moving towards a multipolar financial system

The international monetaryand financial system – a European perspective:

Moving towards a multipolar financial system

Annika Eriksgård Melander

European Commission

FESSUD workshop

25 May 2016

A more multipolar world driven by long-term trends and integration

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0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

19

96

19

99

20

02

20

05

20

08

20

11

20

14

20

17

20

20

20

23

20

26

20

29

20

32

20

35

20

38

20

41

20

44

20

47

20

50

20

53

20

56

20

59

Real GDP at market exchange rates, share of world total

EA15 BRICS US

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

0

0.01

0.02

0.03

0.04

0.05

0.06

0.07

0.08

0.09

0.1

19

60

19

65

19

70

19

75

19

80

19

85

19

90

19

95

20

00

20

05

20

10

20

15

20

20

20

25

20

30

20

35

20

40

20

45

20

50

Population of EA19, US and BRICS as share of world population

EA19 (lhs) US (lhs) BRICS (rhs)

Financial crisis demonstrated global interdependence

Financial crisis, starting as a housing bust in the US,

demonstrated clearly how integrated the world is

• Spillovers not only via economic channel, but

also via financial transmission channel and

confidence effects

• Financial capital flows and monetary stability

policy have a global dimension

• Close cooperation between policy makers is

essential to preserve the current highly flexible

international monetary system

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Financial crisis affected institutional setup of global governance: G7 vs. G20

Starting in 2008-2009: Shifts in international institutional landscape to address crisis, for example:

• G20 elevated to Leaders level, now key global forum

• Creation of FSB

• Tripling of IMF resources

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Example of China: taking on a larger role

Increased role for China in the region / world through, for example:

• Silk road and OBOR initiatives

• New forum / institutions (BRICS: NDB + AIIB)

• Internationalisation of the RMB / inclusion into the SDR basket

• Active stance in global governance: G20 Presidency 2016

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Economic cooperation and coordination remain key

• Fragile and uneven recovery calls for action

using all policy tools, to foster strong, sustainableand balanced growth (G20 FWG)

• Strengthening the stability and resilience of the IMS

improving IMFs tool kit, a more effectivecooperation with regional safety nets (G20 IFA, IMF)

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Operationalising the three-pronged strategy a challenge

Agreement that monetary policy cannot alone do the job, but thenwhat… With different outlook and 'ideological differences' for the role of fiscal policies ongoing, the focus is on

Composition and efficiency of public finances and on

Structural reforms

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Can G20 continue to take the lead in shaping the policy response ?

Com

positio

n a

nd E

ffic

iency Encouraging

Innovation

Improving Infrastructure

Strengthening Fiscal Sustainability

Enhancing Environmental Sustainability

Making sure that:

1. Public money is spent on the most growth-friendly items.

2. Any given expenditure is efficient.

Ex 1: improving the compositionof public finances

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The example of expenditure in education (Pisa score)

Ex 2: improving the efficiencyof public finances

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Full and timely delivery of our agreed reforms and progress towards the G20

"2-in-5" growth ambition

Structural Indicators

Priorities and Guiding

Principles for Structural Reform

G20 Growth Strategies

Ex 3: fostering a stronger delivery of structural reforms 2% more GDP

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Ex. 4: EU has a sizeable firewall and experience that can be of use

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$bn

*Nominal amount after 14th review quota increases and NAB rollback, assuming that quota payments of all members have been completed.

0

100

200

300

400

500

600

700

800

900

1000

IMF,

NAB*

ESM,

BoP,

EFSM

CMIM CRA NAFA ESDF FLAR AMF

EU and IMF cooperation at work

Joint financial assistance

Joint negotiations of programme design and conditionality

Joint missions, mutual consultations on programme documents, and coordinated communication

Joint monitoring of implementation

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THANK YOU

• ECFIN brief: The G20 and the EU: A Win-Win Game http://ec.europa.eu/economy_finance/publications/eeeb/eb009_en.htm

• Regular statements by EU representative at IMF or G20 meetings, e.g. by Commissioner Moscovici at the 2016 'Spring meetings': http://www.imf.org/external/spring/2016/imfc/statement/eng/ec.pdf

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