Welcome to our exchanges at Goldman Sachs Markets Update for Friday July twenty four each week. We drag him with a leader across the firm to get a good, on what they're watching in the markets objects seaward go ahead of corporate communications. Here the firm and my Yesterday's Josie Manuel Barroso, German of Goldman Sachs International we'll be talking about Europe and the huge stimulus package that was just agreed upon in the meetings over their welcome too, that the supplier, So what's the basics this week the eavesdropper avoids truly historic stimulus package agreement. What are they the provisions of this package, what they aiming to do, as it is really very ambitious and significant decision equally, there are two elements there, it's what they call next generation European Union itself, recovery fund, specifically targeting the pandemic, covet Betty

has links with the multi annual budgets. What in Europe they call you multi financial framework to seven years budget, and so the conditions for this plan ass to be links, we, the conditions for the overall budget for seven years so the specific recovery plan, its seven hundred fifty billion euros and the budgets for the seven year period is one point. Eighty two trillion euros so altogether. It that makes model to buy one truly: U S dollars so he'd, still your ambitious and I think it combines the need to act now. As a result, still do copied crises with a more let's say, medium term perspective, its very important to note that of these seven hundred fifty billion euros tree But Sir ninety we'll be through grants, the rest will be loans, grants

so transfers, let's be honest, yet in so called fiscal unit. But this is a step son, of the red lines, are being broken. And one of the most important point for me in terms of another table that is broken is the idea of a joint Dutch, in fact The conclusions are clear: Commission is going to borrow these seven hundred fifty billion euros on the capital markets on behalf of the union and he's going to the repayment we'll be until two thousand sixty eight. So incomparable at european level. Such a junkie of that body. the union as such, not by the member states as new commission, acting on behalf of the European. something these away on board an ambitious that decision is not yet complete. Now it has to be approved by the European Parliament, but I think that you basically be approved

The point I would like to underline is that all deserves the dimensions and all these transfers. They have to respect the conditionality of the programmes, including what it's called European Green Deal, so many measures related to climate action, climbing prediction Digital Revolution and also what they resilience so Fact: it's a very significant programme, a fiscal stimulus that, of course, is to consider adding to other measures that were already announced by the opinion, five hundred forty billion euros. Recently, and were announced some. They were loans from the European Union bank. Some was, of course, possible loans from european stability mechanism, and others are transfers made by. You information for a programme to fight unemployment. So as a robust brought up. Indeed- in some ways. It can be transformational

outside observers, are often sceptical about the ability of the Europeans to Korea on fiscal stimulus. Given the divide between the countries consumer thrifty, affordable and those that are considered bigger spenders. There was this unexpected outcome of the conversations I'm looking for. I was expecting results come to be frank. I in fact our teams that at present is not directed Goldman Sachs. They are set it's going to be very close to the initial proposal of the commission, because, The commission proposal was in fact she pulled with clearly by France and Germany makes a difference in the past because this time? Germany was not with the so called frugal countries doing, precise with the Netherlands, Austria as you know, I'm doing meeting the feeling was also sometimes joining is more, let's say a restrictive country, in terms of spending Angela Merkel, He wants to leave us John legacy. She was

clearly on the side of caution for a more ambitious budget. And you know I was present European Commission for two mandates for ten years. I remember well. I was devastating the last budget, the budget that is still in place to do everything to the peasants, fourteen two thousand twenty tell you. These are the most difficult ever negotiations. In your opinion, it it's a lot of money and about our bible this time than the important difference was Britain is no longer there. Explains why, this time it was not exactly the initial proposal of the commission. It was approved in fact, Initially, there were more commitments into. Of grants and less in terms of loans, so the frugal countries day obtains This concession, let's go, more alone, so the composition of the expenditure is this and also they got some additional. Debates what they pay generally speaking to the budget, but

You know where your opinion is that I won't. I wiped his flooding this for those less familiar with the opinion, because, to be frank, is not only outside Europe. Also in Europe, stupid, difficult to understand your opinion is very difficult to read. European by definition, compromise, it's always incrementally notes creates about twenty seven countries with very different, let's say money can financial cultures. Elephants are not just let's say between the Netherlands and Greece, thanks. I know that from my own experience it states that the difference between Germany and France they have different financial culture between France and Germany are together, and we saw this once again and she put it by european institutions in disguise, nuke Commission, but those of us all Do not forget European Central Bank. The central bank has been pushing for a more I say: fiscal activism

who complemented Sir monetary activism. When those countries corky these are aligned with european institutions most likely. we'll see results addressing that explains why, this time, the sceptics were not right, so for those from with the? U S, system where there is a strong federalism since it, since I Alexander Hamilton Day, explained the differences in approach. The new alluded to the complexity of different countries with national budgets and the like, but plain how the fiscal stimulus differs. From the? U S: approach to fiscal stimulus in many ways. This, let's be frank and open about this European Union, is not a federal state. there are some federalist elements in Europe like the independence of do permission the dependence of European Central Bank dinner. And supranational nature also of european law. The justice and Leah holes were directly elect,

the European Parliament, but it's not a federation Eugene, and he showed my opinion. It will not be. in the foreseeable future, something between a federal state and say a tip No international organization, but it's not just in its most organization. There are elements super nationality. But, to give an example, the European Budget, the budget that is in fact, managed by the European Commission on behalf of European Union he's around one percent of the gdp of the envy of the european countryside, has nothing. Compared with the United States, but this time there were much more. then commitments. There is also another important difference has been asked to do the same economic and social model, because of the methods to be lies is, as you know, we can say that the Eu S its automatic stabilizes settles for this year is to make them too seven percent of GDP

in Euro five point: seven, I'm in countries like ITALY seven point: four: In France, five point nine some useful bearing with two point. Seventy denies the automatic stabilizers in Europe stronger insult expenditure is very difficult to compare. In fact, the steamer was the United States and Europe, because also the different web site, the social model, the role of the welfare state and so on, but certainly whatever measures take, you can agree. I think that we should agree that this time Europeans, I made some steps forward. As I always say, the opinion by weight was said that by by the founding fathers of the European Union after the Second World WAR, when European Union are european community, was created, it's a step by step concept, but this time It was a bigger step because you have a crisis

and crisis. I think from it. Also from my own experience it's only when we have a crisis that we are ready to make a bigger step, and this time it was a bigger step. But it's not yet the emerald a moment are the Philadelphia moment, we are not yet there and I think we should also be cautious about it. When you say historic and so on. I mean today the great trivial isolation, intensive use of the word historic, but certainly is a very strong, an important progress. What happened just The people who are caught up in this headline numbers and forget that the United States, unemployment insurance is, is relatively small compared to the urban, and so the headline numbers shouldn't map across wonder what what's response by markets so far ass. He was in some movement on the currency. How our investors reacting to this announcement

financial markets, have responded favourably to these recovery found agreement with higher european enterprises, the strong euro, lower sovereign bonds threats, but in fact much of these markets reaction. Read your courage and run the summit, starting with the release of the Franco german proposal, and also the release of European Commission projects, so that market responds to the news of the agreement was similar. Now when there was breaking used, there were similar in spirits, but indeed smaller, because the agreement had already been expected asked me if I may say, but if you make a little bit of go, go back. You remember that, some weeks or months before, could sentimental large extent was about a possible sovereign debt prizes. with including by then emanation risks don't insult, I think now. These fears are certainly not at the top of my should avoid any form of complacency, certainly, but

today we are asking you killed them, in a much better place than your messages one or two or three months ago, a busy. You alluded to, Sir, where this stands in the history of the EU and its unity. In the wake of the global financial crisis ass, it were grave doubts about the future of the EU as a governing at tea, partly because of its inability to respond. firstly on the fiscal side. So what is this frame? worked in this agreement, say about the future of Europe and in its path towards more perfect, you. You know once again. I think there are two mistakes you should avoid when we make an assessment about impunity, while is to vat on this integration, as it was happening during the financial crisis. At that time I was present European Commission. I can tell you I remember well going to the G20 the speed. President Obama The Chinese are the Japanese and all the others, and it was their question

using the Euro is going to survive. Is Greece going to leave the euro at that time? The market sentiment, including saw the best economies sum of Nobel Prize of Economy was Greece, No, Greece you'll leave Europe. This is still in Europe and a Europe and you're in seconds the second. what currency after do after the dollar, so We believe that the resilience of European Union and the Euro is higher than most analysed. Commentators knowledge not You said that We are also not going to ask the. the centralisation of the United States of Europe enforceable future It is something between incremental Frank. meant that sometimes muddling through, sometimes extremely frustrating consuming political capital, consuming that's three days Probably

the only way you have twenty seven governments with a different histories of different cultures, but we have to seek other factually only battle If there was not a union are if there were. I really believe my guess is this is a moment. A very critical moment for Europe and for the will be exactly desponding. I think as you have seen during the last financial crises of the day, it took a lot of time, but look you ever did not crumble and now we have in Europe more more issue than before the crisis for its new kids who did you make the kind of european? I must not be possible before the beginning not yet completed. Unfortunately, the beginning of the banking, and so my point is the following: sometimes the crisis, to make progress. In fact, one of the so called founding fathers of European Community Germany, a Frenchman he said Europe is going to be made. through crises, and this

successive responses to successive crises, I'm afraid he's right out. He was right and so on what is happening. So I continue to see my scenario. Is there we progress, but you feel, he'll be incremental, but in time, of crises. Most likely will see some further important steps and I I think we are in this moment indebted and also because of the global geopolitical situation where not Europe Jimmy itself more outside it, leaving some political night your innocence, becoming more aware of needs to sink geopolitical allies this is a trend, but ok, see accidents may happen and there will be problems contradictory developments, but I continue to be, confidence in the process of european integration. There. thank you that last point is particularly important, with leadership lacking in other parts of the world

Thank you so much for joining us today. It's Michael Thank you very much. That's offer this week's markets. De on exchange, the Goldman Sachs in case you missed it check out or other so this week with might sit up. Twenty twenty insurance report, which dogs into how scenarios are allocating capital in today's turbulent markets. This part Ass, was accorded on Wednesday July twenty seconds two thousand twenty thanks for listening and hope everyone has a safe and pleasant weekend. All price references and market forecasts correspond to the date of this recording. This podcast should not be copied distributed, published or reproduced in whole or in part the information contained in this pact. Does not constitute research or recommendation from any Goldman Sachs Entity to the listener. Neither Goldman Sachs nor any of its affiliates makes any representation or warranty as to the accuracy or completeness of the statements, or any information can,

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