martin redrado : financial turbulence – impact on developed and emerging economies ( opening address ) opening address by mr martin redrado, governor of the central bank of argentina, at the central bank of argentina 2008 money and banking conference “ financial turbulence – impact on developed and emerging economies ”, buenos aires, 1 september 2008. * * * during the last years, we have consolidated this conference as an international forum, which includes some of the most renowned academics and monetary policymakers from developed and emerging economies. i very well understand the effort that many of you have made to be here, so i would like to thank all participants and, very especially, those who, coming from abroad, join us every year. organizing this conference is not an isolated effort. this is part of a comprehensive strategy of being an active professional member of the international financial community. the title of this conference was chosen last year, and it probably is more applicable now than then. the financial turmoil of the past year, which very clearly affected some specific sectors in the u. s., does not recede, and keeps spreading to other markets and regions in the world. there is a general consensus that global economy now poses one of the greatest challenges in the post - war period. financial disruptions, through tighter credit conditions and undermined confidence, have imbued the real economy with recession in the main developed countries. the situation is worsened by renewed inflationary pressures, partly due to an unprecedented rise in commodity prices. in this process, there is a convergence of structural factors and cyclical forces associated to the prosperity of the global economy in the previous period. due to some of these factors and to the implementation of sounder and more prudent macroeconomic policies, emerging economies turned out to be relatively resilient. however, it is not realistic to think that they can be completely “ decoupled ” from the events in the developed world, especially if the external context continues to deteriorate. a characteristic of crises is that great efforts are devoted to go through them as quickly as possible. this may occasionally sow the seeds for future problems. in turn, these periods plainly reveal structural weaknesses. looking forward, one of the crucial issues to focus on is how to unwind the massive interventions and collaterals used by the most important central banks. in my view, the extensive liquidity provided was a necessary response. it is arguable whether or not there was a late response and if it would have been

, compliance with the preventive arm of the stability and growth pact. the budget targets set out in last september ’ s update to the 2018 economic and financial document diverge from the rules of the pact ’ s preventive arm. instead of moving towards equilibrium, the structural deficit – that is, net of the effects of the economic cycle and other temporary factors – would increase by 0. 8 percentage points of gdp in 2019 and stabilise in the following two years. in a letter dated 5 october, the european commission requested a revision of the budget targets. the government confirmed the programme for the next three years by publishing the 2019 draft budgetary plan. on 18 october, the commission noted a ‘ clear and significant deviation from the recommendations adopted by the council as part of the stability and growth pact ’ and asked the government to provide a justification. given the deviation, and considering that, as in the past, the reduction in the debt to gdp is not in line with the numerical benchmark, the debt reduction rule will not be respected. on 22 october, the government confirmed its plans, citing the need to support the economy, and engaged to take all the measures necessary to avoid overshooting the projected net borrowing level. on 23 october, the commission issued a negative opinion on the draft budgetary plan. as well as noting the failure to comply with the rules of the pact for 2019, the commission expressed the opinion that some of the prospective measures ( notably the tax amnesty and the change in pension requirements ) could represent a step backwards with respect to past reforms and that, should the downside risks for economic performance projected by the parliamentary budget office materialise, the deterioration in the public finances in 2019 would be greater than forecast by the government. the commission asked italy to present a new draft budgetary plan by 13 november. on 29 october, the commission also announced that it would re - assess italy ’ s position with regard to the debt reduction rule and asked the country to submit all the elements it regarded as significant for an overall assessment of compliance with european budget rules. on 5 november, the eurogroup stated that it was in agreement with the european commission ’ s assessment and hoped that, through an open and constructive dialogue, italy would cooperate with the commission in drawing up a new draft budgetary plan that was compliant with the rules of the stability and growth pact. were the commission to re - issue a negative opinion on italy ’ s plan, it could recommend that the council open an excessive deficit procedure