andreas dombret : statement at the oecd working party 3 - meeting statement by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the oecd working party 3 - meeting, paris, 14 january 2014. * * * dear colleagues, thank you for giving me the opportunity to open the first round of our working group ’ s meeting. let me begin by wishing you a happy new year. in my remarks i will focus on the major oecd economies and address three issues. • first, the current economic situation, taking into account the major economic developments in 2013. here, i can be brief thanks to the excellent background papers the secretariat provided. • second, possible risks to the recovery stemming from financial market developments. • and third, policy requirements to keep up the current growth momentum. in 2013, recovery was underway in the majority of oecd economies – including the euro area as a whole. this positive momentum has been confirmed by the latest oecd leading indicators that were published yesterday. however, growth is still low when compared to the levels achieved before the global financial crisis. in addition, the recovery has been remarkably uneven. the us comes closest to a self - sustaining expansion. here, i would like to emphasize the substantial progress in household deleveraging and the successful correction in the housing markets. both factors will help future growth to be grounded on sound fundamentals. but the fed ’ s caution shows that considerable economic slack probably remains. in the euro area, the recovery is still nascent, muted and uneven. however, a number of crisis countries have left their recessions behind. rebalancing is underway. according to the recent oecd economic outlook, all crisis countries are expected to achieve a current account surplus in 2014. this would equal an average improvement of more than 10 percentage points of gdp compared to 2008. thus, competitiveness - enhancing reforms are beginning to bear fruit and need to be continued. germany is part of the rebalancing equation. since 2007, the intra euro - area german current account surplus has continuously shrunk from 4 ½ - % of gdp to 2 ¼ - % of gdp. this adjustment has been driven by rising imports. domestic absorption has become a more important driver of economic growth. as business investment is projected to rebound in 2014 and 2015, the rebalancing should proceed. japan is a special case, given its long - lasting deflation. here also

. therefore policy makers should be ambitious to deliver. fighting reform fatigue will be the best insurance against the downside risks. building on the progress made in 2013, we will need to lay the groundwork for a sustained recovery in 2014. economic policies should be geared toward restoring the role of the private sector in the growth process. policies should foster productivity gains, increased employment and higher investment in the real sector. the public sector must be prepared for leaving the driver ’ s seat of the economic developments. as regards monetary policy issues, we will discuss them in detail this afternoon. so i will just make one remark. should the fed and the boe exit from their current extraordinary loose monetary policy stance earlier than other major central banks this would constitute a challenge for communication and expectation management. however, in contrast to a widespread view, a timely exit should be primarily seen as a welcome step towards normalization and not as a “ risk ”. reducing the role of the public sector also translates into tackling its high debt levels. this remains a key challenge. consequently, policy makers need to use the current period of relative calm and make progress in bringing down public debt ratios. in the euro area, the trajectory of public debt has not been reversed yet. in japan, the required adjustment remains particularly challenging, while the us would benefit from long - term financial reforms. banking sector policies must ensure that the sector is well - capitalized and that balance sheets are strong. this is especially important for the euro area ’ s bank - based financial system. with the first steps towards a banking union and the recapitalization measures already implemented, a lot has been done. however, with regard to many european banks there are still signs that markets do not believe that banks ’ non - performing assets have been cleaned up thoroughly. the ecb ’ s upcoming assessment is both a chance to create transparency about banks ’ asset quality and to establish the basis for adequate capitalization. it will contribute to enabling banks to once again perform their role as financiers of the real economy. however, in economic policy there is no silver bullet. i caution against the view that a banking union can solve the crisis the euro area is currently facing. if successfully completed, it will be milestone for european financial integration. but it cannot serve as a substitute for bis central bankers ’ speeches further structural reform and fiscal adjustment. financial and structural reforms need to give incentives for increased private sector investment. in some euro - area economies we will need to reduce