April 2017 The Bulletin Vol. 8 Ed. 4 Shock and renewal Challenges for Europe Meghnad Desai on Greenspan’s flaws Brigitte Granville on Le Pen’s popularity Felix Hufeld on banking regulation David Marsh on the Scottish conundrum Mthuli Ncube on mobile banking Sayuri Shirai on Japan’s yield curve You don’t thrive for 230 years by standing still. As one of the oldest, continuously operating financial institutions in the world, BNY Mellon has endured and prospered through every economic turn and market move since our founding over 230 years ago. Today, BNY Mellon remains strong and innovative, providing investment management and investment services that help our clients to invest, conduct business and transact with assurance in markets all over the world. bnymellon.com ©2016 The Bank of New York Mellon Corporation. All rights reserved. BNY Mellon is the corporate brand for The Bank of New York Mellon Corporation. The Bank of New York Mellon is supervised and regulated by the New York State Department of Financial Services and the Federal Reserve and authorised by the Prudential Regulation Authority. The Bank of New York Mellon London branch is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. Products and services referred to herein are provided by The Bank of New York Mellon Corporation and its subsidiaries. Content is provided for informational purposes only and is not intended to provide authoritative financial, legal, regulatory or other professional advice. Contents - Vol. 8 Ed. 4 April 2017 COVER STORY: Shock and renewal Monthly Review 6-7 Briefings – OMFIF Advisers Network, OMFIF meetings Europe 8 French candidates’ economic visions Jean-Jacques Barbéris 9 Unemployment spurs Le Pen phenomenon Brigitte Granville 10 Hammond leaves Brexit setback margin Vicky Pryce 6 11 May off guard over Scottish conundrum David Marsh 12 Dijsselbloem’s Eurogroup role in jeopardy Roel Janssen 12 Italy must protect minority shareholders 7 Lorenzo Codogno International monetary policy 13 Fed reaffirms gradualism as it raises rates Darrell Delamaide 14 Fall-out from less liquid bond markets Hans Blommestein 14 Subtle shift in ECB monetary guidance David Marsh 15 Regulation as science and art Felix Hufeld 16 Scope for reversing balance sheet expansion OMFIF and National Bank of Poland analysis 9 18 New problems from yield curve control Sayuri Shirai 19 Monetary policy is feeding populism Gary Smith Emerging markets 20 Model future for mobile banking Mthuli Ncube 21 Promising dawn for Latin America Carlos Giraldo Book reviews 22 Wielding power in post-war West 11 John Nugée 23 Idealist and pragmatist seeking reform Danae Kyriakopoulou 26 Financial mastery and flawed theory Meghnad Desai OMFIF Advisory Board poll 27 Narrow majority expects ‘acceptable’ EU deal April | ©2017 omfif.org CONTENTS | 3 OMFIF Dialogue on world finance and economic policy Official Monetary and Financial Institutions Forum 30 Crown Place, London, EC2A 4EB The Official Monetary and Financial Institutions Forum is an independent think tank for United Kingdom central banking, economic policy and public investment – a non-lobbying network for best T: +44 (0)20 3008 5262 practice in worldwide public-private sector exchanges. At its heart are Global Public Investors F: +44 (0)20 7965 4489 – central banks, sovereign funds and public pension funds – with investable assets of $30tn, equivalent to 40% of world GDP. www.omfif.org With offices in both London and more recently Singapore, OMFIF focuses on global policy @OMFIF and investment themes – particularly in asset management, capital markets and financial supervision/regulation – relating to central banks, sovereign funds, pension funds, regulators Board and treasuries. OMFIF promotes higher standards, performance-enhancing exchanges John Plender (Chairman) between public and private sectors and a better understanding of the world economy, in an Jai Arya atmosphere of mutual trust. Pooma Kimis Edward Longhurst-Pierce David Marsh Membership Mthuli Ncube Membership offers insight through two complementary channels – Analysis and Meetings – John Nugée where members play a prominent role in shaping the agenda. For more information about Peter Wilkin OMFIF membership, advertising or subscriptions contact [email protected] Advisory Council Analysis Meghnad Desai, Chairman OMFIF Analysis includes research and commentary. Contributors include in-house experts, Johannes Witteveen, Honorary Chairman Advisory Network members, and representatives of member institutions and academic Phil Middleton, Deputy Chairman and official bodies. To submit an article for consideration contact the editorial team at Louis de Montpellier, Deputy Chairman [email protected] Frank Scheidig, Deputy Chairman Songzuo Xiang, Deputy Chairman Meetings Otaviano Canuto Aslihan Gedik OMFIF Meetings take place within central banks and other official institutions and are Robert Johnson held under OMFIF Rules. A full list of past and forthcoming meetings is available on William Keegan www.omfif.org/meetings. For more information contact [email protected] John Kornblum Norman Lamont Kingsley Moghalu OMFIF Advisers Network Fabrizio Saccomanni Gary Smith Niels Thygesen The 179-strong OMFIF advisers network, chaired by Meghnad Desai, Ted Truman is made up of experts from around the world representing a range Marsha Vande Berg of sectors: Monetary Policy; Political Economy; Capital Markets; Ben Shenglin, Chair, OMFIF Economists Network and Industry and Investment. They support the work of OMFIF in a variety of ways, including contributions to the monthly Bulletin, Editorial Team regular Commentaries, seminars and other OMFIF activities. Danae Kyriakopoulou, Head of Research Membership changes annually owing to rotation. Angela Willcox, Senior Production Manager Julian Frazer, Subeditor Catherine Lockwood, Subeditor March 2017 February 2017 January 2017 December 2016 Ben Robinson, Economist The Bulletin Vol. 8 Ed. 3 The Bulletin Vol. 8 Ed. 2 The Bulletin Vol. 8 Ed. 1 The BulletinVol. 7 Ed. 11 Bhavin Patel, Junior Economist Growth, risk, vulnerability Peter Hu, Research Assistant World shocks and emerging markets Power of personality Sam Nugée, Research Assistant Tides turning on central banks Darrell Delamaide, US Editor Coping with change Carlo Cottarelli on financial repression Latin America hopes Mojmir Hampl on multiple mandates Gender matters Norman Lamont on Iran nuclear deal Marketing Øystein Olsen on inflation targeting Women in central banks DeLisle Worrell on benefits of dollarisation Linda Yueh on currency volatility Global Public Investor Gender Balance Index World leaders in 2017: David Smith on Argentina’s Macri FOCUS on advisory board 2017 forecasts Wendy Gallagher, Consultant, Partnerships Danae Kyriakopoulou on Greek debt Abdeldjellil Bouzidi on sovereign climate bonds Etsuro Honda on Abenomics challenges Christine Lagarde on women’s empowerment Carlo Cottarelli on demographic shifts John Mourmouras on central bank independence Vicky Pryce on employment quotas Antonio de Lecea on East-West co-operation Mthuli Ncube on African digital financial services Minouche Shafik on the role of experts Veerathai Santiprabhob on financial fragility Vicky Pryce and Danae Kyriakopoulou on Greek debt Tarisa Watanagase on aging demographics FOCUS on Singapore’s global role Edoardo Reviglio and Marcello Minenna on Italian banks FOCUS 2016 in review Strictly no photocopying is permitted. It is illegal to reproduce, store in a central retrieval system or transmit, electronically or otherwise, November 2016 October 2016 September 2016 July-August 2016 Vol. 7 Ed. 10 Vol. 7 Ed. 9 Vol. 7 Ed. 8 Vol. 7 Ed. 7 any of the content of this publication without the prior consent of the The Bulletin The Bulletin The Bulletin The Bulletin Official monetary and financial institutions ▪ Asset management ▪ Global money and credit Official monetary and financial institutions ▪ Asset management ▪ Global money and credit publisher. While every care is taken to provide accurate information, Eastward shift World looks to Asia Modi and the market the publisher cannot accept liability for any errors or omissions. No India passes a milestone responsibility will be accepted for any loss occurred by any individual March of female power A referendum and its consequences due to acting or not acting as a result of any content in this publication. Monetary to fiscal On any specific matter reference should be made to an appropriate Point of inflection adviser. FOCUS on renminbi swap arrangements FOCUS on Frankfurt’s new path FOCUS on Luxembourg’s role in Europe Company Number: 7032533 Yaseen Anwar on China’s One Belt One Road project Charles Goodhart, Geoffrey Wood on QE risks Darrell Delamaide on Obama’s legacy Javier Guzmán Calafell on multicurrency reserves Kingsley Chiedu Moghalu on African democracy Mar Guðmundsson on financial integration Shaokai Fan on gold’s growth in Asia Vicky Pryce on Germany and the G20 John Mourmouras on debt sustainability Abdul-Nashiru Issahaku on African mobile banking Ignazio Visco on the euro policy mix Wang Yao on Chinese green bonds Caroline Butler on Big Data and markets Kevin L. Kliesen on the slow US economy ISSN: 2398-4236 Marsha Vande Berg on America’s global role William White on zombie banks and companies HISTORICAL REVIEW: SEVEN AGES OF GOLD Patrick J. Schena on Saudi sovereign