ECB chief economist Praet out with scheduled speech 27 Oct
- pvt/public risk-sharing in Europe underdeveloped
- the key question for the economics profession is whether it is possible to remove the link between the stabilisation function and the redistributive function, allowing for a central budget of moderate size to have a meaningful macroeconomic stabilisation effect
- if this were possible, such a central budget could help monetary policy, especially in times of deep recessions when nominal interest rates may reach their effective lower bound
Speech entitled "EMU - How much federalism?"
Not a lot on mon pol on first sight.
Concludes Praet:
The answer to the question of today's conference - "How much federalism?" - is not easy. Yet, speaking as an economist, I think it is likely that the right answer lies on the side of "more than today" rather than "less than today".
Monnet famously said that "Europe will be forged in crises, and will be the sum of the solutions adopted for those crises." He was certainly right that further integration will proceed incrementally rather than in a big bang. What I hope, though, is that Europe will not be forged in crises only. Significant progress towards a genuine Economic and Monetary Union has been achieved in times of acute crisis. Today's improved economic environment offers a window of opportunity to demonstrate that progress is possible in quieter times, too.
Full speech here
