what by when, and I want on, you know, securitization, on investment and saving products, on better and more harmonised or unified supervision, on the post-trading structures. I won't bore you with that. But on all those deliverables, I want result by the end of 25. Now, if you say that to any European commissioner that you know they will go, oh, no, we can't do that. You know, in the old days, we could do things in six years. Now we can do it in two years. Well, economists believe in incentives. There has to be incentives for very talented, very competent civil servants in Brussels to actually focus on speed, on result, and on the outcome that is desirable. If there is the political will, if we know what the focuses should be under the deliverables, then we need to activate them and not tell them. Provide another draught regulation for your commissioner when he comes to the next meeting. No, provide this to make it effective. And by the way, remove all the inconsistency, the layers, the additional buffers and all of that. I'm not talking financial regulations here for the sake of argument, but it has to be cleaned up. In CSRD that you were referring to, we have the U.S. Standard. We have the generally accepted standard by the accounting. Community. We have EFRAG that is putting something else on the top of it. And everybody has the same intention, good intentions that many would agree with, but it's all over the place.

Audience member 1: I work for the Times in London. I've been to Davos for the last couple of years where on panels like this, European policymakers have been talking about the need to make the state bigger, to subsidise greed industries, to do more fiscal spending to support growth, and I'm struck this year that it's absolutely the opposite. The state needs to get smaller. We need to get out of the way of businesses, and we need to deregulate, which would suggest that Europe takes its economic advice mainly from just seeing what the U.S. Is doing and trying to do a version of it itself, but I also bring it up because We assumed that we needed a better growth model to deal with the fact that it's not just growth, but the equitable or the lack of distribution of growth that was the problem. And I want to ask a question to the panel whether we think that deregulating our labour markets, our product markets, liberalising the single market, et cetera, will deliver the equitable growth that voters in Europe ask for, because I guess empiricals over the last couple of years would suggest that trickle-down doesn't necessarily answer that problem.

Roula Khalaf: Yeah, it has been industrial policy for the past few years.

Christine Lagarde: Do you mind if I correct one thing, because you've used extensively the word deregulation, deregulations, deregulations. I think what is in the mind of many of those who are looking at efficiency gains and improved productivity is simplifications. So to the point made by Vice-Chancellor, we're not going to give up the protection of data and data privacy, which is so highly valued in Europe. We couldn't do that because we would lose the European population that wants to see its data protected. But we do not need to have a cottage cheese industry in order to produce the acceptable, appropriate documentation that is, as you said earlier on, 100 pages that will eventually be read by artificial intelligence with a couple of people saying, okay, pass. I think words matter. I don't think that we are heading, that's not what I'm seeing, at least from my vantage point. We're not ...moving to a world of... Deregulation across the board, but we are certainly looking at significant simplification and focusing on actually the purpose of what we are trying to do.

Roula Khalaf: There is, though, a question as to whether if the Biden administration, if Kamala Harris had won, whether more industrial policy would have changed the debate here as well. It's an interesting question to ponder, isn't it? The impact of the US on the way that we think in Europe.

Christine Lagarde: And of removing IRA fundings for the future.

Robert Habeck: Well, that is, if I can add, there are European companies who went to the S because of the IRA. And, you know, one of the first acts of Trump was to cut down an offshore wind farm. And I mean, there's also chance from that point of view for an own technique made in Europe. So, but that means, of course, we have to not shy away and we have be blunt and We have to be fast and we have to give the right... Financial incentives and we have to use the private money and to activate it. But I mean if they don't want to build the techniques of the futures, we are ready.

Roula Khalaf: I want you all to actually think of opportunity because in a few minutes when we end this I would like to end on a positive note. Let's take another question.

Audience member 2: Hi, I'm Gimar Reisen from the Global Shapers of the WEF, and representing the Young Voices. And we talk a lot about simplification, and Lagarde also said, for starters, we need to Europe to go in one direction. I'm curious to hear your perspectives on where will this leadership come from in Europe? Because currently every country is occupied by themselves.

Belen Garijo: I think, you know, let me speak about this, because I think that in current times, leadership in any place will not come in this new age of intelligence from a single technology, you know. I believe leadership will come from those people who understand how technologies are emerging, right, and are able to generate business. That will be disrupting existing models and eventually creating new opportunities. And you know, this is what I believe entering the era of bio-conversion, this is where I believe Europe actually can lead. And once again, you know at the private sector, and I say this with pride but also with humility, we are a company that are extremely well-placed to deal with this bio-Convergence. Digital plus biology. Flexibilizing completely our smart manufacturing operations, automating everything, and making our operations more predictable, combining the expertise that we have in different sectors, in our life science sector, in our bio electronics, bio pharma sector. So I don't believe that we need to pick and choose one single. We need to be focused, we need to invest in R&D dollars and where we can win. And I believe Europe is very well positioned in health technology, right? And digital technology even. Even if we are lacking in some countries the infrastructure that is necessary. But it's all about the way we actually make technologies converge that will give us some opportunities to lead.

Roula Khalaf: Let me take another couple of questions and then we'll come back to the panel and you can answer them together.

Audience member 3: I'm Stu Eisenstadt, I was U.S. Ambassador to the European Union for a good part of the Clinton administration. I came away from Brussels with two lessons and neither one has been addressed. The first is that while you have a terrific education system, the young people who come out of it do not take the same concept of risk as Americans do. If you start a company in Europe and you fail, it's a black mark on you forever. The goal of young people is to go with a large company and stay there. So part of it is simply a risk mentality. Second, we did a study for the Atlantic Council, which I co-chaired with former Commissioner Emanuel Barroso. And we found that one crucial item was that 80% of corporations in the United States, startups and others, are funded by private equity, only 20% by commercial banks. In Europe, it's exactly the opposite. 80% by commercial bank. Who don't want to take a risk, they have to have the collateral and so forth. So in the capital markets union, you have to build in a greater risk taking and in young people, it really is a mental issue. You have to young people who come out not only educated, but willing to take risks, willing to change jobs, willing to move from one country to another to get the as we do from one state to another.

Speaker 6: Thank you for your contribution, please go ahead. Hi, I'm Luana Janot. I'm actually from Rio de Janeiro, Brazil, so not in Europe. So my question is about inclusion, but also about collaboration. So we just received a report from McKinsey that says that we can unlock $12 trillion by including more minoritized groups across the globe. And then I wanted to hear your perspectives on how Europe is using inclusion as a strategy for growth. But also, as the topic of our forum this year is collaboration intelligence era, I wanted you to hear what sort of collaboration European countries are doing among ourselves, but also with other continents like America, especially Latin America or Asia.

Roula Khalaf: Do you want to first take on the?

Christine Lagarde: Thank you very much because you actually point us in the directions of what needs to be improved. And I think it's beginning to improve as well, because when you go to European business schools, which are fragmented, fair enough, because there are 27 member states in the European Union, it's hardly surprising that it is fragmented. You find a generation of young, bright students who actually want to take risks. And when I was finance minister, I started a status that was called the self-employed status, where we were giving a chance to those who wanted to start a business, small to begin with, to have some incentives in terms of removing social security contributions, giving some tax incentives. It just took off like crazy. So I think we need that. It's not necessarily in the DNA of Europeans to take risk. It's not in the DNA to accept failure as it is in the United States, but I think these things are changing and we need to accelerate that change and make sure that capital market unions is also financing significantly those initiatives. Opportunity, risk taking, that's an opportunity.

Robert Habeck: Yes, absolutely. But you were asking a moment ago about positive stories, and I was thinking about explaining to you and telling you the story of how we increased the speed of our energy infrastructure. But I'm not doing that. I'd love to, because this is a real success story from my point of view. And within the bureaucracy of the European union, which we cut down so if you want to learn how you can do it by... Having the standards but not the bureaucracy, what we have done in 2022 and beyond could be maybe one blueprint for it. But I'd like to come back to the question of leadership and the Team Europe question. So what is the mindset of the new American government? Make America strong and America first? And are we European politicians really thinking about Europe? I guess the first what comes to our mind is our own nation. So we don't have the sense of team Europe. And if you want to have a leader, a leadership, which is definitely the European Commission now and I think Ursula von der Leyen is a strong leader, but we have to create a kind of, I call it now a lack of better words, European patriotism. We have to understand that in this crucial time of our history... This is where it has to go to. And if Europe falls apart because there's one third of countries that are, I don't know, backing Trump for not being so tough with them and another one is holding back and trying back and one is trying to set the own agenda, then it's over. It's game over then. We have to stand together and we have to create this sense of common attitude that this is our future, that this our continent, that we have our own value system, and then we find the right leadership.

Roula Khalaf: Very good call to arms. We have run out of time. I'm going to give you three seconds each.

Nicolas Hieronimus: Three seconds each, so I used mine now.

Roula Khalaf: No, no. Two things. Get used to yours.

Nicolas Hieronimus: One quickly, diversity more important than ever, because diversity is creativity and it's not just in beauty, it's everywhere. So we will always stand by diversity. Second thing, I think the opportunity is, you know, in Chinese the same symbol is crisis and opportunity. We have a crisis, it is an opportunity to make Team Europe a reality and I hope it's gonna happen.

Roula Khalaf: Belen, you have, you get the last word.

Belen Garijo: I want to basically insist and emphasise what the Vice Chancellor said. While, you know, we know what we have to do, right? And very high level this has been discussed in multiple forums. It is about the private and the public sector really working together to make things happen. And once again, I believe the private sector is... Naturally collaborating and creating innovation ecosystems because this is part of our business model where we really have to progress is creating that sense of European team that will facilitate all the rest.

Roula Khalaf: Just Do It is the slogan. Just Do it. And on that note, please join me in thanking a very spirited panel. Thank you.