.. >> the headquarters of our asia pacific operations for 25 years now, and we end joy a terrific -- we enjoy a terrific relationship in a lot of different ways. one of my colleagues is with me, doug peterson, who just joined us from citi, and he is heading up standard and standard & poor; and we kohl i don't -- we welco,

doug. and doug has lived all over the world and as such has lived quite a bit of time in japan itself. so it's great to be with you tonight as well, doug. let's see. in terms of this whole notion of the book, you know, by the way it's a very modest title, "banker to the world." [laughter] when i heard of this, and i'm a very close personal friend of bill's, like everybody in this room is, and so when he was talking to me about this concept of what he wanted to write about, lessons of debt crises and all of this, i just knew that it was right in our sweet spot in what we needed to be able to do. so we were able to convince him, and so now i'm not talking to you as his friend, i'm talking to you as his publisher. [laughter] and we had this decision we were going to do this book, and we did. now, the ink wasn't even dry on

this book when henry kissinger came out and said this is a must read for anybody in any section and at any level of the finance industry on that one. well, no sooner did he do that, okay, paul volcker came out and wanted to make a comment about how this is a must read, and it was a must read, and he wanted to put a forward into the book, so we added the forward into the book. and then we saw it again when steve forbes, another good friend, you know, was working on the european crisis at the time and was trying to make sense of certain aspects. and he came out and said this is a must read for angela merkel, nicolas sarkozy and dave cameron. now, in my way of thinking he left out some southern european countries that might also have gotten something out of it, but it's easy to see why, you know, a after you get a read of it, you know, why so many people need to know what bill knows and

how he knew it and what he did with it in terms of doing it. now, everybody knows that bill spent 53 years at citigroup. now, i've heard over 50, bill, i've heard 55 today, and so we're going to go with over 50. that's a considerable amount of time. and when you think about that time frame and going back and whatever, he was a devout disciple of our late and great chairman of citi, walter or riston. walter, again, when you talk about bill and you talk about walter, you're talking about icons in this field. now, every single treasury secretary would come to see walter riston, and there were problems in around general teen that, there were -- argentina,

there were problems in uruguay, there was problems in peru, there was problems in brazil, there was problems in mexico, there was problems in jamaica, there was problems in panama, there was problems in korea, in japan, then we came over here and went back to the european crisis, we went down to south africa where there were problems. and in every case the treasury secretary would come and say, look, walter, i need help. we don't have these kind of people at the treasury. can you offer up somebody, you know, that would understand this and be able to deal with it? now, walter riston would always say i've got the person. the person's name is bill rhodes. but you can't take him, you can only borrow him on that. and so, you know, and here was the fun part. the fun part was every once in a while bill rhodes would go on

vacation, and every time he went on vacation it was walter riston who had to call him and tell him, please, come back to new york right away. and all of that. so the joke was, and it wasn't much of a joke, was that every time he started talking about going on vacation, people ducked. on this one, because they knew something was coming. and with all the lessons that he has developed and learned and applied to in terms of debt crisis, i'll not name the individual's name, but this one person said there isn't a debt crisis that bill rhodes doesn't like on that part. [laughter] so, ladies and gentlemen, you know, our treat tonight is to be with bill rhodes and, ladies and gentlemen, the banker to the world. [applause]

[background sounds] >> thank you very much, wilbur and terry, for your very kind comments. i should mention that, actually, the title of the book was the idea of mcgraw-hill, the publisher, to get that straight. [laughter] and i want to thank the japan so the for up violating me -- the ya a pan society for inviting me to talk about my book. i should mention that in the japanese edition i thank the ministry of finance and the japanese banks for having been such great supporters of the work i did on sovereign debt restructurings worldwide for over 30 years. couldn't have done it without them. i think wilbur mentioned that i would be talking mainly about europe, but i also have some things to say about japan.

we're now in the fourth year, entering the fourth year of the crisis in europe, and it's certainly a long shadow. i think it's fair to say that the problems of new york have caused major problems worldwide with the size of that economy including in japan, the united states, china. look at the trade figures worldwide. in 2010 trade grew coming out of the great recession 13.9%, and in 2011 it was 5%, and i think the final figures for last year, 2012, will be somewhere between 2.5 or 2.7. so it's no wonder that you have the problems that you do in major economies worldwide with the slowdown in trade. and i think that unfortunately,

i think that we're going to see a continuation of the problems in europe at least for the most part of 2013, just take a look at the latest figures out of germany which was the strongest economy in the eurozone when it came out. and we have our own problems, as you're aware, here in the united states notwithstanding getting by the immediate crisis at the end of this year on the so-called fiscal cliff. all we managed to do was to put off some of the biggest decisions for another two or three months. so i think, you know, europe has managed along with a little help from ourselves and elsewhere has managed to cloud the world economy. in the case of japan, i think people are very hopeful with the election of abi who wants to finally get japan out of what's close to two decades of what you might call a lost period of

time. and he's come forth, as you know, with this new stimulus package which is equivalent to 116 billion u.s., 10 trillion yen, 2.2% of gdp. a lot of that would go for infrastructure, a lot to the north for earthquake area. but, of course, we've seen 14 such packages since the late 1990s. and this one has to be different. and also he's pressing the bank of japan. of last time i was here was to -- last time i was here was to introduce governor shirakawa several years ago who i think is a very good governor of one of the major central banks in the world, pressing him to put in more monetary stimulus which i think is necessary. but i, one of the points that was made right in this room several years ago by the

governor, and i've been with him three times in the last two months, is, you know, monetary and fiscal stimulus aren't enough. in the case of japan, you need major deregulation. i think major structural reforms, deregulation in the service area. so hopefully that'll all flow into the package of a new prime minister. certainly, it's a tough job, but this is the world's third largest economy, and if we don't get japan moving with some of the other problems with europe, etc., i think the world's in for another couple of tough years. so so, obviously, we wish him the best in that. but it's very important be that this not just be fiscal and monetary stimulus, that you also take advantage of the structural reform effort. and i think japan faces, as you all know as well as i do, a number of problems. what is going to be the new energy policy, what's going to

be the policy towards nuclear energy, the aging population. i could just run on, territorial disputes with its neighbors in china, korea. so there are a lot of different problems, but i think it's a crisis opportunity situation. the chinese use the expression wayy, so i think the new prime minister is the right person at the right time to take these steps but not limit them, as i said, to just monetary and fiscal. so i take advantage to meet all of these other problems and turn them into opportunities. one last point and then i will mention japan at the end of my brief remarks here. my good friend who died a number of years ago, rudy dornbush who

was a brilliant economist and knew japan very well, he taught at mit, was always concerned that one day the high amount of government debt in japan would catch up to it. notwithstanding that over 90% of it is held by japanese. and, of course, now it's 235% of gdp, the largest of any developed country in the world. and this is something that has to be taken into account as these stimulus programs are pushed ahead, because it's something that japan has got to deal with sooner rather than later. it's sort of like us with our spending problem here. so i think what are we looking at worldwide? i've mentioned the three largest economies in the world. i have not mentioned china because i've been talking about developed economies. but i think we're looking to the emerging markets, 2013, to be

very much a driver. and we have a new leadership in china, shi jinping will come in as premier. they will take these posts formally in the march, and i'm optimistic based on my knowledge of these two things -- individuals, and i think what you're going to see there is they're going to open up the economy in the financial be sector. i think they'll be freeing interest rates, they'll move more rapidly the convertibility of the rnp, and very importantly and key they need and, i think, will stimulate domestic consumption more. china is too dependent on exports, and this'll mean putting in more of a social safety net to free up savings to help finances. so i'm optimistic there. we'll have to see, and we won't see -- we'll see a thing here

and there along what i'm saying, but the real changes, i think, will take place after march. and i think the relationship not withstanding the territorial disputes between japan and china are key for both countries. so i'd like to just put that on the table. if you take a look at where growth is going, the institute of international finance thinks it won't be much better next year than it is this year. they're talking about growth in the order of 2.7% as against 2.5%. so we'll have to see if those figures in aceps are correct. in a sense are correct. and those figures are pretty low when you take a look at economic growth. others have much higher figures, as you know. i think it's very important that

we see europe move ahead, and the europeans have this idea, i think they've now been disabused of it, that because the eurozone was made up of so-called developed countries unlike latin america in the '80s and '90s and asia and the asian financial crisis in the late 1990s that any of the lessons that a lot of people in this audience learned, you know, from those two crises and other ones in turkey and i could run on, east and central europe, were not valid for them because they were so-called developed economies. and so what i thought i would do here is just run through some of the lessons that we learned there that i think, unfortunately, should have been looked at by the europeans. and they're only now starting to realize that they could have cut

down this present negative situation because, let's face it, europe as a whole -- with a few exceptions -- is in either recession or stagnation. first, each cup is unique and -- each country is unique, and a cookie cutterrer or approach does not work. this is something they didn't want to see, obviously. greece got into a situation by a long time mismanagement on the fiscal side and dragged the banks in. in the case of ireland, it was the banks that dragged the sovereign in, much different. wilbur is an expert on that. in the case of portugal, and we have some portuguese in the audience here, it was basically a decade of no growth in portugal. in the case of spain, it was a bubble in real estate that was financed by mainly the savings and loan institutions, some of which have gone under, a number

have gone under, and a government that basically drove up the deficit and regional governments -- because regions are very important in spain -- also drove up in this problem with big deficits. and they weren't attended to. and so in each one of these you have somewhat of a different reason. the case of italy, a debt to gdp of over 120% and growing and the lack of action in trying to do anything about it by the former government, monte came in as a technician. and, by the way, their period of time is limited because they have no popular support vis-a-vis an election with will it be -- whether it be greece or italy as we've seen this. and as you know, there'll be elections in italy, and we'll see how monti does. but you need popular mandates to get these changes really through. i'm encouraged in the case of

ireland, they're making good progress getting back to the market, but there's still a lot of problems. the latest victim is cypress. the banks held a lot of greek paper. they ran up the deficit there, and so they're the latest bailout case that we're going to see. but each country is different, and that leads to what is the same, and that's contagion. and the europeans did not want to see that there was contagion at the time of greece. and no matter who you talk to with a few, i think, exceptions, policymakers, they thought there'd be no contagion out of greece in 2010. well, we know there's been plenty of contagion. and the minister of finance of germany made a statement to a group of us in tokyo at the imf

meetings there a couple of months ago. when he was asked what was the biggest mistake you've made so far in the european debt crisis, and he said we did not understand and did not accept the idea of contagion. and, boy, europe's paid for that, and so has the world. and remember, he is the most important finance minister in all of europe, bar none. because germany is the biggest economy. so i think contagion, unfortunately, is alive and well. my friend mario draghi is talking about positive contagion. i certainly hope that he is right. i think one of the things i learned from my friend paul volcker was, and i learned this early in the 1980s during the latin american debt crisis, is that timing is of the utmost importance because the longer you take to fix a situation, the

worse it gets. and, again, there's been no sense of urgency or timing in europe up til very recently. the feeling was that the policymakers there, politicians had all the time in the world, and we see what that's brought vis-a-vis the growth or lack thereof in the area. so i think timing really and when you announce timelines, you've got to live up to them. and we till don't have -- we still don't have important timelines that are being lived up to there. i think another one is be we want a program -- if we want a program to succeed in a country, austerity or better called reform program, we've got to make sure that the local populace of a country supports it. and that was, that's been a problem day one in a country like greece. i think it's been somewhat better in portugal, it's been better in ireland, but still there have been problems there. and so you've got to get the

people's support. and the only way you do that is say this program is going in, it's a tough program, but it's going to lead to growth. because if you don't have programs leading to growth, the local population in a country will not buy off on it. so i think it's very, very important that we have that. i mean, you take a look at some of the cases which are really, you know, i would say so serious, greece is in its -- right now they're going into their suggestionth year of recession -- their sixth year of e recession. this last year probably ended up 6.5, 7% negative growth. next year they're talking about 4-5% negative growth. that's not a recession, that's a depression. and you take some of the unemployment figures there, there they have 170% of debt to gdp and growing. so it's very important that you can convince the population that growth is there. sixth, i think, obviously, is

very important on point which is strong political leadership. if you have strong political leadership, you can sell these programs, and you can make them work. but that means you've got to have people running a country, policymakers who believe in structural reforms, privatizations, tax reforms, budget cuts, labor mobility and the need to be competitive both internally and externally. if you don't have governments with plans like that, you're not going to get them back to growth anytime soon. so it's very, very important that you can do that. seven, the point is the private sector or. and i think this is a problem because at the beginning there was no interest in the case of greece and in some of these other countries in involving the private sector. and, in fact, it was only when things got so bad that greece called upon the private sector with the troika which, as you

know, is european union, the european central bank, the ecb and the international monetary fund to really get the private sector involved. and there you had a big haircut. if it had been dealt with earlier, it wouldn't have been as bad, and now they just had to do another debt buyback problem, operation which is still a problem. so i think the idea of getting the private sector involved early on, and we showed this both in latin america and asia, the asian financial crisis, korea being a good example, i think it's very, very, i think, important. so those are the lessons learned from elsewhere that the europeans are now just starting to utilize into the fourth year. but what needs to be done going forward? because that's what really is, i think, important. i think three things need to be dope. first of all, you need to get this banking union that's been talked about most of last year actually accomplished. because you need to break the

tie between the sovereign and banks. and you've got to get the banks back lending. and we still don't see that sufficiently in europe. and so you need to get this banking union arranged. originally it was supposed to be -- and i was a questioner on july 26th when mario draghi made the famous historic statement now that he would do everything possible at the ecb to make sure the euro got through this problem. and i was designated as a questioner to ask him about the banking union. and at that point he was very optimistic. he thought the banking union could be worked on and in place in the first quarter of this year. well, now they've moved it to the first quarter, hopefully, of 2014, and you still have arguments over how it's going to be done. so you need to put a timeline on this, and then you've got to adhere to it. but to get the banking system back with similar regulations

throughout the eurozone is absolutely necessary. it is key to the recovery of europe. second of all is a plan that he talked about on july 26th in london last year which is the outright monetary transactions, omt, where it's the ecb would buy bonds from the countries in trouble along with the european stability mechanism under certain conditions. in other words, certain conditionality. now, the ecb isn't going to put up that conditionality. they've got enough on there as a central bank and now as a supervisor for the banks. and so it'll probably be the international monetary funneled. but they haven't really -- fund. but they haven't really agreed what kind of conditionality they're going to put up and who's going to do it. the lead candidate for this should be spain, but the prime minister of spain told me

several months ago he'd only go into this program if there was no additional conditionality other than what he was taking, because he thought he was taking enough in spain. and second of all, if ecb could prove to him by taking this on that the spreads or the cost of issuing bonds would go down significantly. as you see, nothing's been done there. but what psychologically has helped the market to know this program is there, but they've got to make it work and show exactly what the conditionality's going to be. the next one is a favorite, and i agree with chancellor merkel of germany. and that is you need a fiscal pact. and this was agreed on in march last year. you need 12 of the 17 countrs to approve it. ireland was one of the first to

approve it in may. and it's very important because when you formed -- when the eurozone was formed, it was formed with a monetary union which was the european central bank and the mastric treaty to limit deficits to gdp to 3%. and who were the two first countries to break it? germany and france. so she is adamant that this fiscal pact go through, and i think she's right. because you cannot move forward with the eurozone unless l l you have a fiscal pact to match the monetary union. and a lot of work has to be done on that. but i think these are the three things that are necessary to get the eurozone and most of europe back to growth. and it's not going to be easy. and so i think i would just say to you that the banking system

in europe -- and, again, a number of you know it very well -- will be getting itself involved in, unfortunately, but in europe the countries and the businesses depend more on the banking system than they do here in the united states. why? because we have a more developed capital markets. although it's starting to develop more rapidly because of the banks' problems. so the key, as i said, to getting them back to growth is the banking system. and so the, all the things i've mentioned here are very important. now, the european central bank has put in the ltros, three-year loans at 1%. they did that a year ago, and now they have done the omt, they've lessened the amount of collateral necessary to borrow with the european central bank. but, and the banking system there has been shedding assets because they've had to raise additional capital, and they've

been concentrating more on that than lending, unfortunately. and a lot of you in this room are aware of that, and some of the benefactors of that, beneficiaries have been japanese banks who have been buying portfolios and investors like wilbur on the market. but we've got to get the european banks back to lending. that is key to all of what i've said here. then i would just say a few words about -- and, again, firm timelines to do this because if you don't have firm timelines, it won't happen, and the markets won't believe. i would just throw in another thing is that i, frankly, think that the euro is kind of strong if you really want to improve your export base. and i think at some point in time you've got to get the euro down to vis-a-vis the dollar to a weaker euro mainly to help

spur exports which'll help spur growth. which is exactly what the new prime minister abi is trying to do in japan. and i think that one of the things i want to mention that he's very, i think is going to push -- and i think he's very correct -- is trade within asia. and he's got two opportunities. one has been there on the table a while and is clouded by territorial disputes which is the northeast asian economic bloc which would be japan, korea and china. and i think that it's very important that this go ahead with the second and third largest economies and the tenth largest economy, korea, in the world. and he has said he really wants to move ahead on that. and so i really hope so. but, of course, it's clouded by theserser the territorial dispu. the other is something, and trade as was mentioned as the subject that terry mcgraw has

shown tremendous leadership in over the last decade. and we now have something new on the table, not so new, it was announced almost two years ago which is the trans-pacific partnership. and i think japan should be part of that. it'll take a courageous decision of abi because there are a lot of people, entrenched interests in japan that do not want to be a part of that. but i think if we could do things that we talked about before, you know, he's announced the fiscal stimulus, pushing the bank of japan on a monetary stimulus. if he could do the structural reforms i discussed and push on these two, northeast economic bloc and the pan-pacific trade agreement, i think this'll be a big help to japan on exports. and as we all know, japan is very dependent on exports, and you need to stop the hollowing out of industry in japan moving elsewhere. so i think these are key. now, at the end of the day as we

know there are major territorial disputes with china and with korea. and i think i look favorably on the new prime minister abi sending a representative to korea to talk with madam park, the new president-elect of korea. and, hopefully, something can be worked out in this area. as you know, a senior delegation led by kurt campbell, the outgoing assistant secretary for asian affairs in the state department, is basically in japan and korea right now trying to see if the united states can have a helping hand, because that's the u.s.' two big allies in the north pacific. the territorial dispute with china is, i think, going to be much more difficult. but japan, as you know, is one of the biggest foreign investors in china. so it's not just japan that suffers onto this, also china.

so i'm hoping when president jinping fully takes over in martha he and prime minister abi can work something out. there are a lot of voices both in japan and china which are very militant, and it's not going to be an easy job. but i think it's very important. and for the united states, this is most important. to get this trade moving and and get our allies working together. and so i tend to be an optimist be, like terry, and that's why we work together on all these trade deals. and it's been, it was a long, difficult battle on korea and latin america and all the others, but at the end of the day, i think it's worthwhile. i hope we're going to be seeing a new dawn in korea in in the regard. so we have new leadership in china, new leadership in korea and new leadership in japan. so hopefully, they will be able

to see some of these things through, because i think it's very important not just for asia, not just for these countries but, frankly, for the world given what's happening elsewhere particularly in europe. so having said that, terry, i think we should go and have our little conversation. thank you very much. [applause] [inaudible conversations] >> here's the book in japanese. [laughter] >> and the book, bill, is in portuguese, it's in simplified chinese, korean and now japanese. as well.

um, i think that, you know, the dissertation we just heard from bill, you know, is so lucid and so straightforward that you sort of, you know, grab this notion of why didn't we start to implement on some of these things quicker in all that? and we seem to get into such complications. and so the first question, bill, i think that i'd like to ask you, and i'll ask you a couple questions, and then let's throw it open and go in any direction anybody wants. is, you know, because we were talking about, you know, the lack of coordination and cooperation in relationships and that people were going it alone, especially in the european crisis and the like. now, you had this longstanding relationship with walter riston. could you talk a little bit about that relationship, and from the book's standpoint who are some of the world leaders that you've dealt with that had

the most positive unnuance in terms of -- influence in terms of relationship development and getting things done? >> well, walter was a, was an internationalist first class. and he expanded citibank significantly overseas. he was a great friend of japan. he used to go to japan regularly, and i think he along with paul voc or on the public sector -- volcker on the public sector side were major mentors of mine. i think it's fair to say, and you've seen this, that walter was the greatest banker of his age. and that's what citi's going back to, i think, at this point in time. we have a lot of present city bankers, former citibankers in this audience who i know will agree with me. but as far as, you know, working with walter -- and he's the one that got me involved in all of this stuff, and john reid later

on -- were both, i think, senate senate -- significant world financial leaders. as far as having talked with a lot of people, i think meeting mandela, having dealt with a number of cases, spent an hour in 1980 with fidel castro, he wanted my advice on how to restructure the cuban debt, and he said i can speak to you about that because we nationalized you in cuba, one of the first times we nationalized foreign banks, and then you offset on our reserves. so, you know, we're kind of even here. and this was in nicaragua with orr ortega who was running the sandinista government who's now back again putting this together. certainly fascinating there. i mean, i could run through so many people. i had to, one of the sessions with mandela i was asked to tell mr. mugabe who was then president of zimbabwe and is

still president of zimbabwe that he'd used all his time up. and he wasn't very happy with that. and because of that, i was able to do that, our secretary of commerce, ron brown, asked me if i would chair at the 50th anniversary of the united nations the africa lunch which the u.s. was doing at that time. which i did. he said if you can do that, then you can take care of anything else, bill. so, i mean, there have been a lot of people. you mentioned secretaries of treasuries here in the united states, certainly the various heads of the fed and central bankers i think worldwide. i think one of the things that we need to see more of getting to the point that i know you wanted me to talk about is we need the leadership. and we haven't seen the tough leadership in europe that we need to see to get out of crises. we were very lucky in the case of the latin american debt crisis that we had paul volcker at the fed, and we had jacques

dela rosier at the international monetary fund. and, you know, because the world -- people forget now, it was so long ago, in the early '80s it was about to go under. in fact, they compared it to moving deck chairs on the titanic. and that worked out. i think nick brady with his brady plan. so we had really real leadership, and i think that's what we're missing in many parts of the world including europe where you -- although i must say at the ecb mario draghi and before him jean claude jean-claude trichet, but a lot of the policymakers and politicians have not. we need to see that worldwide, we need to see it in our own country. i mean, just witness this discussion that went on, whatever you want to call it, at the end of the year. and we have sort of the best to come yet because we had to decide on the debt ceiling and spending.

and so this is where we really need leadership which we were used to. i tend to be an optimist about the united states because people gave up on us on vietnam, on the watergate crisis, and we came charging back. and i think we'll do it here. but it would be nice if we didn't have to go to the cliff each time to do it. >> well, you know, and again, when you start talking about the kind of relationships and the kind of leadership, you know, we till seem to have -- we still seem to have this atmosphere where people talk more at each other than trying to find some common ground, some common goal in getting it down. and, you know, you broached the whole goal of growth and jobs, and that is the answer to all of this. you also talked a lot about contagion. on this one. now, we all, you know, sensed that if the your -- european situation got worse and they're

representing 22% of gdp, you know, the effect it's going to have on the united states, india and brazil is going to be real and everything. so with 40% of their exports coming here to the united states and so forth, you know, all of a sudden, you know, we started to see the effect in our own growth, in india's growth, brazil's growth -- >> china. >> and china. now we add another 21% of world gdp, the united states, which is under 2% growth and, you know, if we don't resolve some of the debt ceiling and some of the spending cuts and get into some of the fiscal order that you were talking about, you're going to have that weight on it. and even though you proposed a lot of hope with japan in terms of some of the political leadership, they are still at negative growth with 7%. >> exactly. >> with so now you're up to 50% or so of world gdp that is a drag on the economy. how do you look at, you know, the broadest sense of contagion as it relates to emerging market

growth and developing country growth with 50% of world gdp possibly in that situationsome. >> well, i think the trade figures tell it all, whether you agree with the figure on growth or not, i think the trade figures show what's happening. and there's no doubt picking one of the countries you've mentioned, china. i mean, china for the last 20 years has been double-digit growth. last year they had one of the worst years in recent memory. we'll see the final figures coming out. it didn't get below 7% which i view as a hard landing, but when you move from double digit down to 7 something percent, and one of the major drivers of that was their largest export market is europe. and they didn't believe that europe would, a, get into the problem, b, take so long to get out of it. and, of course, their second largest market is us. so they helped get the world out of the great recession with this

incredible stimulus program. you're not going to see that again in china. so i base think that you've got to have things worked on at the g20. the only summit i think was worth anything was london when the world was going into the great depression, not the great recession. and they took certain steps to ameliorate that and move ahead to stimulate growth. so i think that this next year is going to be tough, and i think you sense complacency in europe. it's interesting that one of the real drivers in brussels is ali rand. and he came out with a statement the other day saying he's concerned about complacency, and i think he's right on. because you have all these people saying, oh, since mario draghi made that comment on july 26th, look where the markets have gone. well, you know, the markets can be right, but the markets can be wrong. and i think not having been able to do the three things i said with a fixed timeline basically

said how long is europe going to be stuck in here. and so i think that this is a real question. you mentioned india also. india was up 8.5, 9% growth. dropped below 6%. when you have these major world economies where they are. and so i think you need a good dose of not only fiscal stimulus and monetary stimulus, but you've got to back that up with structural reform. and i think deregulation. and i think that's really key to, for the world to get out of this problem that it's in today. because we both agree it's all growth and jobs. and if you can't show the path -- that's why i used nick brady and the brady plan. because it gave a pathway to growth. korea, 1998. a man of the left came into power, the last thing he wanted to do was to sign an imf agreement, etc.

and he told me, he said, look, i inherited this, you got my full backing, do can whatever's -- do whatever's necessary. and who were the first ones to sport -- support me in the japanese banks. first ones. with that i then got the american banks online and the european banks online. so there you had the political will to do it. brazil, fernando car dose sew, 1994. the country had been in moratorium, i don't know how many restructurings. and he decided enough is enough as finance myster. and -- minister. and he said we've got to get this debt deal done. we worked on it, got it done. within hours he announced the real plan which took brazil out of hyperinflation, and brazil's had its ups and downs since, but it's a different brazil today than in 1994 with cardoso. and the last example i would give is turkey.

when asked of that in 2001, my friend al dervis was called in to be finance minister. and i worked with him on that particular plan because we had to convince the u.s. treasury to support the imf. but he put in reforms, and he told the people of turkey, look, you're going to have to take this austerity for x period of of time, but we will lead you to growth, and he did. look where turkey's come after that. so i just use these three examples; one in the middle east, one in latin america, one in asia where they were able to do this. and this is an example of leadership to do what's necessary. i mean, in korea we got this done in a couple of months, and four months later they were raising -- which is a lot of money in 1998 -- $5 billion in the international markets because they just took a decision and went at it. >> there's a lot of these things

that you were talking about, the leadership, political leadership, timing and the banking union, getting the banks back into the lending and the fiscal pac in those components on that part. you know, just as an aside, in talking about another country, russia, you know, russia desperately wants to reintroduce itself to the rest of the world and not in some of the vein that it has been. they've got this opportunity with the g20 coming up in september. crystal ball. do you see anything from a coordination standpoint from the g20 coming out of this? and do you see russia's image changing? >> well, i think this is a big opportunity for the prime minister to show what could happen in russia. we'll just have to see because they're sitting on top of all these oil reserves. we know where the price of oil is. but there, as you know, there

are a lot of problems. and so we have to see whether, you know, russia can show that it's taking some of these reforms it needs to take. and we'll see. and this is a perfect opportunity to do so. so far i think, as i said, the only g20 meeting that really did anything positive was the one in london, and i give credit to gordon brown. that was his greatest moment, i think, at that particular time. to do it. i mean, you've had very well organized meetings. i was in korea, there's nobody that organizes like the koreans. it was a great, organized meeting. all they talked about was currency wars and, you know, nothing much came out of it. and then the one in france with sarkozy, it rained the whole time, and it's sort of like raining on the parade because it was a disaster, and nothing happened. and although there were a lot of nice intentions coming out of

mexico on the last g20, it's not clear what we're going to see. one of the areas we haven't gotten into, i didn't get into here is this whole question of regulation of financial institutions. and this is one of the mandates of the g20, you know, the financial stability board at basel. and if they don't get this right and get a level playing field worldwide, we're going to have more regulatory arbitrage than we had before. and, you know, this is a worldwide problem not just a european problem. because here in the united states we have dodd-frank. in england we have vickers. and then in europe we have a lincoln report and all sorts of variations. switzerland has its own series. and the whole idea was that the g20 through the financial stability board and the basel committee were going to come through with a series of amendments and raising capital and liquidity standards on a universal, global cooperative

basis, coordinated basis that would avoid what happened in the great recession. so the next one's not worse. but the record's very mixed there. >> let me take a break here, and let's open it up, and let's start right over here. >> jim bixler. lots of economists such as your friend rudy dornbush from mit that you mentioned, are believers that competition is the hallmark of a country thriving, growing including jobs, etc. and lots of economists even before the euro was instituted argued that they needed europe more competition rather than a

coordinated currency, etc. and they predicted bad woes for europe under the euro. you've mentioned a lot of the problems on the flip side of competition, namely regulation. give us your perspective in terms of competition, regulation and the euro and government coordination. >> i think it's a very good question. a lot needs to be done there. and i think that at the time that the euro was put together and my good friend bob mundell -- professor at columbia, nobel prize winner -- had different views of how it was going to work out than what's happened. that was not in his idea book,

because you've had tremendous regulation there. you need more deregulation. there's no doubt about it. in order to get more competitive. i mean, take a case -- and i keep going back to greece because that's in extreme misthere when you take a look at the unemployment rate between, you know, 58% of youth between, you know, under 25. it's just incredible. even in the great depression here we didn't have that. and overall unemployment level of 26%. and so you need that all through southern europe. i must say that victor gash par who's the finance minister in portugal -- and we have a portuguese expert sitting here -- who is a professor of economics in portugal has tried to really drive that home, the need for portugal to be more competitive. and they've made, they've made a lot of progress there. not enough, but i think one of

the things that i'm hoping that we see out of all these countries whether it be portugal, spain, italy, all of the countries that i've mentioned here that we get more in the way of competitiveness. just take a look at france. now, france is the second largest economy in the eurozone, and it's very important that you see some of these reforms that are talked about happen, or we're going to get france stuck in stagnation if not recession. and so i go back to -- and as i said, there's a japanese equivalent to it, but the chinese expression -- this is a great opportunity for the europeans to do correctly what they haven't done before. now, whether they'll pick up on it, we'll see. but certainly just like ben bernanke can't solve our problems here in the united states, also mario draghi can't

solve the eurozone's problems either. so i think the point you're making on competition are key to be worked on at this moment. and you can drive a lot of things through now in the eurozone because of the economic situation. >> will there be a year row in 10 or 20 years? euro? >> i think they'll make it through. i think you can question who the members are going to be. i think, obviously, in the case of greece nobody wants to do anything because you've got elections coming up in germany in september with chancellor merkel. and everyone wants to hold it together. but at the end of day, it's going to very much depend on whether greece can implement the programs they have agreed to. and i think there will be a euro. the question is what it'll look like and what the membership will be. because, you know, originally there was a big school of thought saying that the euro just should have been the northern tier of the membership. it shouldn't have taken in the

so-called southern tier countries that have problems. and the next year or two, i think, are really key. and this idea of complacency, and i've had some talks -- actually, he was good enough to buy my book last year and read it, and we've discussed it. i was with him a month ago, and i think he's one of the more thoughtful people in the bureaucracy in brussels. and i think that when he starts talking about complacency, and i should say younger came out, also, and talked about his concern on the value of the euro vis-a-vis the dollar. my point on exports. so i think we're very far from where a lot of members of the marketplace are that, you know, the worst is over for europe, don't worry, it's just a matter of time. >> [inaudible] >> did everyone hear that? i think -- >> did the u.k. make the right decision in not being a member? >> well, the prime minister at

the time certainly thinks so. and as you know, cameron osborn is sort of a young mentoree of his. so you can argue that back and forth at this particular point in time. the question is if you had a referendum in the u.k. today which you're not going to have probably for another couple years, what would the vote be? and most polls think it would to pull out if there's not some sort of restructuring of the u.k.'s role. certainly without the u.k. the eurozone can continue to exist. i think chancellor merkel certainly wanted to keep in the e.u. because they never went into the eurozone. but they are an active member of the e.u.. she wants to keep them in. >> time is getting a little tight here, so let's go to two questions very quickly. right here and then right over here.

>> do you think it would enhance economic opportunities in asia if we had more asian members of congress? >> that's an interesting thought. of course, some very senior members of congress, in fact, the senior senator just died who, inouye, who had tremendous clout there. and you're seeing more and or more asian members elected, male and female. and i think you'll continue to see that. you know -- >> who else -- [inaudible] >> well, you have, i think there are several. you have one who's a korean, i think you have one korean-american, and i think you'll see more going forward because you've got a lot of asian americans who are mayors, you know, in major cities. and i think that the answer is i

think would be very helpful to have more asian-americans as members of congress. and, of course, you had governor who's now our ambassador to, who is our secretary of commerce who is now our ambassador to beijing. and if you believe the chinese on the street, he's the most popular ambassador of any in china today. so popular that some members of the government think he's too -- the chinese government think he's too popular. and he's a good friend of terry's and also of mine. so i would hope to see more of that going forward. >> at the time of the formation of the euro, the three-tier euro was considered but not adopted. an unfortunate result of this has been that the mediterranean countries so largely dependent

on tourism have become, well, they're really not competitive. is it time to reconsider the three-tier euro in that an important effect would be a very substantial devaluation of the mediterranean countries, and that should result in job growth, economic growth simply from near-in increased tourism? >> well, i think it's fair to say historically when i talk about latin america and also about the asian financial crisis -- career -- korea is an example, indonesia also -- is that one of the great aids they had was the ability to e do value and to push -- to devalue