The EU in the International Monetary and Financial Regime
Europe in World Economy 2017
Vladan Hodulák

Next week
•Lecture by Aleš Chmelař, Chief economist at the European Section of the Office of the Government
of the Czech republic •Topic: What's wrong with Europe's monetary union and how to fix it?
•Readings: Baldwin and Giavazzi (2016) How to fix Europe's monetary union?

•Position in financial institutions
•
•International Monetary Fund (to be reformed)
–over 32% of votes, 7-8 seats on executive board
–SCIMF (subcommittee on IMF matters under Economic and Financial Committee)
–EURIMF – EU members states’ representatives at IMF
•World Bank (to be reformed)
–over 32% of votes, 7-8 seats on executive board
–meetings, information exchange
•Bank for International Settlements
–11 out of 19 seats on board of directors (CB governors)
•G7
–GB, Fr, Ger, It
–ECB on selected issues, president of Eurogroup
•G20
–GB, Fr, Ger, It, EU

Euro vs. USD
•International position of USD (2013)
–61% world reserves (euro 24%)
–87% of all forex transactions (euro 33%)
–anchor for 13 countries with population over 1 mil. (euro 17 countries)
•Volume international financial transactions – over 5,3 trillions USD a day (!) in 2013, trade
volume – 17,8 trillion USD a year
•Due to historical and power related reasons the USD considered the safest currency and US
treasuries the safest asset in the world
•FED is the ultimate lender of last resort
•

Euro vs. USD



Eurozone Crisis
•In 2010 Greece announced problems with financing its debt
•Later affected – Portugal, Ireland, Spain
•Reasons
–Excessive budget deficits
–Inefficient financial regulation
–Intra-European imbalances
•Eurozone response
–Austerity measures (ECB – EU – IMF)
–Financial system bailed out
–European Financial Stability Facility, European stability mechanism
–But in reality – ECB is forced either to finance states or to let eurozone desintegrate

Source: IMF, World Economic Outlook Database



121115greekGDP-2.jpg



Source: IMF, World Economic Outlook Database



Source: IMF, World Economic Outlook Database



Reforms
•Financial oversight
–European System of Financial Supervision (ESFS)
•Banking union
–deposit insurance, supranational regulation, Single Resolution Mechanism (SRM)
•European Stability Mechanism (500 bn euro)
•Policy coordination
–The European Semester
–Fiscal Stability Treaty