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Economic and Monetary Union

OECD Sovereign Borrowing Outlook 2019

Date of Editorial Board meeting: 
Publication date: 
Tuesday, April 23, 2019
Abstract in English: 
More than a decade on from the Global Financial Crisis, while debt-to-GDP ratios are back around pre-crisis levels in some countries, debt burdens have continued to climb in others, exceeding 100% of GDP in some cases. The challenges sovereign debt managers are confronting in an environment of high debt burdens and relatively tighter financial conditions have been compounded by recent political uncertainties. OECD governments will also need to refinance around 40% of their outstanding marketable debt over the next three years. This means that most countries are focused on mitigating refinancing risk, maintaining flexibility in funding programmes, and broadening the investor base. In countries where financing requirements are limited and declining, sovereign debt managers face a “positive” set of challenges. For example, the minimal optimal size of outstanding sovereign debt required to maintain a vibrant government bond market and facilitate the implementation of monetary policy is currently under discussion in a few countries.
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Rebalancing the Euro Area: A proposal for Future Reform

Date of Editorial Board meeting: 
Publication date: 
Saturday, December 15, 2018
Abstract in English: 
Under a monetary union, fiscal and monetary discipline have to go hand in hand if macroeconomic stability is to be maintained. The question is how to set up the right institutions to achieve this stability in a credible manner. This policy brief proposes a new institutional arrangement for the euro area to restore fiscal discipline. It places the responsibility for compliance entirely on the shoulders of the member states. It also provides for the mutualisation of 30% of the member states’ debt-to-GDP ratio.
This would help to maintain a stable currency and to limit the risk of contagion should another crisis occur in the future. However, this comes at a cost. Under the fiscal scheme proposed, member states, which would be fully fiscally sovereign, would need to run long-term sound fiscal policies to benefit from euro membership.
In addition, this brief proposes a reform of Target2 under which overspending economies would have to pay the financial cost of accessing extra euros, which would deter the accumulation of internal imbalances within the euro area. All this is expected to change the current fragility of the architecture of the euro, provide member states with the right incentives to abide by sounder economic principles and make them fully responsible for the policies they adopt.
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Revisiting the Economic Case for Fiscal Union in the Euro Area

Date of Editorial Board meeting: 
Publication date: 
Tuesday, February 20, 2018
Abstract in English: 
The paper makes an analytical contribution to the revived discussion about the euro area’s institutional setup. After significant progress during the eurocrisis, the drive to complete Europe’s Economic and Monetary Union (EMU) had stalled, and the way forward will benefit from an in-depth look at the conceptual issues raised by the evolution and architecture of Europe, and the trade-offs involved. A thorough look at the underlying economic issues suggests that in the long run, EMU will benefit from progressing along three mutually supporting tracks: introduce more fiscal risk sharing, helping to make the sovereign “no bailout” rule credible; complementary financial sector reforms to delink sovereigns and banks; and more effective rules to discourage moral hazard. This evolution would ensure that financial markets provide incentives for fiscal discipline. Introducing more fiscal union comes with myriad legal, technical, operational, and political problems, raising questions well beyond the remit of economics. But without decisive progress to foster fiscal risk sharing, EMU will continue to face existential risks.
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63
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Regional Economic Outlook: Managing the Upswing in Uncertain Times

Date of Editorial Board meeting: 
Publication date: 
Tuesday, May 15, 2018
Abstract in English: 
This paper describes the current and future economic situation in Europe: While Europe has enjoyed a strong recovery, medium-term perspectives are less exciting, hence the necessity for European government to use this window of opportunity to improve their fiscal policy and implement reforms aimed at transforming the short-term recovery into a long-term one. The recovery is also a great occasion for European Countries to strengthen their economic and monetary ties, and therefore deepen the Economic and Monetary Union.
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108
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The Evolution of US and European Monetary Policy after Bretton Woods - A Historical Overview and Lessons for the Future

Date of Editorial Board meeting: 
Publication date: 
Wednesday, September 7, 2016
Abstract in English: 
While a new Bretton Woods-style agreement is highly unlikely, the US and Europe should help update the existing monetary system with a new set of best practices and norms.
Many of the seemingly ‘established’ norms of monetary policy are in fact quite recent, having emerged since the breakdown of the Bretton Woods system in the 1970s. These norms include inflation targeting, central bank independence from political authority, and the separation of monetary policy from regulatory activity such as bank supervision. Central bank orthodoxy has also, until recently, largely ignored the international ‘spillover’ effects of monetary policy.
The 2008–09 financial crisis and its aftermath changed the picture. Monetary policy was recruited to assist governments in stabilizing financial markets and restoring liquidity. And conventional assumptions about the primacy of central banks’ responsibility for price stability were challenged as quantitative easing (QE) proved less inflationary than feared. Indeed, eight years after the crisis, the inflation rate – the most significant driver of monetary policy under the old regime – remains consistently low in most major economies.
In this context, the United States faces some unique challenges. The dollar’s status as the global reserve currency means that the US Federal Reserve’s decisions often have international ramifications. Emerging markets are becoming more exposed to spillovers from US policy, as globalization renders their economies and financial systems more interdependent and as finance becomes increasingly important relative to other economic activity.
In Europe, the euro’s problems reflect similar shortcomings to those that undermined the 1944 Bretton Woods system. Launched in 1999, the euro was in effect an attempt to maintain fixed exchange rates between member states. However, the single currency’s designers underestimated the difficulty of maintaining such a system across multiple national economies, each with different growth profiles and fiscal policies. The euro’s structural problems have been exacerbated by the secular shift from a world of politically ‘subservient’ central banks, as existed before the creation of the European Central Bank (ECB), to the current system in which the ECB is highly independent.
Despite the current strains on the monetary system, consensus on a formalized new international framework in the mould of Bretton Woods is unlikely. A more plausible outcome is the organic development of a new set of norms articulating principles both for the mechanisms by which central banks pursue price stability and for the governance of central banks themselves. The United States and Europe are likely to be at the forefront of this process. They should proactively shape the new norms to ensure that they meet the challenges of today’s evolving economic landscape.
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26
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EU to DO 2015-2019: Memos to the new EU leadership.

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Date of Editorial Board meeting: 
Publication date: 
Wednesday, September 3, 2014
Abstract in English: 
The new EU leadership – the president of the European Commission and his team of commissioners, and the presidents of the European Council and of the European Parliament – will have to address pressing challenges. Despite the significant steps taken by Europe – among them the creation of a European Stability Mechanism, the start of a banking union, the strengthening of fiscal rules and substantial structural reforms in crisis countries – results for citizens are still unsatisfactory. It is impossible to summarise all the memos in this volume but a common theme is the need to focus on pro-growth policies, on a deepening of the single market, on better and more global trade integration. Reverting to national protectionism, more state aid for national or European champions – as frequently argued for by national politicians – will not be the right way out of the crisis. On the contrary, more Europe and deeper economic integration in some crucial areas, such as energy, capital markets and the digital economy, would greatly support the feeble recovery. But in other areas, less Europe would also be a highly welcome signal that the new European leadership is serious about subsidiarity. Internal re-organisation of the European Commission to ensure that it better delivers would also be welcome.
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168
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Remaking Europe: Framework for a policy

Title Original Language: 
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Abstract Original Language: 
La survie et le succès de l'Union européenne dépendent de la vitalité de la zone euro. La priorité est en conséquence de donner à celle-ci une perspective claire à 10 ou 15 ans et de la transformer progressivement en un espace réellement intégré, qu'il s'agisse des engagements nécessaires pour mettre en oeuvre des politiques économiques saines et convergentes, de la volonté de recourir aux instruments de solidarité les mieux adaptés ou de l'adoption de règles de gouvernance adéquates. Ainsi seront réunies les conditions d'une nouvelle croissance et d'un meilleur emploi.
L'Union européenne, à 28 Etats membres, doit elle aussi retrouver le chemin de la rigueur et de l'efficacité. Il convient de lui assigner quelques objectifs politiques essentiels, objectifs d'ores et déjà énoncés dans les traités et dont la mise en oeuvre concrète devrait être approuvée par tous les Etats membres : énergie et environnement, marché intérieur, défense, conditions nécessaires pour préserver la libre circulation des personnes.
Original Language: 
Date of Editorial Board meeting: 
Publication date: 
Sunday, September 1, 2013
Abstract in English: 
The survival and success of the European Union depend on the vitality of the Eurozone. The priority is therefore to give the Eurozone a clear perspective for the coming 10 to 15 years and gradually to transform it into a truly integrated area. This approach must embrace the commitments necessary to implement sound and convergent economic policies, a determination to embrace practical instruments of solidarity and the adoption of meaningful rules of governance. These are the keys to new economic growth and higher levels of employment.
The 28-member state European Union has too to find the path of rigour and efficiency. We should agree on a few essential political goals. These goals are already there in the treaties: their concrete implementation now has to be agreed and accepted by all Member States. Energy and the environment, the internal market, defence, and the necessary conditions for the free movement of individuals, are the key policies.
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20
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What project for Europe? An introduction to the national debate "Quelle France dans 10 ans?"

Title Original Language: 
Quel projet pour l'Europe? Note d'introduction au débat national "Quelle France dans 10 ans?"
Abstract Original Language: 
L’Europe apparaît parfois comme la responsable des difficultés françaises ou, inversement, comme le seul espoir de demeurer un acteur qui pèse sur la scène mondiale. Au-delà de telles positions tranchées, l’évidence est que les futurs de la France et de l’Europe sont de facto très liés. Il est donc nécessaire pour la France de clarifier sa manière d’être à l’initiative pour aider l’Europe à se redresser.

Jamais les incertitudes sur l’avenir de l’intégration européenne n’ont été aussi fortes. Ses difficultés à créer une prospérité partagée et un horizon de progrès social, à constituer une valeur ajoutée incontestable dans la compétition mondiale et une ambition partagée par les peuples ont érodé l’élan européen. La crise de la zone euro et les divergences entre pays sont venues accentuer la perception d’une Europe à l’édifice institutionnel inachevé, qui n’a pas clarifié ses intentions sur les buts à atteindre, et dont les décisions s’élaborent trop loin des citoyens. La valeur de l’Union persiste pourtant, qu’il s’agisse de faire de son marché de 500 millions de consommateurs un levier de croissance et d’influence ou de porter des valeurs de paix, de démocratie et de progrès économique et social.

Pour que la France joue un rôle moteur dans le renouveau du projet européen et de son idéal de prospérité partagée, il lui faut clarifier son ambition. Une refondation du marché unique est-elle possible ? Au sein de la zone euro, un progrès parallèle de la responsabilité budgétaire et de la solidarité est-il possible ? Partage des risques et partage de la souveraineté peuvent-ils aller de pair ? Une union politique est-elle souhaitable et sur quelle base ?

Comment envisager la question des frontières européennes ? À quels efforts sommes-nous prêts pour la stabilité et la prospérité de nos voisins ? Quelles sont, au total, les conditions économiques et politiques requises pour que la France s’inscrive avec succès dans une stratégie ambitieuse de refondation européenne ? Telles sont quelques-unes des questions que nous devons nous poser aujourd’hui.

Contributeurs : Marine Boisson, Etienne Espagne, Cécile Jolly, Jean-Paul Nicolaï, François Vielliard.

Original Language: 
Date of Editorial Board meeting: 
Publication date: 
Thursday, September 26, 2013
Abstract in English: 
There has never been so much uncertainty concerning the future of European integration. Its difficulties in creating a shared prosperity and a socially progressive outlook, in generating incontestable added value against global competition and in fostering an ambition espoused by its citizens have depleated the energy of Europe. The Eurozone crisis and the divergence between countries have heightened the perception of Europe as an incomplete institutional framework that has failed to make its intentions clear in order to attain its objectives, and in which the decision-making process is too far removed from citizens. Nevertheless, the value of the Union remains, whether in terms of making its 500 million-strong consumer market a lever for growth and influence or of upholding the values of peace, democracy and economic and social progress. In order for France to play a dynamic role in the European project and its ideal of shared prosperity, its ambitions must be made clear. Can the single market be reformulated? Within the eurozone, can there be parallel progress in budgetary responsibility and solidarity? Can risks and sovereignty be shared? Is political union desirable and on what basis? How should the debate on European borders be framed? To what lengths are we prepared to go for the stability and prosperity of our neighbours? In sum, what are the economic and political conditions required in order for France successfully to pursue an ambitious strategy of European renewal? These are some of the questions that we are required to address at this time.
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