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- [00:00]
A
You're listening to the Monocle Daily, first broadcast on 29 June 2026 on Monocle Radio. The United Kingdom's presumptive next prime minister makes his pitch. Pakistan and Afghanistan trade blows, recriminations and cruises for people who'd rather not deal with other passengers. I'm Andrew Muller. The Monocle Daily starts. Hello, and welcome to the Monocle Daily, coming to you from our studios here at Midori House in London. I'm Andrew Muller. My guest Isabel Hilton and Vincent McAvany will discuss the day's big stories. And we'll also hear from the governor of Sweden's Central bank, recorded during Monocle Radio's recent foray to Gotland. Stay tuned. All that and more coming up right here on the Monocle Daily. This is the Monocle Daily. I'm Andrew Muller and I am joined today by Isabel Hilton, founder of China Dialogue and visiting professor at King's College London, and by Vincent McEvany, political commentator and Monocle Radio regular. Hello to you both. Hello, I'm back. Although to listeners, Isabelle, it may not seem like I've really went away because we did two shows or at least two episodes of the Daily from Al Madalen week on Gotland last week. And I bring this up because it transpires that you went there at least once as well.
- [01:31]
B
I did. I went there twice and I absolutely loved it. It's such a beautiful place. And it is this extraordinary thing that Sweden does is it has all the party conferences in one week in the same place. And so it's just you can, if you want to meet anyone in Swedish politics, there's only one place to be.
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A
Well, and as far as I could tell, they come to blows relatively rarely. They have this little crescent where all the parties have a tent next to each other.
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B
That's extraordinary. Although I gather, I mean, I'd love to know more about this year because I gather it essentially a pre run of the coming election and it must have seemed a bit like a busman's holiday because all the talk was about getting rid of the actual party leader before the election and strange new coalitions beginning to form. Sound familiar?
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A
Indeed so. But yes, if listeners do wish to hear more about that, I do commend them to the current episode of the Foreign Desk, which is on our website. Vincent, you have not been to Gotland yet.
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C
No, but this sounds so much better than the months I've given of my life to traveling around party conferences in the uk, where you schlep from city to city over Four weeks.
- [02:36]
A
No, I think it's a vast improvement on that. They knocked the whole thing over in a week and a week. And I assure you, I assure listeners, I was not got at by the Gotland tourist authorities while I was there in the most delightful surrounds you could possibly imagine. Visby, the biggest town on the island of Scotland. Absolutely gorgeous. You have, however, Vincent, been to a different European island?
- [02:57]
C
I have one much further south and normally much hotter than everywhere else. Although last week it turned out I had a cooler break. I was in Sicily. Sicily, where it was only, and I say only 28, 29 degrees. So it was very nice to escape what you all had here in London during that. And yeah, just a sort of really beautiful time. I think the second year in a row I've really noticed and I think the part of its strength of the US economy, just even more Americans than ever really sort of exploring the Mediterranean at the moment. I know it's a story we're going to come on to. A lot of big yachts in the harbors as well.
- [03:32]
A
Well, yes, we will be returning to that subject later, but we will start here in the UK and the imminent taking of another step towards 10 Downing street by everyone in this studio as the United Kingdom prepares to welcome its seventh Prime Minister in the last decade and a bit. Our numbers have to come up eventually. Andy Burnham, for it is he will likely become prime minister on July 20. Absent any other hats being tossed into the ring. He has today given a speech outlining his vision. A substantial part of this is a devolution of power away from London, including an outpost of number 10 to be known as number 10 north and established in his present mayoral bailiwick of Manchester. A reminder for international listeners that Burnham's creed of intertwined social and economic progress has already become known as Manchester Ism. Vincent, first of all, number 10 north does rather have the whiff of sort of 1990s sitcom about it. Are we excited for this concept?
- [04:33]
C
I have worked in two organisations that have attempted to do this. One is the BBC and one is Channel 4 where they have sort of moved sections of the headquarters out of London and moved it to one to Manchester and one to Leeds. In fact, I don't think this works and I don't think it will work. And I think it is going to be costly. And the problem is, and I think that there is recognition across politics actually that possibly the physical infrastructure of where our prime minister sits, number 10 Downing street is not an effective place to work anymore. It is a series of Conjoined terrace houses, essentially, it is quite small, quite cramped. The problem with it is in 1997, 1998, Tony Blair wanted to purchase another building, the Queen Elizabeth Centre in Westminster, and move the Office of Prime Minister to there. But it was the Foreign Office that said no. Foreign leaders love coming and being at the big black door. And I have seen many of them love getting their photos taken there with a little smile as they walk up for the historical connotations. But I still think that the error is that that should be a residence and sort of entertaining space and we do need somewhere else for the Prime Minister to sit. But I think separating it out and part of the reason that people, even though there is room in the Cabinet Office actually for spillover of Downing street staff, they all want to be as close to the Prime Minister as possible. You do not want to be on the end of a zoom to Andy Burnham. You want to be two rooms away so you can talk to him, grab him, look. So he's someone that look at every day. And I just think we're going to run into problems with having a satellite office in Manchester. And I think he actually, and I listen to the whole speech today, I think he is making an error by tying himself too much to one city, and particularly one region. The Northwest, outside of the Southeast, is the most prosperous part of this country. It has two serious cities in Liverpool and Manchester. And actually it has a lot of economic weight already at it. It has a slight, I would say, sort of chip on its shoulder for wanting to speak for the rest of the country. But I go to places like the Southwest, the Northeast, rural parts of Scotland, Northern Ireland. You know, there are places that get far less attention, far less money spent on them. And I think those more than the Northwest are places that are actually left behind in this country. So he's in danger with this of being too tied to Manchester.
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A
Isabelle, this is not the first Labour Prime Minister or Labour Prime Minister in waiting to have talked big and indeed done big things on devolution, the most dramatic step obviously taken under Tony Blair Absolutely 20 or 30 odd years ago. Now, this is what gave us the Scottish and Welsh Parliaments, which he later said were among the biggest mistakes he made. Is there an argument that they do just not only introduce another layer of bureaucracy, but actually further the divisions that already exist?
- [07:23]
B
Well, I think that, you know, I'm not sure that there is a Manchester independent movement, but in. Oh, give him time, give him time. But yes, when Burnham claimed this was going to be the biggest rebalancing of power our country has ever seen. I did wonder where he was in the Blair years because that was undoubtedly bigger. And although this is significant and I'm not unsympathetic, it's all about England.
- [07:49]
A
Well, as has already been pointed out by the new leadership in Wales.
- [07:53]
C
Quite.
- [07:54]
B
So, you know, it's a bit. And when he, you know, sort of started on this journey to Downing street talking about Manchester, I thought he was going to present it as a massive success story, but actually he's presenting it as a place that seems politically neglected and needs more attention, which is confusing. Devolution, you know, I'm fine with devolution, but devolution needs to come with the ability to raise money and spend it and that's where it tends to get stuck. So that is the danger that you refer to of creating another layer of bureaucracy which does mean much because it doesn't actually have power. So that's going to be a bit of a problem. I'm not sure, you know, that number 10 north is quite the approach I'd take.
- [08:42]
A
Vincent, some big talk here as well about housing. He's promising the biggest council house building program since the immediate post war era when obviously a lot of things had to be built very quickly because a lot of stuff had just been knocked down. Given the UK's recent record at attempting large scale infrastructure projects, however, how confident should anybody be about any of this happening?
- [09:05]
C
Well, important lesson on that. HS2, which I think you're referring to there, which has swelled over budget by tens of billions, but also shrank from a train that was going to run all the way to Scotland, is now just a sort of commuter train to Birmingham.
- [09:20]
B
It doesn't even come into London.
- [09:22]
C
Yeah, it doesn't come into where it's meant to and is still about a decade away. So we've had a disastrous experience. Some of that has been from NIMBYism and sort of the famous bat tunnel, sort of over sort of zealous green protections as well that have cost hundreds of millions. And I do think that's an important point because Labour only got back into power because they managed to reclaim a lot of Scottish seats at the last general election. And I do think that's a really valid point that Isabel just raised about. Actually you should have put this north in somewhere like Edinburgh or somewhere like that to sort of try and tie the kingdom maybe a bit together better. But on the housing front is anyone have had work done on our house in the past year? There is a shortage of workers. So there are huge delays and part of that is Brexit. Now, we've had a lack of training schemes for British people, hence the number of NEETs in this country. And Andy Burnham was talking a lot about vocational education and getting those schemes off the ground. But that will take time to train those people up. The cost of raw materials at the moment is still huge. That was effects of the Ukraine war, that was effects of Strait of Hormuz, which again over the weekend seems to be blowing itself apart. This memorandum, not a peace deal that Trump got. And so building on that scale, and we've seen it with mayors, Andy Burnham himself has not managed to build on a huge scale in Manchester that he had promised. Sadiq Khan here in London also promised huge scale over a decade ago. That has been incredibly difficult. And in part, as someone who owns a property that's affected by this, that is because a lot of UK builders are collapsing because of the burden of replacing cladding. There has been a number of court cases where those builders have become liable for decades more of botched buildings. And you're really seeing a problem on that as well.
- [11:05]
A
Just finally on this one, Isabel, he did talk about what he just referred to as sovereign manufacturing. This idea that the United Kingdom should build more of its own stuff with at least half an eye there on national security. Is that an idea whose time may have come?
- [11:23]
B
It's certainly not only the UK talking about such things, but almost every European country. And as you say, it does relate to security. And this is partly the supply chain shock of the pandemic, but it's also the very radically realigned geostrategic picture and the behavior of the United States and indeed Hormuz and China. Now, all of these are factors that make that comfortable assumption under globalization that we had an open trading system and we could do just in time, manufacturing and so on. All of that is gone. So everyone is reassessing, looking at the need to spend more on defence and security, looking at how that would relate to creating new industries or fostering ones we already have, particularly in the SME sector, and therefore, you know, contributing to prosperity rather than being seen just as a burden. So it's very much. It's a very topical issue right now.
- [12:27]
A
Well, to Pakistan, which, in between attempting to negotiate a peace between the United States and Iran, is continuing to wage war against Afghanistan. This has been rumbling on since circa February, when Pakistan hit camps in Afghanistan utilized by by Islamist militia groups, notably the Pakistani franchise of the Taliban and the Afghan outlet of Islamic State. In recent strikes along the border, Pakistani authorities are claiming to have killed 29 fighters, while their Afghan antagonists estimate a rather higher tally of civilian casualties. Each side has also summoned the other's diplomatic representatives for further mutual recitation of grievances. Isabelle, before we get into whether or not any of this is actually going to do any good, is it fair to say that Pakistan does have a case here, which is to say that they have been plagued for years and years and years by Islamist groups operating with the, let's say, at the very least, the indulgence of the Taliban?
- [13:27]
B
Absolutely. And it is. It's a complicated relationship historically, because if, if you remember, the Taliban themselves grew up in Pakistan. They were the product not. Not of, you know, village culture, though it. From their religious policy, but they were. They were displaced. They were refugees from the war, fostered by the Pakistani Security Service, the isi, and, you know, promoted because Pakistan has a particular relationship with Afghanistan, which is that the, you know, doctrine in the military and in the intelligence services demands a certain amount of control over Afghanistan for strategic depth in the event of invasion from India. That's what it's about in kind of longer term military thinking. But it's always been problematic because Afghanistan is an unruly place because Islamist groups, you know, blossom everywhere, including in Pakistan. And yes, they have a case. They have been. They have been under attack and actually very recently by groups which operate across the border. So, you know, certain amount of sympathy here for that case.
- [14:40]
A
Vincent, as Isabel hints, there is something of a history of people attempting to subdue Afghanistan or people operating out of it by the application of military force. Little of it has, in fact, ever worked. Afghanistan remains Afghanistan, and surely nobody knows that better than Pakistan. Does this therefore strike you as one of those things a country does when it knows nothing's really going to work, but it feels like it has to do something. This is. It's sometimes rendered as the politician's fallacy. Something must be done. This is something, therefore we must do it.
- [15:13]
C
Yeah, the USSR at its, you know, height, and NATO couldn't really kind of control the country led by the US I don't think Pakistan will be able to, but it does seem, and I think I remember covering the initial outbreak of this latest round of skirmishes was just a few days before the Iran war kicked off. And I remember seeing and reading interviews with people because there were protests in Pakistan from just ordinary people who had been fed up of these sort of skirmishes that were happening at the border, and they had demanded action and Hence, I think part of it was a slightly performative by Pakistan of doing, doing airstrikes, even on Kabul and other places, just to sort of show its own population essentially that it was taking this seriously. But I think they know that particularly that sort of mountainous border is so hard to control, and it's so easy to hide there, as we well know, from Al Qaeda, that trying to stop this once and for all is pretty much impossible.
- [16:11]
A
Isabelle, China obviously has an interest here and has been sort of trying to mediate a bit. I mean, I think it's fair to say that China would vastly prefer that none of this was happening. But how invested in this does China really want to get?
- [16:26]
B
Well, China tends to be reluctant, actually to get its hands dirty, but it is a very, very close relationship, as you know, with Pakistan. And Pakistan has protected China for many years from what you might expect to be the blowback from its policies in Xinjiang and its repression of the Muslim population of Xinjiang. And it's quite strik how little China has suffered terrorism, you know, in response to that terrorist attacks, a certain amount in on the Belt and Road Project, there were attacks on Chinese workers. So, yes, China definitely has an interest. It has a lot of people in Pakistan and they are vulnerable. So it doesn't want this to get out of hand. But, you know, China's quite reluctant to sort of, as I say, get in the room, roll up its sleeves and actually negotiate it. It's more inclined to put pressure on, on both sides. It has a good relationship with the
- [17:25]
A
Taliban also, that being the case. And this, I guess, may be where the danger lies here, Vincent, that given the fairly recent experience of the the Western world in trying to bring Afghanistan to heel, nobody else is going to want to get involved in this, are they?
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B
No.
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C
And I think everyone's attention is too split at the moment between every other.
- [17:46]
D
Sorry.
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B
Busy elsewhere. Exactly.
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C
Yeah.
- [17:49]
A
Yeah. So I think Pakistan and Afghanistan may be taking a number, but to South Korea now, which appears reasonably confident that AI is not. This year's NFT President Lee Jae Myung has outlined an investment plan worth somewhere in the vicinity of US$900 billion, pushing South Korea's chips all in on AI semiconductors and data centers. President Lee appeared to frame this colossal plunge as a national security imperative, arguing that South Korea had to do this, quote, faster than any other country, a line which will have pricked ears in Beijing, Tokyo and Pyongyang. Lee also suggested the investment will revitalize hitherto somewhat neglected regional centers, though some churlish critics have Noted that at least a few of these tend to vote enthusiastically for Lee's Democratic Party. Isabelle, first of all, would you be happy for your national leader to bet the entire economy on AI in this fashion?
- [18:46]
B
Probably not the entire economy, though I do sympathize with the feeling that we have to keep up here because, you know, a lot of of South Korea's prosperity has been built on technology. Samsung's a massive force and they've always had an industrial strategy and a tech based industrial strategy. So it would be surprising if they didn't respond to current trends. This is a very big bet. On the other hand, these things are expensive.
- [19:12]
A
I mean, there is a sense that he's trying to communicate, I think here, Vincent, that the race is on. I mean, that line about faster than any other country. I suspect those were words he chose carefully.
- [19:25]
C
Yeah, very carefully. I think as well, it's trying to, apart from the potential economic benefit if the bet pulls up. And you know, these semiconductors and AI, it's not just for computers, but they have a huge automobile manufacturing industry as well. But part of it, I think is because, you know, we have seen a sort of, you know, over the Trump years and yes, we might be in the close of those. We have seen, you know, the sort of, of attention America has paid to South Korea has sort of waxed and waned. They obviously rely on the security support from the US and they probably think, you know, if we can show that we are a great source of chips and AI infrastructure for the US that protection will stay in place. Because the fate of Taiwan obviously is unclear and the US is trying to reshore, sort of. They've done, I think, tcms, the huge chip processor out of Taiwan, has built clone factories essentially in Arizona that Trump, that Biden put in under the Chips Act. And whilst they have mimics the infrastructure and these are incredibly complex factors because they have to have these sort of seals to stop any kind of dust getting into these highly technical chips. What they're struggling to find actually is the workers in the sort of natural population, the us, this sort of highly technical skill, they have really struggled to find them. So they're having to move people out of Taiwan to do this. And I think this is a play by Korea to sort of see that, that even if the US manages to reshore some of this, they are still going to struggle. And if they can build the expertise and the workforce, it'll increase their chances of more business. But also support from the United States
- [21:02]
B
relations, I think, yes, certainly the South Koreans like the Taiwanese thought that they could keep in with the United States by investing and building factories in the us it didn't go terribly well for Hyundai last September when they were raided by ice. Several hundred Korean workers who were part of this project were deported and are pretty fed up about it, practically.
- [21:29]
A
Well, not unreasonably. But that aside, Isabel, does South Korea. I mean, there seems to be an assumption, I'm just wondering if it's a correct one, that they may have a natural advantage here because they do have that fabulous manufacturing sector already. And I think all of us around this table have lived long enough that we can recall Made in Japan and Made in Korea once being punchlines. They are now bywords for reliability, innovation and all the good stuff.
- [21:59]
B
They've been on that journey and we are now at the sort of next leap, and that's what they're keen to. So they do. Yes, they have that experience. They have the companies, they have the engineers. I'm. This. This idea of dispersing it across the country is quite curious because, in fact, these things work better in clusters.
- [22:20]
A
Is.
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B
Is just the fact. I mean, in Taiwan, Andy Burnham's got to them.
- [22:24]
C
He's told them about.
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A
It's Manchesterism.
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B
Oh, right, okay.
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C
Levelling up.
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B
Yeah. It just has a whiff of a man with an election coming up to me, you know, kind of, oh, you neglected parts of the country. Country. You know, vote for me and you will do well.
- [22:42]
A
Well, just finally on this, Vincent. And in further populist gestures by South Korea's president News, are you surprised by how far he has gone in addressing the Republic of Korea's crashing and burning out of the World Cup? I mean, rather than just saying, well, this is all terribly sad, he has said, and I quote, I am not just taken aback by this unexpected outcome. I am utterly baffled. He is demanding an inquiry and has also said, when competence is overlooked in favour of factional loyalty, the disastrous result is entirely predictable. Is he edging arguably beyond his remit here? Somewhat?
- [23:20]
C
Quite possibly. I mean, I think I can. Now that Scotland's out. I am not interested. My interest was not peaked at all. Anyway, I think I will go through this whole thing not watching a single game because I'm just sick of FIFA.
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B
Would you like to turn my back on it?
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A
Would you like an inquiry into Scotland?
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B
I think absolutely. I think someone should be hanged.
- [23:39]
A
Well, who can argue with that? But we will move along to news which may well alter the summer holiday plans of tonight's panelists, Orient Express, operators of the posh Train of that name have branched out into yottery and if Isabelle or Vincent are quick, they can embark upon the Orient Express Corinthian, currently the world's largest sailing ship, for three nights between Corsica and Rome for July 19th for an extremely reasonable €17,700.
- [24:08]
D
Listening.
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C
My email address is elsewhere.
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A
In Ultra Yacht News, French gajillionaire Bernard Arnault, CEO of lvmh, is reported to be overseeing a colossal new boat, having apparently outgrown the mere 101 metres of his present runabout symphony. Vincent, first of all, I don't know what you spent on your recent trip to Sicily. When you look at €17,700, I bet it was barely half that.
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C
Yeah, it was not at that level, but we did go a bit of a road trip around Sicily and a lot of super yachts and I think this is something I sort of noticed as well around Greece and last year when I was there. The yachts are definitely in force and increasingly it is Americans I feel that are coming off them because I think in the last few years they have got so much richer. And I think this is part of what this article is saying is that there's a lot of Americans who've done very well out the stock market in recent years, particularly now with the sort of AI little boom as well, and they are shopping at. And if you don't want to buy one of these things, which can be huge depreciation, very expensive to run, you don't use it for all the year renting or getting on board a luxury yacht like this is a pretty nice option.
- [25:23]
A
Isabelle, what manner of yacht are you usually spending your summers on these days?
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B
Probably actually I did spend several summers on a converted Danish fishing boat which has sails but doesn't really sail. But I think we should take this very seriously. It's trying to address a very profound social problem which is these unfortunate rich people can't spend their money. I know and you know, they need help and I think we should be entirely sympathetic to this. There was some other cruise ship news, however, on the 19th of June when the ovation of the Seas arrived in Seward, Alaska with a 61 foot whale's body on its bow, sadly deceased and sadly pregnant before it was deceased. So I'm afraid cruise ships are a bit of a mixed blessing.
- [26:14]
A
Well, indeed. It struck me though, Vincent. I mean, I did have a bit of a look at the website of the Orient Express Corinthian, undeniably handsome ship again. Email address readily available etc. Not. Not saying I would knock it back, but it did strike me and it is a somewhat melancholy reflection. This is obviously an extreme illustration of it, but every increment we spend on travel, is it not. It's all about getting us further away from other travelers. Like, when you get on an airplane, you. You're not charged a premium to sit bunched up with loads of other people.
- [26:48]
C
Well, you know, hell is other people. And I think, you know, if you're this class of person, you will literally go straight from your private jet to, you know, one of these and you won't have to mix with the rest of. It's a lonely life with the rest of us. A lonely, sad life, isn't it?
- [27:03]
A
Sounds brilliant,
- [27:07]
D
but.
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C
No, I mean, yeah, we would all, I'm sure, love a trip on it, but obviously if there's going to be more and more of these, then I suppose it is maybe on some ports. I remember going on cruises when I was a kid with my family and you were descending on tiny islands and small ports with thousands of people in one sort of dramatic blast for the local infrastructure. And we know places like Venice that have banned big cruise ships and things going into them and sort of taxing them, trying to stop this kind of just sudden dump. There'll be some ports that do welcome these sort of smaller ships, fewer, but spending possibly significantly more money keeping a town going.
- [27:50]
B
I think we need to set some rules here because they are getting further and further afield in places which really don't have the infrastructure to deal with an arriving cruise ship like Stornoway. You know, they have actually built a harbour that these things can dock in on the mistaken assumption that they would do well by it. So, you know, thousands of people descend for an afternoon and then go back for. For the evening. They go. They don't stick around. They don't spend money in hotels. They don't really spend money at all. Say, you know, they'll look at a standing stone and then go. Go home. So it's. And. And the. The kind of. The shock to the.
- [28:29]
A
What else do you expect them to do? It's a standing stone. You've seen it, you've got the idea.
- [28:33]
B
Running or walking. Yeah, it might be more interesting. I agree, exactly.
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A
Well, I did want to close, as we sometimes do, by soliciting confessions from the guests. I mean, Vincent, first. First of all, everybody, I think, has a bit of this when they book themselves travel somewhere. You do start wondering, what slight extra luxury can you possibly justify to yourself? What's the most extravagant thing you've ever talked yourself into.
- [28:56]
C
Business class flights. Yeah, that is quite nice. I'd say that is the most extravagant thing I've done. And I do like a nice hire car, but I'm actually someone that's like it has to be the right car for the right place. So in Italy, I just love having a Fiat 500 just to sort of zip around in. And you know, I drove through Naples, which is essentially like driving in here. You are a. I know, I know. And I quite like it because I think it's fun. You just have to drive like Jason Bourne. So nice hire cars and business class.
- [29:29]
B
I thought last week was actually the week to hire a Vesta. I'm surprised you missed the opportunity.
- [29:34]
A
And Isabel, I'm quite mean.
- [29:36]
B
I'm being, you know, an Aberdonian, so I don't splash out a whole lot. Although I did take my young people on a 10 day cruise, I guess, but it was pretty kind of basic converted Danish fishing boat.
- [29:56]
A
When you say like so the to the Outer Hebrides, the Austin Aberdonian cruise, is this one of those everyone gets on board, is shown to their oar?
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B
No, basically you get on board and you have to hoist a sail kind of of thing. But it's great, it's fun and it's not lonely.
- [30:12]
A
Isabel Hilton and Vincent Mcevany, thank you both for joining us. Finally on today's show, excellent news for listeners who tuned into last week's daily and this Saturday's foreign desk and have since been fretting that they may have heard all the material we gathered during Monaco Radio's excursion to the annual Swedish political jamboree on Madalen Week on Gotland. We have more. Among those who dropped by our pop up studio during al Madalen week was Eric Thedin, governor of Sweden Central Bank Sveriges Reichsbank, the world's oldest central bank established in 1668. I began by asking Eric if those centuries of history were at all daunting. Whether any governor of the Reichsbank arrives in post thinking they'd really better not be the one who screws it up.
- [30:57]
D
Not, I think if you were to be afraid of taking on the responsibility, you're probably the wrong person. So I have not thought the way you're thinking. But for sure I take this very, very seriously. Not so much that because we're old, but you know, what we do and what decision we take has a lot of implications for households. More so in Sweden than in many other countries. As we're highly indebted in the household sector and people typically have variable mortgages. So that's why I'm actually fairly well recognized in the streets of Visby, because everybody has a mortgage. Okay. So they know who to blame when rates are too high.
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A
I guess I did wonder if, for that reason and others, if you come to Alma Dale and with an assortment of disguises.
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D
Oh, well, no, no disguise. I have my identical twin brother here, but apparently we're not that identical any longer. So he's. He's not recognized.
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A
He gets away with it. He doesn't get blamed for people's mortgage payments.
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C
No.
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D
No. Not what he tells me anyway. No.
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A
Okay. More seriously, on the same subject, I was wondering what it was like for you coming to Al Madalen, especially with an election not too far away and obviously every party which is running for office is also here. Do you get people, especially from those hoping to keep their jobs, coming up to you and saying, look, if you're going to raise interest rates, can it wait?
- [32:16]
D
No, I don't. And I think seriously, this is a very good question because we have this going on in the US where Trump is attacking the federal government. And I must say it has been a very, very respectful relationship between fiscal and monetary policy. So, no, I don't know the party leaders. I do have interactions, especially with the finance minister, but no, they don't ask me to. They might think so, but they don't tell me. And that's the most important here. So I think, you know, and a good example is actually before I took office back in 22, that board and my predecessor Stephanie, they raised rates by 1 percentage point three weeks ahead of the election and of course probably was not popular. But, you know, nobody has taken that as an argument to change the independence. And I think also the thing that's going on in the U.S. now, often I get this question now, has this happened in Sweden as well, but rather the country Contrary. Seems it seems like people are taking the US as a warning example and actually respecting the independence even more.
- [33:23]
A
Well, let's talk then a bit about the Swedish economy. Are you generally bullish on it, do you think? The indicators at the moment are fairly positive.
- [33:32]
D
So there's a long term, a short term issue. So short term, I think we're seeing a little bit of an upturn. We have higher growth forecast in Sweden than the rest of on Euron and for sure the uk, uk, the momentum, I guess is slightly better, but we started with a fairly weak position. We have very lackluster kind of growth for many, many years. Long term, I'm fairly optimistic. If you compare to rest of your productivity growth has been higher than in the rest of Europe. We have a very vibrant tech sector, we have a very vibrant capital markets. I sometimes frame it as a mini London in Stockholm and switch. So there's a lot of things that is kind of pointing in the right direction which large part of the rest of Europe are struggling with, namely to get innovation, productivity, structural reforms which has been made in this country for a number of years under different governments, many times I think in the right direction.
- [34:28]
A
There have been of course a number of economic jolts this year related mostly to energy prices, which in turn are related to the conflict in the Persian Gulf. But I think to a lot of people, especially people who've spent their entire adult lives in the period since the crash of 2008, it seems like there's been nothing but one economic shock after another. Does it strike you though that institutions like central banks, not just yours but others as well, have got any better at dealing with them? Like for example, when you get told this is now happening, there will be a war in the Persian Gulf, the Iranians have closed the Strait of Hormuz. This is going to have astonishing knock on effects. Did you feel like you had enough options to deal with that?
- [35:14]
D
So the option to deal with is very much maybe do something on interest rates if inflation picks up. But also in the event of some kind of crisis, you could of course handle that. But what has been a very good thing with the new restaurant Sheen with the inflation target, independent central banks, credibility, blah blah, blah, is that when we have inflation shock that we had after Covid 10% in this country, we actually have the credibility. So we raised right to 4%, that's high. But we didn't raise it to 10%. The reason being that people actually believed in what we were doing. So we got the economy kind of move in the same direction that we are trying to get it. So I think this is a long term mission that we're in and I think that and it's many credit, credit credibility to my predecessors and others, we have built this credibility. So shocks are more absorbable, let's say, than they would have been if we were to end up in the kind of 1970s kind of pro cyclical policies that we did. But having said that, we also know that we could have low inflation for many, many years and still end up in a crisis. So you know, we're not safe, but we are in a better place than if we would have, you know, a Turkish situation with no credibility for the central bank and everything being politicized. That's much worse.
- [36:31]
A
That was Eric Fedeen, governor of Sveridge's Reichsbank, speaking to Monocle Radio at Al Madalen Week on Gotland. There's more from Al Madalen Week in the current episode of the Foreign Desk, which you can find on our website or wherever superior podcasts are downloaded. That's all for this edition of the Monocle Daily. Thanks to our panelists today, Isabel Hilton and Vincent McEveney. Today's show, produced by Thomas Waterhouse and researched by Josefina Astrad Nagla Gomez. Our studio manager was Elliot Greenfield. I'm Andrew Muller here in London. The Daily is back at the same time tomorrow. Thanks for listening.