closing remarks - oesterreichische nationalbank …74b2f639-cf5d-4880-a69f...closing remarks...
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Closing remarks Workshop
Toward a genuine Economic and Monetary Union
September 11, 2015
Andreas Breitenfellner
Foreign Research Dicvision www.oenb.at
www.oenb.at [email protected] - 3 -
The vision of the Five President’s Report
Genuine
EMU
Mo
net
ary
Un
ion
Eco
no
mic
Un
ion
Fin
anci
al U
nio
n
Fisc
al
Un
ion
Po
litic
al U
nio
n
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Emerging consensus but still open issues
The glass is half full
Some further integration indispensable
• What kind of reform-mix? (complements vs. substitutes)
• Detailed design? (pooling sovereignty, risk sharing)
• Timing and Sequencing? (How to deal with skepticism?)
www.oenb.at [email protected] - 5 -
Are there easy ways out of impasse?
www.oenb.at [email protected] - 6 -
The debate continues
If the euro fails, Europe will fail.
(A. Merkel)
Europe will be
forged in crises.
(J. Monnet)
L’Europe se
fera par la
monnaie, ou ne
se fera pas.
(J. Rueff)
EMU will not
survive unless it
also brings
prosperity to its
members.
(S. Fischer)
Within our mandate, the
ECB is ready to do
whatever it takes to
preserve the euro.
(M. Draghi)
www.oenb.at [email protected] - 7 -
The way forward
• Publication:
Homepage
• Journal EMPIRICA – special issue end-2016?
• Meanwhile workshop proceedings?
• Follow-up events?
• Networking
• Continue research and public debate
• Support decision makers
• EMU is a priority of the Juncker Commission.
www.oenb.at [email protected] - 8 -
Thank you!
• Contributors
• Participants
• Euro50 Group
• Organizing team
• OeNB staff
Bon week-end and a save trip home!
Auf Wiedersehen!
Appendix
www.oenb.at [email protected]
The rationale for a monetary union?
Benefits:
• Exchange rate stability
• Low interest rates
• Low transaction costs
• Price transparency,
competition
• Completion of the common
market
• Europe’s increasing role in the
international financial system
• Political integration, European
‟identity”
Costs:
• No national monetary and
exchange rate policy in case of
asymmetric shocks
• Divergence creates tensions
• Without a genuine Economic
and Monetary Union (EMU),
central bank may overstretch
its mandate
www.oenb.at [email protected] - 11 -
The euro is part of the European peace project
• End: political unity
• Means: economic unity
• Common market requires common currency
• But where to start with?
Compromise:
Convergence criteria
Coronation Theory:
first harmonize economic structures and policies
(held by DE and NL)
Locomotive Theory:
common currency drives economic harmonization
(held by FR, BE, LUX)
www.oenb.at [email protected] - 12 -
Optimal currency area theory
R. Mundell (1961), McKinnon (1963), Kenen (1969):
1. Countries benefit from a common currency
• the opener they are,
• the closer their trade relations,
• the more synchronized their business cycles,
• the more flexible their economy (wages and process),
• the more mobile economic factors are (labor and capital).
2. Politics can help “optimize”
• fiscal discipline (Stability and Growth Pact – SGP)
• economic policy coordination (e.g. investment plan)
• common institutions (e.g. ESM, Banking Union)
www.oenb.at [email protected]
(Currency) integration convergence or
divergence?
Optimists
(European Commission, 1998):
• Trade in the EU (intra-industry)
• Demand shocks hit all
countries at once
• Integration leads to similar
economic structure
Pessimists (Paul Krugman):
• Free trade economies of
scale and concentration of
production
• Demand shocks hit individual
countries (and products)
• Integration leads to asymmetric
shocks
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EU response to the crisis (until now) Emergency measures Financial markets
European Systemic Risk Board (ESRB) macroprudential supervision
European System of Financial Supervision (EFSF)
• Banking authority (EBA)
• Security authority (ESMA)
• Insurance authority (EOIPA)
microprudential supervision
Financial market regulation (Basel III, mutual funds, rating agencies)
Ad-hoc assistance
Fiscal policy Structural policy
Excessive Imbalance Procedures (EIP)
• “Scoreboard” macro economic indicators
• Preventive and corrective arm
Stability and Growth Pact 3.0 • Expenditure rules • Debt criteria
“Fiscal pact” (TSGE)
European Semester
More duty to inform
European
Commission
(six-pack & two-pack) EU 2020 Growth strategy
ESM (European Stability Mechanism)
Investment plan
+ Capital Markets Union
Banking Union • Single supervision (ECB) • Single resolution • Harmonized deposit
guarantees
OMT(ECB announces unlimited purchase program option)
www.oenb.at [email protected]
The five pillars of the Five Presidents’ Report
• Economic Union –
convergence, prosperity and
social cohesion
• Financial Union – integrated
finance for the economy
• Fiscal Union – integrated
framework for sound fiscal
policies
• Political Union – democratic
accountability, legitimacy and
institutional strengthening
Genuine
EMU
Mo
net
ary
Un
ion
Eco
no
mic
Un
ion
Fin
anci
al U
nio
n
Fisc
al
Un
ion
Po
litic
al U
nio
n
www.oenb.at [email protected] - 16 -
Stage 1: immediate steps until mid-2017
• Economic Union
• Competitiveness authorities (wages ≤ productivity)
• Re-enforce Macroeconomic Imbalance Procedure
• Focus on employment and social performance
• Revamp European Semester (policy coordination)
• Financial Union
• ƒƒComplete Banking Union (e.g. common deposit insurance scheme)
• Launch of Capital Markets Union
• Fiscal Union
• New advisory European Fiscal Board
• Political Union
• European Parliament in control of European Semester
• Interaction between European Commission, the European Parliament and national
parliaments
• Reinforce the Eurogroup
• Consolidate external representation of the euro area (IMF, etc.)
• Integrate Intergovernmental devices into EU law (fiscal compact, Euro Plus Pact,
Single Resolution Fund)
www.oenb.at [email protected] - 17 -
Stage 2: complete EMU architecture by 2025
• Economic Union
• Formalize binding convergence process
• Fiscal Union
• Set up macroeconomic stabilization function for the euro area
• Convergence toward resilient economic structures (= condition for
access to stabilization function)
• Political Union
• Integrate ESM into the EU legal framework
• Euro area treasury