is below the area average. that is larger however, because of, because of the sudden bids. right, the peripheral countries having massive indirect tax increases. so i think the underlying rate of inflation in germany is below that. no, the bank is willing to accept. the bank has no say in the matter. the bank, the policy, and the policy is in frankfurt. for the euro area. all that it has done is discover aarithmetic. right. no, if the target. and it is quite serious about it t 2% on average. they are above it. if you know the periphery will have to do less than 2% if it is to regain competitiveness. somebody is going to have to do more than 2%. that's not economic. that is arithmetic. germany therefore, and finland, and the other -- bigs that are not -- trying to improve their

value competitive areas in the euro area will have higher inflation. whether they like it or not they can't do anything about it. they don't set interest rates. they have a little bit of discreti discretion. so, germany, in monetary policy has one vote. so it's -- national central bank president. and, technically is not speaking for germany. but if you say that, he is -- he has a legacy there. two of 23. this is not the choice of the bank. they haven't decided to accept inflation. they decided, two plus two does indeed equal four. >> a few member questions over here. >> to what degree will media get involved? and will one country try and talk to the electorate of another country? will people in germany, or

entities of some sort, advertise and, present the position of the germans to the greek voters? or to the portuguese voters? or to the french voters? will that start to happen? >> it may well. we have had examples of politicians lecturing the electorates of other countries on what they ought to do. especially -- in one of the many irish referenda, the french were pointing out that no country that accounted for -- 2%, with 3.5 million people should hold 400 million european, and that, of course went down like a ton of bricks. right? so, if this -- there is one way you are going to get the referendum lost it is for german, french politicians to

remind where their interests lie. as private entities do it. probably written in bad english. and, you know -- i can hardly mention, built, conveying, messages that would be convincing to anybody any where. it may not happen. the european yet get the effective cross border lobby of -- of industry or groups -- it's possible. it's possible. but i think it would be a minor issue. and more likely counterproductive. >> a question over here. >> how much is this reminiscent of the situation 30 years ago in the '80s when mitterrand came into power in france, there was a bunch of disarray in the euro zone.

wasn't then ape euour a euro, e zone. u.s. currency was strong, for a three, four year period do you see the phenomenon happening again and what are consequences? >> it is similar. things move a lot faster. it took mitterrand two years before realizing he couldn't have this in one country. unrestricted capital account. fairly unrestricted capital account. and it now will take three months. i think that is the difference. so if -- he gets a -- a majority, a lasting majority. zone party or left, we will have to, simply justify to his voters -- his political existence. he will have to engage i think in this pro-growth, but unfunded policy. and it will get slapped down i

think by q-4. yeah. late summer crisis. yeah. >> any other member questions, mr. soris? >> could you comment on the -- the target two euro system and the controversy of articles by zin on the liabilities incurred by jgermany? >> yes. an economist has done a disservice to his discipline, than professor zin on the writing of the piece on target two. what is target two imbalance. condifgs ttion of the central b. every central bank has one. it is simply the stock of knelt for an exchange reserve.

it is uso claims. the cumulative overall balance of payments surplus. the official sentiment balance surplus. within the euro area. and it has increased massively. because germany doesn't just run historically an overall service, it runs a surplus, data aren't very good on this, within the euro area. and in this, had capital infloeps into germany. so the finance account -- is in surplus as well. and so the -- the central bank makes it all add up. and it has been accumulating claims on the central banks like crazy. now is that a measure, is that a

measure of exposure to the euro system? no. even if you have no target two in balance. say zero, there is still, they are still responsible for a percent of the losses or profits, made by the euro system in its monetary policy operations. right. if greece leaves the same applies. then germany pays slightly more than 28%. greece is out now. if everybody walks out and germany is the last one standing. they will simply have a bunch of

bilateral claims than the two, 27% share becomes the same as the -- as the target two imbalances. these claims are not extinguished. the claim comes to collect on them. so undoubtedly -- the bank, not necessarily germ no inc., because much of the increase in target two imbalances as the crisis started is the german private sector, shoving its bad foreign assets into the bank and into the german government. because -- there has been some increase in net german exposure to the euro area since beginning of the crisis.

because, the -- the cumulative current count dech sit ineuro area of germany has been positive. much more than capital inflows. much of it is simply germans taking foreign assets home. since they can't do that in the aggregate, because that decries a bigger account surplus than they had, they are simply shoving it into the public sector. so the main, exposure change has not been for germany, but was within germany that the german taxpayer is much more exposed than the german private creditor. there is an enormous capacity in germany to forget that you can't have an irresponsible borrower without having an irresponsible lender. and of course, germany in the unup to tu run up to the financial crisis was prime example of the irresponsible lender. they were shoving money into the periphery, island, spain, and, as if there was no tomorrow.

and -- as a result of course, and, reflected the massive german savings rate. and that unwillingness to invest in it because of the returns, itch they'if they're obtainable there. then they recognize that the -- the periphery was indeed in trouble they repatrioted and put their money either in, in the bad assets either into the ecb, the bank, or into the government, kfw took some, german state bank and german facilities. so, most of the debate is actually between the german taxpayers and original german creditors. germany prefers off to think of it as a fight between the -- the mediterraneans and the virtuous german savor. only a small part of the story. >> we have a minute or two left. i just want to ask you one sort of longer-term question. you spoke earlier about a small

fiscal pot. i am wondering, beyond exits, orderly, disorderly, are we going to see some point, a stable, broader fiscal union? >> not in my lifetime. and i expect to live forever. but we will see a minimal fiscal europe. which is basically a collection of pots. we will see, for instance, the, esm, the successor of the current alphabet soup. i think ultimately, increased in its authorized capacity, to -- to multiple trillions. my view is they need something like the noninflation, and their capacity of the ecb. but even then, just as there is now, there will be a loin that says, this limit, this ceiling, can be raised with, with unanimous consent of the

government. and the liquidity facility. unsure ans fa s insurance facility. significant cross border insurance. and then it has to be associated with sovereign anti-structure mechanism, and the very part of the, off the -- off of the year's end. to deal with the future -- fiscal insolvency, which i think are, are likely to occur then you have 17, i think, going down to 16, and then, then, whatever -- coming in, 18. and soon -- you know, 26 countries. in the euro area. and throwing the uk out. then 27. with scotland in. and england out. that will all work. but -- so, the banking union,

right, which is a single banking regulator, do away completely with -- with national banking sector. a single resolution, single resolution fund, as well. i think since there will be serious -- serious unsecured bank debt restructuring, both, subordinate and senior, in the euro area before this is over. for a number of years afterwards. it will be difficult for banks to get term funding unsecured. without guarantees. and then, unable to give that in most countries. it needs to be, what i call a -- unsecured -- bank debt -- guarantee facility. and a finite fiscal pot again. so, recapitalization, facility. fiscal project, the -- the -- the loan guarantee facility.

loan guarantee facility. and we needy poz it in sh depos. set up a privately funded backup fun, to handle any possible run, which will be never. it has to be separately. and that, hopefully they will have nice symbolic gesture of turning every bank to incorporate, instead of the national law that would make it clear, that way you cut this -- now, deadly umbilical cord between the soch rvereign and t banks. necessary condition for survival. little fiscal europe. but no cross board distribution. the notion that simply because the portugal is much poorer than say whatever, than sweden, you are going to have equalizing transfers. it doesn't play within europe anymore.

the willingness s -- willingness to engage is vanishing fast. more englishmen. there are rich catalonia no longer wishes to give its largess to andalucia. in, in italy, it is believed that, italy stops, not too far south of rome. and it wants to end the transfer. the notion that you are going to have a transfer europe is, politically impossible. you are going to have an insurance europe. that should be good enough. hopefully prevent tich oive eur. >> probably a good place to

stop. doctor, thank you so much. >> you are welcome. on friday, saturday, president obamawell cups world leaders from the largest economies to the g-8 conference

at camp dach it vid in maryland. and the u.s. hosts nato head of states in chicago. next a preview of the g-8 summit and u.s./russia relations. former u.s. ambassador to nato, nicholas ferns taulks about the future of nato. >> when people are saying to him -- don't take the vice presidency. right now you are a powerful majority leader. don't take the vice presidency. you won't hatch any powve any p. johnson says power is where power goes. meaning i can make power in any situation. his whole life. nothing in his life previously makes that seem like he is boasting. because that's exactly what he had done. all his life. >> sunday night, the conclusion of our conversation with robert caro on the passage of power, volume four the years of lyndon johnson.

sunday night on cspan's, q and a. >> the center for strategic and international studies hosted a forum last week on u.s./russia relations. panelists include the former u.s. ambassador to russia, and the current russian ambassador to the u.s. this comes ahead of the g-8 summit at camp dach vid this we. >> welcome. i'm meredith, the chair in international business here at csis. on behalf of myself, and the director of our russian-eurasia program program. on the eve of the g-8 summit meeting and period leading up to the vote we hope next month in the russian state to ratify

russia's succession to the wto, world trade organization. since 2009, the reset in relations between russia and the united states there, have been many successes, including the s.t.a.r.t. treaty, cooperation on afghanistan, iran, and north korea. civilian nuclear power, and other areas. but there have been notable differences over syria, missile defense, human rights, enforcement of intellectual property rights and con dufkt elections last month. both president put spin and president obama have called for a deepening of economic cooperation between the two countries. the russian state duma its expected to ratify russia's succession to the wto in june or july. we expect 30 days after that, roughly, that russia will become a member of the world trade organization. for the united states, to take advantage of the new market openings in the russian market,

congress must pass legislation to grant russia permanent normal trade relations treatment. the panel today will focus on prospects for improving relations with russia, and how the wto process has prompted russia to take measures to open its economy, to more international trade and investment. we had timed this panel so it could set the stage for the meeting between president obama and president putin, on may 18th. which we have just learned has been canceled today. president putin has decided to forego his trip to the united states for the g-8 summit meeting. we will hear more about that from our panelists. i would like to yield to my colleague, andrew crutch spins, director of the russia/eurasia program here at csis. he will moderate. >> thank you for the introduction. welcome everybody to csis.

delighted to see a full room and such interest in u.s. slush russia relations and economic dimension. and we have an absolutely superb group of speakers. let me make haste and make some brief in troep dutroductions. we'll start off with our two -- ambassadors to each other's country. first of all current ambassador from the russian federation to my right, ser vagei ivanovich, g severing, members of the min streep of forei -- min streistry of affairs. here since 2008. overseeing from the russian side, improvement in relations often called the reset. he has served as the russia's ambassador to brussels and ambassador to nato and deputy foreign minister.

a wonderful pleasure to see you here at csis. our second speaker will be ambassador john buyerly, who just returned from a successful stint in moscow as our ambassador off to the russian federation. he arrived back in january of 2012. he from the american perspective was implementing on the ground the improvement of relations in, and the long series of agreements and cooperation that have developed over the past three years between the united states and the russian federation. he is one of our longest severing and most successful decorated members of the, u.s. foreign service. he has also served as our ambassador to bulgaria. from 2005 to 2008. and many, many other assignments having to do with, with the soviet union, russian federation, east central europe and europe. john, great to see you here today. >> thanks. >> our third speaker to my left will be ambassador susan

schwaab, served as united states trade representative for several years beginning in june of 2006. she is currently professor at school of public policy at university of marylandai pla, s a long history. you served as dean of the university of maryland school of public policy for eight years in '95 to '03. if you read in the biographical material, on ambassador schwaab. you will see a long series of achievements she representing the united states and trade negotiations. own one i am not seeing, u.s./russia bilateral agreement in november 2006. senate is my oversight. our final speaker, batting clean-up today. will be, claus kleinfeld, ceo of alcoa, the largest, integrate

a alum numb country. 61,000 employees in 31 countries. a big job. i want to extend a shout out to the business council. and their, president, ed varona, vice president, randy levinas, working for the coalition of u.s./russia trade and working on this effort to, to promote russia's graduation from the jackson/vanek amendment and being granted permanent normal trade status. which we hope will happen sometime soon this year. so with that let me turn the floor over to the ambassador. sorry, the ambassador. my apologies. >> our guest of honor.

>> i was trying to achieve a measurement of success. [ inaudible ] for >> the amendment that was introduced way back in the cold war time. and following the disagreement. and with the united states, the immigration since then. we have progressed in our

relations with israel significantly. it is a friendly country. and the visa with each other. russians go to israel. >> i think you probably have to switch the microphone on. >> and coming back, russian origin. coming back with ideas. with sometimes, money, technologies. to work in the country that they know very well. and that is quite normal. i would say that we have -- normalcy in our relations with israel but we do not have normalcy, relation in the particular field with the united states over the issue that is no longer. by all standard. still there because there is a political context for this. and probably we will see, hear it a lot. debate to whether russia can

graduate from jackson/vanek or not. in terms of russian economic interest, the condition of negotiations, offen tr entry, ie wto, give us an opportunity to become a member pretty soon befrp the e before the end of the year. if it is not granted to russia that means, kind of it isresip r recip reciprocal. it means the benefits that the wto gives to foreign countries, entering russian market will be less available to american counterparts than to many others. we do not like that kind of situation. what we think is needed is normalcy in our relation. normalcy. it is something that is still missing. we try to measure our relations by agreements in arms control.

one to three agreements that are extremely important in their own right. and what its missing? normal trade. interaction in business communities. not only big companies that have entered the market and are doing pretty well or, a number of russian companies that have invested heavily in the united states, are doing pretty well. and i will give you a couple of examples. tmk is -- the biggest producer of tubes. in the world. they have become number one. having entered the american market as well. they're the best. they have invested in -- i think, four, or five, facility productions here. they are also interested in steel mills here.

they are well-received where they operate in the united states. and we consider it to be a step toward the normalcy in our relations. i would also say that we are big market. you are the bigger market. we have market with 142 million people with the highest income, depends on how you qualify the countries with economy in transition or developing countries, but, russian market its very, very significant for -- for all of the parties including those in the united states. the current numbers if you look into this -- are reflecting our trade. extremely modest. the last year, the trade both ways accounted for $40 billion. sound almost impressive.