terms of cross border flows. if there's not, you're restricted on cross border finance. it feeds back on to the fiscal side. that's absolutely paramount. the other purpose is to provide funding certainty for the affected nations over a reasonable period of time, which is going to be measured in two or three years. we are still going to be talking about europe next year when we are here, so that some of the reforms have time to start to bear fruit. now, in the context it is more effective facilities, there is a role potentially for the imf. not just for europe but as christine emphasized, to provide some cautionary certainty for the world during this process. >> chancellor, if i may ask you

this, what is your view actually of the -- at the very least, everybody i've heard, and i've spoken to a number of people privately and i've heard it publicly, that people insist that the eurozone put out more iceable money. there is sort of a sense that there's a risk transfer going on, which is quite illegitimate. this is one of the two larger economies in the world. why should this -- why should the rest of the world come along and do this? there's an additional factor and some people believe that the imf has gotten into trouble so that it's not even clear that they can perform their role within the incredibly difficult context. so what do you think needs to be

done by the eurozone itself to make it reasonable to demand or expect a big contribution from outside? >> well, the eurozone needs to provide a significant increase in available resources. i stress both the word significant increase and available. it has to be a deployable firewall in that sense. and i think the eurozone 4r50eders understand that, that there aren't going to be further contributions from the imf to other g-20 countries, including britain, unless we see the color of their money. our other requests are that the imf is not in any way debased as an institution. the full conditionality, the rig grous analysis, that it helps countries, not currencies. if the conditions are met, certainly britain would think very carefully about providing other resources and i'd probably

have to go to my parliament. but i'd be willing to do it it. i think if we accepted, if we said that the imf was never going to be there to help countries who had created a single currency, first, we'd want to wonder why they are any concern to the ifm and we would undermine the imf. we shouldn't let people in countries deal with their problems on their own. the world should try and help those countries. the final point i make is the lasting solution, however, to the eurozone. ultimately, the united kingdom knows, the united states, and others. you have to transfer fiscal resources to make good differences in competitiveness, regional competitiveness and ultimately for all of the

structural forms that are going to be undertaken, there is still going to be regional disparities when it comes to competitiveness. and i think the price of having a single currency, you make good those differences. you ameliorate those differences by transfer of funds, whether it's from new york city to alabama or from the city of london to the north of england. those transfers to take place and that is what -- how you can make a single currency work. it's one of the reasons why britain didn't want to join the euro. but the euro having been created, i think it's going to be a permanent feature of a euro that works. >> a picture that we don't have, representative germany on this panel because i have a pretty

good idea of what the response would be to this suggestion. and the outside perspective is really very interesting. >> when i look at it as market point of view, when people talk about the size and strength and who is contributing material for building firewalls. in fact, no matter how hard, no strong how hard a firewall is, the market will look at the nature of the economies, which is firewalls that it is protecting. it protects an economy suffering from short-term liquidity problem. if the firewall is protect being what we consider to be insole vant economy. no matter how strong the firewall is, it won't survive. the question s. how are we able to do this? pop look at how does the economy survive longer term. for that reason you have to find ways in which to energize the

public sectors from a market point of view to make sure in a medium or longer term that these are solvent economies. in that case, the question of firewalls are less significant, in my view. >> one of the really big questions is, of course, making presicily that distinction in the case of states. it can be quite difficult to define the borderline between liquidity and insolvency and there has been enormous debate, obviously, in europe about this. but obviously it's linked to what sort of growth they get, interest rates they get, policies they pursue. there are plenty of countries that can argue that they are liquid but not insolvent at the moment. the point is actually fundamental and it clearly arises in the case of greece that we are now dealing with.

>> i just want to mention about speaking about the imf, i think that the most important thing that europe asserts effort. otherwise, the action of europe, i don't think countries like china or other countries are not so willing to pay more money for the imf even if the imf is secure in the return because under the condition that the europe makes most of the effort and they make a firm action. and then imf can support the european countries and in that condition i think we --

including our japan and i think that other countries, other communities, we are waiting to support the euro zone through the imf. >> well, the whole financial system is based on a shortened fundamental concept. and that is the trust to the state. so the value of the sovereign signature and debt at the core of the financial system and also the corporate functions on top of that. now, when greece started to have problems, a country which is only 2% of the gdp, by the way. it is very important that the default of greece should have been prevented. even psi, private sector

involvement, we think it is wrong. because when you let a country in the european zone has raised the risk. every single country has already started to pay for it. and now that once the door is opened for defaults, then it is possible and likely that other countries could also go through that door. and once that, again, coming back to the concept of confidence, once that is hurt, that is going to take years if not decades to heal this. so i think it's now time to show serious demonstration of solidarity and within the euro zone, if possible. if not possible that the only resources of euro zone include other resources, but make sure countries do not default. these are the countries of the modern world and the technicians, the politicians, i

think what is needed to be done in every country is very well known. it's what kind of policy action should be implemented. so when we talk about firewalls and so forth, it has a limit. we can talk about 500, 1 trillion, it's a lichlt. but then you open doors for defaults. then just talking about fixing the amount of numbers is probably not enough to prevent the fires. so before the situation gets really out of hand, it is very important to give the guarantees and assurances about what kind of measures are necessary to make sure that a euro zone country has not defaulted. confidence is taken, maintained, and then built up with fiscal

steps, measures, and so forth. and then steps to be taken. the order i think is very important. >> there are so many questions but let's just focus on one question. it's already come through with really quite clear emphasis. let me get the issue out there. which is the fiscal austerity, who should have t. how much, how you manage it. obviously some people -- and i'm one of them -- are concerned that we are in a situation with a lot of private sectors delivering for reasons we know and massively so. there are a whole range of reasons why they lack confidence. i accept that as an issue. if the whole range of big governments -- and, remember, the governments we're talking

about account for half of the world economy -- all go into austerity together, this is the pair paradox. that's what somebody like sme concerned about. that doesn't give you the exit strategy. you're very clear that you need fiscal control. you are, of course, too. christine la guard has put a different issue on this. how do you see the dangers of the collective rush, particularly in the euro zone now? everybody consolidating at the same time. why do you think this is going to work? >> well, i think the issue is debt. we are recovering from balance sheet recession and and let me speak about the uk. i became the finance minister when the country had an 11% budget deficit. this is the largest deficit that britain had run since the second

world war. i think you've seen over the last 18 months countries that have not been able to put forward convincing markets and have seen their market rates go up, have seen the problem -- again, it's getting worse on them and they are having to do more austerity than what they would have done at the beginning. and i think what we've done in britain has achieved two things. one, it has kept those market rates low but it's also prevented a spillover into our financial system. britain is the home of one of the largest global financial centers. the home of one of the world's largest banks. if there had been a spill over into our financial system, it wouldn't have just been britain that would have suffered. the whole world would have suffered. so i don't think -- i think it is necessary but i don't think

it's sufficient. i don't think i've ever argued that the only thing you should try to do is reduce your deficit. >> the fact that britain was consuming 50% of its national income in terms of expenditure. i've always believed that you have to take structural reform, make the business and tax system competitive like reforms to education and the like. i never thought it was sufficient. it is necessary. as a result, i think we have had frankly a rather painful experiment with some of my neighbors of what happens if you are not confident in your ability to pay your debts. >> christine lagarde, you've spoke about countries that do and countries that don't have room for maneuver. how do you define maneuver in that con netext in. >> first of all, in terms of

general principle, when -- >> your predecessor did on this panel for the first time. >> absolutely. and there was a plan for 2% of gdp for the then unfolding of the financial crisis arising out of the united states. and that was a shift at the time. my sense is that we need to be careful with those sort of broadcasted general, one size fits all. the ramt will vary from one country to another and it has to be tailored and made specific to the situation of the country. so first principle. no one size fits all and has to be fit to the specifications of

the country. the first category is that of countries that are in such bad shape or have so much room to tighten that they just have to go for fiscal consolidation. go fast, go deep, get it done. the old system, if you will. front loaded programs and bounce back from a hard prescription. second category is those countries that should let automatic stabilizers play out. that's the case for the uk, for instance. the fiscal revenues go down because the state collects less tax. it spent a bit more because social safety nets have to play out and that is fine and that's, you know, a perfect trap to be on. and then you have some countries, not many at the moment but i'm not going to go through the list of them. but around the world i would say there is handful of them have that the fiscal space to

actually slow down the fiscal consolidation path without violating the domestic rules because some of those have those in-house domestic rules that have to do with fiscal consolidation and balanced budget and the rest of it. so that's what i would define as those three categories, customized treatment that is needed. >> two very quick points, if i may. one of the things that has to be done is to reinforce an enabling environment for business investment. i'll use the uk with focus on infrastructure, the corporate tax rate. these are the type of things that also can help unlock that. that is incredibly important.

but let me just draw attention -- we don't have a representative of the u.s. on this pabl. we have 2.5 percentage points built into the united states in 2013. i think there's some illusion, perhaps -- i don't want to put words in your mouth christine, but i just did -- in an environment where you have a central bank that is clearly down for a long period of time, the purchases assets that you are the reserve currency, one has to understand the wisdom of fully of having that level to starting january 1, 2013, 2.5 percentage points down on gdp because of the fiscal multipliers. >> i'm going to turn it to the floor. we could go on for many hours. but i want to give the opportunity for people to ask questions. very difficult to see people. the person in the third row, i

think, if you would stand up, say who you are, and it's a very, very brief question. >> larry elliott of "the gua guardian." there are 75 million people without work today. how serious is it and what should be done about it? >> the thought is that it's more than 75 million but we won't quibble over it. the person in the front row, are you good enough to stand up and -- >> i just want to -- maybe a question for mrs. lagarde. i want to put together the comment by governor carney and yourself. governor carney spoke correctly and you spoke about competitiveness and i think if one puts two things together, this means that it's a europe crisis. one is to face it. in europe t. stands from different competitiveness.

this is why we need to restructure reforms. this means that quite likely when the structure reforms can make this area a currency within a sufficient short period of time. as governor carney said correctly, i think this firewall without that it doesn't matter very much. thank you very much. >> i'll take one more question. somewhere in the back. i can't see very clearly. yes. somebody over there. it's incredibly bright. >> thank you. thank you. i would like to hear chief executive carney's view on whether the ecb should wait or not on the greek haircut. >> oh, the greek haircut. who other did you want besides

governor karn sn governor carney? >> i think i'll ask bob first. 75 million young people unemployed. actually, it must be far more. it's a problem not just within the developing world. we see it as a central issue in what has happened in north africa and the middle east. it's a central concern for you. from your perspective, both in the world bank and more widely, how important is this issue and what, if any anything, should be done about it? >> well, it's important across a range of things. number one, what we've seen is that if people don't get a good start in terms of employment and skills, it can can affect them their whole lives. number two, this is a testimonily then underused resource. three, there's a specific issue

that we're dealing with and others are about the school, the work transition, and some of the skills development that is part of this. so all of this is part of the bigger issue that i think some of us have been trying to draw out, which is, it's not enough to wid dell through. and frankly it's not enough to do the fiscal fix. there's a little bit of tone, particularly from the emerge, markets and a little bit from mark and george about the restructure reforms, about the base of competitiveness going forward. the reality is, if you're going to do fiscal restriction, it's helpful to have that occur. frankly, there's other aspects related to open markets and trade and removing some of the impediments that we see in the private sector where there are resources that need deployed.

>> a very big point here presumably is that policy needs to be much more in the round. they are focused on fiscal and financial problems that we're missing that. >> one little point on that. because i think i almost said it on the other part. europe is so focused on the euro zone. as you've seen in the past couple of days, we've tried to organize support for the southeast asia. we got information yesterday that verified what i've been worried about, which is you're going to see a credit retraction as the banks pull back. the events in the euro zone and union are going to have an ability to overcome the economic issues related to the political problems. we're seeing it in trade finance. again, i think there's a little bit of my open pea yeah and some of this goes back to how you implement the banking regulations. the european standards did not

take account for these risks. i think it's now adjusting. they have ripple effects of this. they affect young people and old people in situations that we should be concerned about. >> mark carney, one of the issues was raised here, if central bankers take losses when an actor loses in a full hearty manner. and secondly, is the regulatory system what you're actually providing completely confused message closing doors and making the banks incredibly resilient, exactly the point when you want

regulatory forebearance. >> part of what i believe is get it right. do it quickly and get it right. what comes out of the current discussions is that it's credible. so the size of the haircut, the aggregate haircut to greece has to lead to full stop. it can't just be beating a number because the number was there before. and if that requires fuller participation from the private sector and potentially the public sector, so be it. then the question would be, how should it be done? it's not going to surprise you that fiscal responsibilities are the responsibilities of governments, central bampbls ultimately backed by governments. it's better to sort these things in realtime. there is a back stop in europe. it should be used.

three level of clarities we need to provide. the capital rules are out there. the definitions are there. banks know what they are. those countries have done so. anybody should speak now or forever hold back. the second clarity, which we should establish this year s. clarity on resolution. anything too big to fail. we should get as far as we can and make it clear what is left to be done. but in the final clarity, we really need to get back to is to be absolutely clear that actually there's a tremendous value to open markets, cross border markets. not just within europe. the global cross border markets. there's a lot of worthy but important plumbing that we're doing in other markets and other things. with you we need to think about

the shade doe banking, the net impact on cross border flows of capital, which is going to be important to get the global economy from a 3% per annum to 5%. bob's points are fully appropriate. >> final question. are we trying to turn the euro zone into an area that is exposed in a year or two and, if so, is there in any way a viable project? i think that was the question. may i ask christine lagarde about what her view is on that? perhaps there's a wrinkle. the way i mention it, you mentioned competitiveness. it's a relative, not absolute concept. are other people prepared to accept to become less

competitive that? that's essentially the same question. >> >> everybody has to be more competitive. i know it's a relevant issue and you measure against somebody else. >> everyone can become more efficient but everybody can't become more competitive. >> everybody has to compete to be more efficient. can we settle on that? >> yes, we can. >> okay. that is what is needed and it's not something that the imf can actually control or monitor in way of our programs. because our programs are short term generally and deal with balance of payment issues. so i can see your point about our current programs, particularly in that part of the world, with a bit of ambiguity that the countries have. given the length of time it is going to take some of them consistently repeat for more efficiency, given where they start from. it's perfectly legitimate that

the imf continues to be involved as a gesture, as a statement from the actual international community and with the tools that it has to be on the ground to make sure that there's delivery and the conditional teas embedded in our program. >> presumably you would agree, we all accept that it's essential but the underlying efficiency problems that have emerged, they are not going to be fixed in a few months. we're talking about a multi-year problem. this is true for all countries. isn't that the case? >> the structural reforms will take many, many years. but i don't think they are ever going to be sufficient. i think you are going to make