A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Oesterreichische Nationalbank (Ed.) Proceedings European Economic and Monetary Union: The first and the next 20 years. 46th Economics Conference 2019 of the OeNB in cooperation with SUERF SUERF Conference Proceedings, No. 2019/2 Provided in Cooperation with: SUERF – The European Money and Finance Forum, Vienna Suggested Citation: Oesterreichische Nationalbank (Ed.) (2019) : European Economic and Monetary Union: The first and the next 20 years. 46th Economics Conference 2019 of the OeNB in cooperation with SUERF, SUERF Conference Proceedings, No. 2019/2, SUERF - The European Money and Finance Forum, Vienna This Version is available at: http://hdl.handle.net/10419/234532 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu SUERFSUERF THE EUROPEAN MONEYTHE EUROPEAN AND FINANCE MONEY AND FORUM FINANCE FORUM OESTERREICHISCHE NATIONALBANK EUROSYSTEM 46th ECONOMICS CONFERENCE 2019 of the OeNB in cooperation with SUERF European Economic and Monetary Union: The first and the next 20 years ECONOMICS CONFERENCE 2019 CONFERENCE ECONOMICS th 46 Contents Contents Ewald Nowotny Opening remarks 6 Session 4 The international role of the euro Keynote Lecture Martin Summer Jean-Claude Trichet The international role of the euro from different perspectives 106 European Economic and Monetary Union: from the past into the future 12 Kerstin Jorna From start-up to scale-up: the global role of the euro 108 Session 1 Toward a better EMU: past lessons, structural adjustments Arnaud Mehl The euro’s global role: past, present and future 114 Luiz de Mello Making the most of the EMU: Challenges and opportunities for structural reforms 26 Session 5 Peter Mooslechner Digitalization of money: future challenges 20 years of EMU, 10 years in crisis mode: Kurt Pribil What might the future “new normal” of monetary policy look like? 36 Remarks on digitalization of money and future challenges 124 Session 2 Ulrich Bindseil Monetary and financial stability Controlling CBDC through tiered remuneration 128 Andreas Ittner Andrei Kirilenko Macroprudential policy complements ECB monetary policy 52 On crypto assets 140 Ed Sibley Session 6 Monetary and financial stability: the implications for prudential supervision 56 Completing European Economic and Monetary Union Martin Wolf Doris Ritzberger-Grünwald Escaping the trap: secular stagnation, monetary policy and financial fragility 64 Completing European Economic and Monetary Union: next steps 148 Session 3 Bruno Cabrillac Monetary and fiscal stability Integration and convergence in the EMU: a complex dynamic 152 Ernest Gnan Isabel Schnabel Monetary and fiscal stability – a post-crisis view on a complex relationship 76 Reconciling risk sharing with market discipline: a constructive approach to euro area reform 162 Gottfried Haber Strengthened EU fiscal framework: fiscal discipline versus economic stabilization 82 Ludger Schuknecht Mitigating fiscal risks from the financial sector 94 2 OESTERREICHISCHE NATIONALBANK 46th ECONOMICS CONFERENCE 2019 3 46th ECONOMICS CONFERENCE 2019 46th ECONOMICS CONFERENCE 2019 Ewald Nowotny Opening remarks Governor Oesterreichische Nationalbank Ladies and gentlemen, global level since the 1930s; as well as It is my pleasure to welcome you to a second, specifically European crisis, the 46th Economics Conference of the which posed a severe – and one might Oester reichische Nationalbank, orga- even say “existential threat” – to the nized in cooperation with SUERF, the single currency, as ECB Vice-President European Money and Finance Forum. Luis de Guindos recently put it in front Two decades after its introduction, the of the European Parliament.1 It was euro is arguably the most tangible result only thanks to the joint efforts of Euro- of the European unification process – a pean governments and institutions that token for the European project that we the crisis has been overcome, as well as use day in, day out; something that we thanks to the support that the Euro- share with our fellow citizens – as many pean citizens have been lending to fiscal as 340 million people living in 19 coun- consolidation and the sometimes severe tries of the continent. adjustment programmes and structural Since the start of Economic and reforms that were necessary. The ECB Monetary Union (EMU), the number for its part has contributed by backstop- of euro area countries has gradually ping the financial system and providing increased from 11 to 19. As the com- monetary stimulus. mon European currency, the euro Some of the shocks that led to this swiftly established itself as the second crisis were exogeneous. Many were not most important currency of the world specific to the euro area. But quite a and has come to serve as a stable mon- few observers have attributed certain etary anchor for most of our neighbour- aspects – as well as the depth of the cri- ing countries in Central, Eastern and sis – to a faulty design of the monetary Southeastern Europe. union: its “lopsided” nature, with mon- In a recent survey, 74% of Europeans etary integration lacking a fiscal coun- said they were in favour of EMU, with terpart and institutions that allowed one single currency, the euro. This is unsustainable imbalances between the highest level of support for the euro member countries to emerge. ever recorded. It is also testimony to But while the single currency was the success of the Eurosystem in fulfill- certainly not perfect when it was intro- ing its mandate of maintaining stable duced 20 years ago, it would be wrong prices and in providing an environment to blame the crisis on its existence for economic growth and high employ- alone. The challenges the euro area has ment over the past 20 years. It is not by faced and that we continue to face are accident that approval rates for the euro very similar to the challenges – if not declined when unemployment rose the very same ones – that led to the cre- during the recession and crisis of 2008– ation of the single currency in the first 2013 and thereafter rebounded signifi- place. cantly when the euro area returned to a The single currency was not invented path of stable growth. as the political symbol, the most tangi- So the euro has been a success – ble result, of European unification it is hasn’t it? We are well aware that the today. To be sure, the single currency past 20 years have seen one of the worst was from the beginning also part of the financial and economic crises at the political desire to express a European 1 Euro at 20 years: the road ahead. Address by Luis de Guindos, Vice-President of the ECB, at the European Parlia- mentary Week, Brussels, February 19, 2019. https://www.ecb.europa.eu/press/key/date/2019/html/ecb. sp190219~6f4c9be85b.en.html. 46th ECONOMICS CONFERENCE 2019 7 Ewald Nowotny Ewald Nowotny identity on the international scene. But money itself. As a result, the single Euro- decisions on European monetary policy currency area. But countries will con- first and foremost, monetary coopera- pean currency acquired the double role came to be taken de facto in Frankfurt tinue to be hit by asymmetric shocks, tion in Europe was the response to the as the backbone of European economic and Bonn, and not jointly by all mem- and the question how to deal with challenges of creating an integrated integration as well as the face of Euro- bers of the Snake or the EMS, thus cre- trade- offs in economic policy will con- economic area in the face of interna- pean identity it still has today. ating political discord and discontent tinue to be at the core of political tional monetary instability. At the time As the following decades would show, among the European partners. debates. Imbalances within the euro the project of European integration was close monetary cooperation was diffi- The consequence that policy makers area will continue to arise from time to born in the 1950s, exchange rates were cult to implement and even more diffi- drew from these recurrent challenges time, and so will pressures to adjust. still governed by a stable Bretton Woods cult to maintain. On the one hand, eco- was the introduction of the joint cur- Debates on how such adjustment is best system. The risk that exchange rate nomic integration made the mainte- rency, the euro. In some respects, the engineered are here to stay, as was fluctuations would distort trade and nance of fixed exchange rates increas- euro is a technical solution for the