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Economic Adjustment in a Monetary Union

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Prakash Bhavi says: 22 Sep 2011 11:54

The World Bank is a important source of financial and technical assistance to developed and developing countries around the world. Like its sister institution, the International Monetary Fund, the World Bank Group is currently enhancing multiple reforms, exploring cooperation with other organizations, and trying a transformation to better represent the global economic realities of the post-crisis 21st century. Over all Streem mean to say "Crafting Monetary Policy for Stability and Convergence"....... SHOULD BE WELL WORSTED WITH GLOBAL TRENDS... While framing the monetary policy, one should frame THE POLICY based on Global requirements.

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About this Event

21 Nov 2011 @ 12:45

Download the audio podcast of the keynote speech here.

About the Speaker:

Jürgen Stark has been a member of the Executive Board of the European Central Bank since June 2006.  Within the Executive Board, he is responsible for Economic and Monetary Analysis. Raised in Germany's Rhineland-Palatinate, he studied economics at the Universities of Hohenheim and Tuebingen, receiving a doctorate in 1975. From 1978 to 1998, Dr Stark held economic policy positions in the German Federal Government. From 1998 to 2006, he served two consecutive terms as Vice President of the Deutsche Bundesbank.


About the Event:

Dr Stark delivered a keynote address to a packed house in the Institute on the theme of Economic Adjustment in a Monetary Union. Commending Ireland as a "role model" for other countries embarking on programmes of austerity, he nonetheless acknowledged that "strong headwinds" in the global economy threaten to blow its recovery off course. "The sovereign debt crisis has re-intensified and is now spreading over to other countries including so-called core countries."

He went on to argue that the crisis was not confined to Europe and that it was in large part a crisis of confidence. It is important that advanced economies do not talk themselves into a second recession. That said, many of these economies urgently need to pursue fiscal consolidation or else their debts will sooner or later become unsustainable. Dangerous fiscal positions are often compounded by structural weaknesses and these too must be addressed. The fiscal outlook for many states threatens the broader economic situation, as do persistent macro imbalances.

Dr Stark recalled that there has historically been little urgency attached to the problem of heterogeniety across Eurozone economies by European leaders. Rates of inflation for example varied widely across Europe in the years leading up to the financial crisis. Risk was inappropriately priced up to 2007 and there are governments that have never properly adjusted to the demands of monetary union, which were well understood by its architects. As far back as 1998, finance ministers and heads of state and government agreed that economic and monetary union should never be used as a justification for financial transfers.

Speaking to journalists after the event, Dr Stark said that “Eurobonds, even if they’re called ‘stability bonds’, won’t solve the sovereign debt crisis in Europe, because they don’t tackle the structural problems some countries are facing." They "seem to be feasible at a later stage, but only after the transfer of sovereignty.”

 
Read the Irish Times report of the event here.
 
Read RTE's coverage here.
 
Background reading:
 
Hearing at the Committee on Economic and Monetary Affairs of the European Parliament. Introductory statement by Jürgen Stark, Brussels, 17 October 2011.
 
Economic Adjustment in a Monetary Union. Speech by Jürgen Stark, Riga, 12 October 2011.
 
Jürgen Stark's Resignation Is Setback for Merkel. Report by Der Spiegel, 12 September 2011.
 

This content forms part of the E View project, which is part-funded by DG Communication of the European Parliament. 

 

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