- Date 20 July 2018
El Cronista: Argentina has agreed a financial package with IMF. In your opinion, how can countries as Argentina become more resilient of economic shocks? Do you think that this was the best path for Macri administration to overcome financial instability?
Olaf Scholz: Argentina has faced a sharp deterioration of market confidence and has come under significant balance of payments pressure. Against this background, I welcome the government’s commitment to tackle macroeconomic imbalances and support sustainable growth within the context of an ambitious IMF-supported program. It has been appropriate to approach the IMF at an early stage in order to timely address the economic challenges. A successful program implementation will help to regain market confidence and to bring the country back on a sustainable and stable path. Therefore, strong ownership and commitment by the Argentine government and a broad-based societal support is essential. In the end, it is a country’s own responsibility to pursue sound economic and financial policies as well as decisive structural reforms which are key to enhance resilience and to become well-prepared for future crises and economic shocks.
El Cronista: As globalization progress, do you think national economies should be ruled by supranational organizations as IMF, the European Stability Mechanism or monitored by G20 in order to finish with imbalances?
Scholz: One thing is for sure: International cooperation in our highly interdependent world is more important than ever before. Multilateralism is a complicated word for a simple truth: There are problems that we can only solve together. I believe that we have to strengthen the role of those institutions that organize our multilateral cooperation, to safeguard how we work together. If we are successful at further strengthening multilateral cooperation, as we are working for together as G20, we are up to the task of shaping the process of globalization to the best for the people. Cooperation includes at its core the openness to exchange arguments. If international organizations like the IMF and the OECD or fora like G20 put forward analyses and policy recommendations, they surely deserve careful consideration. This is also true for both, internal and external imbalances.
El Cronista: We are living in a period of financial volatility and we are threatened by future economic shocks. Which are your thoughts about global economic prospects? What are you going to propose in the next G20 meeting?
Scholz: The global economy is still in expansion, but risks are increasing. With great concern I watch the evolving trade conflicts. Their impact on global value chains poses a severe risk to the global economy. I believe that disintegration and everyone-for-himself as guiding principles of economic policy are a dead end, costly to all of us. As German Finance Minister I do not forget to emphasize how crucial sound fiscal policies are in boosting the resilience of our economies. But more than that: Forward-looking fiscal policies also include creating scope for investment in growth opportunities. This scope is important given that many of our economies are facing the risk of structurally low future growth.
El Cronista: Can the G20 finance ministers meeting try to deterrence the trade war initiated by US? If so, how? Is Germany going to work with other countries in that direction?
Scholz: Surely, most of us and the international organizations will make the case that free trade and a rules-based multilateral trading system with the WTO at its center is of the essence for global welfare. Protectionism does not solve any problem and often hurts the poorest the most. On your last question: We have a common trade policy in Europe and speak with one voice. I am glad, that the European Union stands united and consult and act with confidence. We will remain resolute and ensure that our positions are based on facts and reason.
El Cronista: Do you think that new powers as BRICS are more committed with multilateral regime nowadays than US?
Scholz: I appreciate the support from BRICS and emerging economy countries for the open and rules-based multilateral trading system and the WTO. Indeed, the broad backing within the G20 for these guiding principles is crucial. However, across advanced and emerging economies many countries – to different degrees – have increased trade barriers over the last years. It is essential that we practice what we preach.
El Cronista: One of the topics of this G20 is the future of work and tries to anticipate the effects of the technological evolution. Which effects will have this process over the economies of the countries? Do you think that the Fourth Industrial Revolution will expand the gap between developed and developing countries?
Scholz: I am thankful to the Argentine government that it puts the question of the future of work so prominently on the agenda of its G20 presidency. Technological advances and digitalization in particular are an enormous challenge for all countries. Argentina presented to us in March a convincing report on how these changes impact for example on labour markets, productivity and public finances. And now G20 finance ministers and central bank governors are hopefully endorsing a report on our policy options and policy examples to effectively address these challenges.
I would not say that this new Industrial Revolution per se broadens or narrows the gap. The ability to leapfrog older technologies unhindered by existing regulations or incumbent players could be a chance for developing countries. The menu of policy options addresses how innovation and technology adoption could be encouraged particularly in less developed countries – including encouraging private and increasing public investment in R&D and enabling infrastructure, fostering technology diffusion through international collaboration and upgrading skills and education.