Monetary policy in an incomplete Monetary Union

Registration

Dinner

Dinner speech: Stanley Fischer, BlackRock

Welcome address

Mario Draghi, President, European Central Bank

Panel discussion The road to a genuine Economic and Monetary Union

Chair: Daniela Schwarzer, German Council on Foreign Relations

Panellists

• Elga Bartsch, BlackRock
• Mathias Dewatripont, Solvay Brussels School of Business and Management, Université libre de Bruxelles
• Jeroen Dijsselbloem, Former President of the Eurogroup
• Sylvie Goulard, Banque de France
• Mario Monti, Bocconi University

The sovereign debt crisis revealed structural weaknesses in the architecture of Europe’s Economic and Monetary Union (EMU), with significant implications for the single monetary policy. This has led to institutional developments and debates in four key areas of EMU: banking union, fiscal union, economic union and political union.

Monetary policy transmission can become ineffective owing to fragmentation along national lines in times of financial stress. Establishing the banking union has been a major step towards a monetary policy transmission mechanism that functions more smoothly. Nevertheless, is the banking union fit for purpose or are there still risks of fragmentation in EMU?

The notion of monetary and fiscal policy mix is challenging in a monetary union with 19 fiscal authorities. Europe’s fiscal framework has not prevented pro-cyclical fiscal policies, meaning that monetary policy has been overburdened. Is there a need for new instruments, such as a central budget, to ensure a smoother functioning of EMU? Is the current fiscal framework sufficient to ensure an appropriate policy mix in EMU?

In the run-up to monetary union it was argued that monetary integration would spur economic convergence. 20 years on one of the features of EMU remains significant cross-country heterogeneity. Setting monetary policy for EMU as a whole is challenging when there are differences between the economic policy frameworks of member countries, for example in their wage and price-setting behaviours. What are the causes of lasting economic divergences in EMU and how should they be addressed?

Finally, the resurgence of nationalistic sentiment combined with populist tendencies brings about political challenges to European integration and to the single monetary policy. This raises the question of how to strengthen democratic accountability in a monetary union consisting of sovereign states.

Conversation Challenges to the single monetary policy and ways forward

Moderator: Claire Jones, Financial Times

• Jean Pisani-Ferry, Bruegel
• Adam Posen, Peterson Institute for International Economics
• Peter Praet, European Central Bank
• Isabel Schnabel, University of Bonn

The ECB, like other major central banks, has resorted to both conventional and unconventional monetary policy tools to fulfil its price stability mandate. What are the most common challenges in central banking? What specific challenges are presented by the incomplete nature of EMU? How can these challenges be overcome?