FRANKFURT (MNI) – Standard and non-standard easing by central banks
including the Federal Reserve and European Central Bank have helped ease
financial market pressures, ECB Executive Board member Benoit Coeure
said Friday.
“Although we are still grappling with tensions in credit and
sovereign debt markets, and with the painful adjustment of our
economies, the financial system is recovering and we are working hard to
strengthen that process,” Coeure said in prepared remarks to a
conference on macroeconomic modelling in Paris.
“In addition, banks are replenishing their capital buffers and the
institutional foundations of the euro are being strengthened, e.g.
through the Fiscal Compact and the forthcoming banking union, together
with improved regulatory frameworks,” he said.
In prepared remarks that largely focused on macroeconomic
modelling, Coeure said policymakers still lack the tools that could
offer insights into the consequences of tough economic adjustments.
“Who will bear the cost of the much-needed sovereign and private
deleveraging? To what extent will the social cost of the crisis bear on
political outcomes, and thus on economic policy decisions? How much
fiscal risk-sharing can be accepted by the people of Europe, and what
should be the optimal combination of inter-temporal risk-sharing through
balanced budget rules, ‘horizontal’ risk-sharing between countries (such
as through the ESM), and ‘vertical’ risk-sharing through a common fiscal
capacity?
“To answer such crucial questions, we would need to plug a
political economy model into a rich description of the euro area economy
and financial sector, disaggregated at country level. We don’t have this
in our toolbox,” Coeure said.
— Frankfurt bureau: +49 69 720 142; email: ccermak@mni-news.com
[TOPICS: M$X$$$,M$$EC$,MGX$$$,M$$CR$]
