Ewald Nowotny: Boosting EU competitiveness - the role of the CESEE
countries
Opening remarks by Prof Dr Ewald Nowotny, Governor of the Central Bank of the Republic
of Austria, at the Conference on European Economic Integration (CEEI) 2015, Warsaw,
15 October 2015.
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Dear President Belka,
Ladies and gentlemen,
• Let me express a very warm welcome to this joint event also on behalf of the
coorganizer, the Oesterreichische Nationalbank. Cooperating on a joint project is
always a great opportunity to learn from each other, to establish contacts with new
people and to view one and the same topic from different angles. The impressive
conference program that we have on the agenda today and tomorrow is excellent
proof of the benefits of such joint ventures.
• But changing the setting of a well-established conference series may also be
somewhat risky. I am therefore very glad to see that many of the traditional
participants in the OeNB's Conference on European Integration have joined us here
in Warsaw.
• I would like to thank President Belka and the conference team at the Polish central
bank for their tireless efforts in making this event happen and for their great
hospitality.
• Both conference series, the OeNB's Conference on European Economic Integration
and the NBP's Conference on the Future of the European Economy share a
common focus on the path of future integration in Europe.
• Since its very beginning, the European integration process has been a dual process
of both deepening and enlargement. What started out as just a small community of
no more than six countries with a very narrow cooperation focus aimed to prevent
any future wars in Europe has now reached a stage where the European Union
counts 28 members and where monetary union and banking union have become a
reality for a subset of 19 countries.
• Even more importantly, we have found a way to deal with the fact that EU Member
States proceed with integration at different speeds. In particular the euro area
countries have further deepened their integration, for example via the Single
Supervisory Mechanism (SSM), which later may attract additional members. This
paves the way for progress even in view of diverging opinions while respecting the
different political and economic conditions of the member countries.
• I fully agree with my friend Marek that the two biggest challenges that the EU and
especially EMU have to tackle today are anemic growth and uncertainties relating to
the future of EMU and also of the EU.
• The growth perspectives are directly related to the ECB's mandate, which has price
stability as a prime goal. The ECB - and many other central banks - define price
stability as an inflation rate of below, but close to, 2 %. For 2015 our inflation
forecast for the euro area is 0.1%, for 2016 it is 1.1%. So we will clearly miss our
target. A main cause for this is the dramatic fall in the price of oil and raw materials,
which central banks clearly cannot influence. But core inflation rates are also clearly
below our target. It is obvious that under such a constellation we need stronger
economic growth, which should help reduce unemployment and bring us closer to
our goal of price stability. ECB is using the monetary policy instruments available -
but it is quite obvious that in the current macroeconomic situation additional sets of
instruments are necessary. These include structural measures - and here we are at
the heart of the conference topic: competitiveness. But let us not forget that
economic growth depends not only on the supply side, but also on the demand side
and the institutional settings of an economy.
• With respect to the uncertainties regarding the future of EMU and the EU, the
severe crisis we experienced has reminded policymakers of the pitfalls of an
incomplete monetary union. President Belka already mentioned the "Five
Presidents' Report", which highlights four pillars: an economic union that promotes
convergence and social cohesion, a financial union that integrates banking and
capital market regulation, a fiscal union that supports the soundness of public
finances and a political union that strengthens democratic accountability and
legitimacy.
• Suddenly many good ideas are on the table to push the European integration
process further. But these different approaches will need to be developed in more
detail and will have to pass the reality check. In this crucial moment with discussions
still ongoing, it is up to research to come up with feasible approaches.
• The OeNB, for example, hosted another conference just a couple of weeks ago with
the aim of stimulating academic debate on ways to proceed with integration.
Throughout the event, which was entitled "Toward a Genuine Economic and
Monetary Union," a broad consensus emerged about the need for a fiscal and
economic policy framework that combines risk reduction and risk sharing. In other
words: a genuine EMU needs more discipline and solidarity.
• And here I am coming back to today's conference topic - "Boosting EU
competitiveness." I see the ongoing integration process as a central precondition for
ensuring competitiveness in the long term. While competitiveness is largely a
challenge for national polices, European policies can and need to deliver their
important contributions to this overall aim.
• At the euro area level, this will require steps to complete monetary union. Diverging
economic developments and unbalanced growth models as well as the lack of
correcting and equilibrating mechanisms were the origin of the current crisis and
seriously threatened Europe's competitive position.
• At the EU level, the policy challenge will be to encourage trade within the EU and
with the rest of the world with the aim that countries benefit from the division of tasks
and from economies of scale, while at the same time shielding European exporters
from the repercussions of international crises. This requires a high degree of
regional and sectoral diversification of exports. The recent automobile scandal is a
cautionary tale of how quickly the benefits of trade integration may turn into adverse
contagious effects.
I am very much looking forward to the contributions to these issues by our speakers
•
from central banks, international institutions and academia and to the interesting
discussions I am sure we will have in this inspiring setting.