Nadia Calviño, EIB President: Can Europe compete?

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1:04Peter Macjob:No matter your goals, investing style, life stage or experience, Schwab has everything you need, all in one place, so you can invest your way. Visit schwab.com to learn more. Hello, I'm Peter McJob, BBC presenter, and this is the interview from the BBC World Service. the best conversations coming out of the BBC. People shaping our world from all over the world.

1:33Nadia Calviño:If you're not a little bit afraid, then you're not paying attention.

1:38Peter Macjob:We have never seen a people so united. Do not make that boat crossing. Do not make that journey. Being born in America, feeling American, having people treat me like I'm not. We're more popular than populism. For this interview, I met Nadia Carvino, the president of the European Investment Bank in Luxembourg. A former Spanish finance minister who now oversees the EU's huge lending arm, mobilizing billions of euros to finance infrastructure, technology and energy projects across Europe and the developing world. You're going to hear about how Europe needs to find its place in a shifting global order and why Nadia Calvino believes the continent is an economic superpower and needs to act like one.

2:25Peter Macjob:But with wars, energy concerns and tariffs rocking the global economy, Europe's priorities are shifting with an increasing urgency around defence and security.

2:37Nadia Calviño:We're the European Investment Bank, so we put the money where Europe's priorities are. Right now, this means climate, technology, security and defense and social infrastructures and the rest. So I think that all of it is very much underpinning competitiveness and security. Many people may think, oh, well, defense is about tanks. No, defense is also about energy security, isn't it? It is about resilience to health, as we learned very, very clearly with the COVID pandemic. It is about social cohesion and territorial cohesion. It is about social infrastructures. That's the European brand. That's the European way of life.

3:20Nadia Calviño:So we need to act in all these areas in order to ensure peace, security, stability on our continent, but also in our neighborhood. And that's what the European Investment Bank has in its DNA. And that's where we're good at.

3:39Peter Macjob:Welcome to the interview from the BBC World Service with Nadia Calvino. How important is the strong Europe when you look at the current geopolitical landscape?

3:49Nadia Calviño:Well, we see that the geopolitical context, the global order is reshaping. Some say it is actually crumbling down. I think there is a new global order that will emerge, but we are in the midst of this transformation And we're entering a new phase, as we see. And in this context, it's more important than ever that Europe acts as a beacon of democracy, of human rights, respect, win-win partnerships where everybody wins. In order for you to have a success, you don't need others to lose, which seems to be the approach of some others in these troubling times. An approach that fosters peace and mutual respect.

4:31Nadia Calviño:I think that this is really important and Europe has learned lessons throughout our history. Unfortunately, that can be very valuable for the world as we are building this new world order.

4:44Peter Macjob:You identified four key urgent action plans. That includes having a deeper European integration, large-scale investment, especially in critical infrastructure, simplification of the EU, making it more nimble, more agile, and of course more partnerships and global alliances. Can you break that down a little bit?

5:06Nadia Calviño:Well, it is clear that sometimes we focus very much on what is happening on the other side of the Atlantic, whether there is a tariff that has been imposed or that there are new technologies and supply chains around the world are changing. But actually Europe is a superpower. The European Union represents 450 million persons. Of course, much more when we talk about the UK, Switzerland, Norway. And if we think about those sectors that are key for the future, Europe is a superpower, a technology superpower, whether it's quantum technologies, aerospace, health tech. Many people may think, oh, this is very far from me, but more and more I think that we're all aware that these technologies are going to be key in our daily lives.

5:54Nadia Calviño:So if we build on our strengths and we have a larger, real integrated one market in Europe, then that is going to create the right scale for companies to be able to thrive and scale up. And likewise, when it comes to simplification, reducing bottlenecks, reducing friction and fragmentation and large scale investments. And that's where the European Investment Bank comes in. Of course, it's a great success story of the European Union. with capital injection by the member states, now 27, originally 28, have been able to mobilize trillions of investment that finance the super infrastructures that we have, from highways to airports, also research centers, universities, and hospitals, and frameworks that can build networks and partnerships around the world.

6:45Peter Macjob:What are your key priority areas for investment right now? I mean, there's a lot that the AIB is doing across the region, but also in places like Africa and Latin America. But in terms of your priority, what would you say is the niggling one right now? I mean, there's a lot that the AIB is doing across the region, but also in places like Africa and Latin America. But in terms of your priority, what would you say is the niggling one right now?

7:10Nadia Calviño:Well, 90 % of our finances, you rightly say, finances projects inside the EU, 10 % around the world. But our priorities are similar in all areas. And our shareholders have unanimously supported them last in 2024. So we're keeping the course in being the climate bank, making the green transition, the clean transition a European success that leads to lower energy prices, cleaner, more sustainable energy. And as we're seeing these days in the Middle East with the escalation of the conflict, we need to accelerate our energy autonomy in Europe. That's very clear. Second priority, technological leadership, supporting high-risk, innovative technologies, whether it is in clintech or space, as I mentioned, that ensure that Europe continues to be a technology powerhouse.

8:00Nadia Calviño:And third priority, security and defense, because it is very clear we need to step up our support and our strength in the area of security and defense. We're also very active in agriculture and bioeconomy. Of course, we support territorial cohesion, but probably these three areas are our top priorities right now.

8:18Peter Macjob:I noticed that with your funding for defence, it's quadrupled in the last year, and you've broken it down into five key areas, investing in infrastructure, homegrown capacity, i.e. drones, etc., research, SMEs within the supply chain, and of course, new venture capital within the EU focused on security and defence. Could you elaborate on the decisions behind quadrupling the budget, but also how you intend to go down the ecosystem?

8:47Nadia Calviño:Yes, when I took the helm of the European Investment Bank in January 2024, the war in Ukraine had been going on for almost two years, and it was clear to me that we needed to step up our support in this area, which was virtually non-existent at that time. And it is impressive how in a matter of a couple of years, we've been able to build a very robust pipeline. We've been able to finance last year around 4 billion euros, reaching 5 % of our finance inside the EU. And these five areas are determined by the pipeline of projects we have. And those areas where the European Investment Bank is uniquely placed, there is no other institution in Europe, public or private, that operates in all the 27 member states, in all the regions, and can provide really large-scale long-term finance, loans that may run up to 30 years in good financial conditions so as to finance military mobility infrastructures, military campuses, but also high-risk research programs, scale-up, also venture capital investments, acting as an anchor investor that brings in private capital to support the ecosystem of startups and scale-ups in Europe.

10:03Nadia Calviño:And what I see is great potential. I have myself visited a number of companies that show that this technological leadership is there. And what we need is to reach scale and speed.

10:14Peter Macjob:Are you or is the AI beyond us some pressure to be the financier of defence within Europe?

10:22Nadia Calviño:We're the European Investment Bank, so we put the money where Europe's priorities are. Right now, this means climate, technology, security and defense and social infrastructures and the rest. So I think that all of it is very much underpinning competitiveness and security. Many people may think, oh, well, defense is about tanks. No, defense is also about energy security, isn't it? Absolutely. It is about resilience to health, as we learned very, very clearly with the COVID pandemic. It is about social cohesion and territorial cohesion. It is about social infrastructures. That's the European brand.

11:03Nadia Calviño:That's the European way of life. So we need to act in all these areas in order to ensure peace, security, stability on our continent, but also in our neighborhood. And that's what the European Investment Bank has in its DNA. And that's where we're good at.

11:20Peter Macjob:Some reports have shown that over 60 % of EU companies complain about a fragmentation within the market when it comes to exporting.

11:29Nadia Calviño:You know, some estimates from the International Monetary Fund consider that the fragmentation existing in our internal market is actually comparable to a 45 % tariff when it comes to goods and even 110 % tariff when it comes to services. You know, I see this as a huge opportunity.

11:49Peter Macjob:I'm wondering this strength that Europe has is almost like a reminder to the rest of the world to say Europe has always been a superpower. But with what's happening now in the geopolitical system, it was an opportunity for Europe to remind the world that we are here and we are the stable partner that you can rely on regardless of what's happening around the world.

12:11Nadia Calviño:Yeah, absolutely. You nailed it. Because many times with this doom and gloom around us, and as we see war and death and blood around us and conflicts, it is sometimes overwhelming. And citizens feel insecure and they wonder, you know. And obviously the European Union is a project of peace. So we cannot be a defense and a military superpower when we have been building a project of peace on the ashes of the wars that have permeated the European history. So sometimes we need to remind ourselves. And I think the investment report, although it may be very far away, is a very good illustration because we built this report on the basis of the analysis of 13 ,000 companies in the EU and in the US.

13:01Nadia Calviño:And this year's report confirms what we already saw last year, which is that European companies are weathering the storm quite well. European companies are showing remarkable resilience. They have been withholding the tariff shock better than U.S. companies because they have redirected the trade. They have benefited from the 76 investment and trade agreements that the EU has signed around the world. They have built new partnerships and new supply chains. and so that has allowed them to be quite resilient to the tariff shock, likewise to the energy shock. What we see that European companies have continued to grow, to invest, to trade and they are committed to the green transition and the integration of new technologies in their productive systems.

13:50Nadia Calviño:And when it comes to advanced manufacturing, industrial robotics, aerospace, quantum, health tech, These are areas where European companies are second to none. So we have to also have a bit more of self-esteem and believe more in ourselves because when we act, and that has been proven time and again, we can be having a very strong influence in the rest of the world, a force for good in these troubling times.

14:21Peter Macjob:You are listening to the interview from the BBC World Service.

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16:13Peter Macjob:My conversation with Nadia Carvino was not confirmed until the last minute, following weeks of negotiation with her press team. In fact, it wasn't until her videographer appeared to film her arrival that I knew the interview was on. In person, she had undeniable presence, flanked by media staff and a stern-looking minder. As we spoke, I was struck by her enthusiasm and a close grasp on the detail of the work she's leading for the EIB. Okay, let's return to my conversation with Nadia Carvino. Let's talk about the EU single market. This is a 19 trillion economy, the European Union. Is the market underutilized?

16:58Peter Macjob:Are there enough commercial activities to attract the kind of investment that you're clamoring for?

17:04Nadia Calviño:You're absolutely right that when it comes to the size of our market, it is comparable to the US in comparable terms when we take into account the currencies and the prices. and it is in nominal terms also comparable to China. So Europe is a superpower and it is perceived to be a superpower by the rest of the world. Sometimes others see what we can't. So what we need is to build on this single market, on this one market, remove the inefficiencies, simplify processes and allow companies to scale up. That is probably the one area where we do have a serious gap because we have a vibrant ecosystem of startups which is comparable to the American one.

17:47Nadia Calviño:But we are, in a way, the incubator of the world. They grow, they start to grow, and we support them, and they're doing great. But when they need to really become adults, when they need to have 500 million euros or even more in their capital, then they have to go to the other side of the Atlantic. Because even though Europe has large savings, there are no suitable investors, venture investors, that are ready to take the risk and put up a large amount, a large ticket. And that is the gap that we need to fill. When we do that, then European companies will be able to grow and thrive here in Europe.

18:26Peter Macjob:How do you think we can find these investors, these risk-tolerant investors, the ones possibly willing to take losses but committed to the long term? What steps do you think needs to be taken to be able to find these investors?

18:41Nadia Calviño:There is no magic wand to mobilize these investors. Only this morning I had a meeting with some of the largest European foundations, non-profit institutions. They are extremely interested to support us. But they are also subject to regulations, to rules, to restrictions as to how much venture capital they can have in their portfolio. For example, there are tax divergences between the different countries. There are different rules and regulations. there are hindrances and disincentives for these institutions to take risk. And here's where the European Investment Bank Group can help, because our institution is a catalyzer of private investment.