ewald nowotny : “ bretton woods @ 70 – regaining control of the international monetary system ” welcome remarks by prof dr ewald nowotny, governor of the central bank of the republic of austria, at the conference on “ bretton woods @ 70 – regaining control of the international monetary system ”, vienna, 27 february 2014. * * * ladies and gentlemen, i am very pleased to welcome you to the conference on “ bretton woods at 70 – regaining control of the international monetary system ”, which is hosted jointly by the reinventing bretton woods committee, the austrian federal ministry of finance and by the oesterreichische nationalbank. i am particularly delighted that we have managed to attract so many distinguished speakers from around the globe, among them academics, market participants, as well as policymakers. you are all here in vienna today to discuss with us, from different angles, the evolution of the international financial system, both in a historical and in a forward - looking perspective. let me thank in advance to all our speakers for their contributions. i feel also honored that such a great number of participants have accepted our invitation to attend. our conference will be organised in six sessions. we will start out with a historical account of the role of the bretton woods system, including the bretton woods institutions, namely the international monetary fund ( imf ) and the world bank. subsequently, session two will be devoted to the euro area ’ s role in the international monetary system. the creation of the euro in 1999 was one of the biggest changes in the international monetary system since the breakdown of the bretton woods system in the early 1970ies. session three will take up the issue of global adjustment in an increasingly multipolar world. session four will deal with the management of capital flows, reserves and exchange rate volatility, which is a topical issue given the current problems in some emerging economies. session five will cover the topic of preventing the middle income trap. session six shall draw conclusions and provide an outlook on the possible future role of the international monetary system and the lessons learned from the bretton woods system. from the 60th to the 70th anniversary : taking stock of the past decade almost exactly ten years ago, in june 2004, we held a conference here in vienna, at that time to commemorate the 60th anniversary of the bretton woods institutions – some of you have joined us already at this conference. i would like to use this opportunity and take stock of these past ten years

– particularly at the present juncture of considerable model uncertainty – to any mechanical rule - based approaches. the latter are usually taylored to specific views of how the economy operates and are therefore less likely to perform well in periods where these views might have to be adapted. monetary policy rules usually derive their policy recommendations from a very narrow set of economic indicators only. in many cases they rest heavily on the output gap and the equilibrium real interest rate, which, as i have pointed out, are potentially very unreliable concepts at the present juncture. financial stability third, the financial stability of the euro area has been enhanced by the single currency ; the latest developments have provided indisputable proof of this. generally, the implementation of monetary policy in the euro area has proved highly efficient. the eurosystem has successfully introduced a market - oriented, modern and flexible operational framework. the money market has clearly benefited from this in its refinancing operations. short - term interest rates have totally converged and the money market within the euro area has become fully integrated. as a result, we have an efficient and liquid euro money market, and banks benefit from the conformity of market conditions. the euro money market has widely used daily reference indices for interest rates, notably eonia for overnight transactions and euribor for transactions with longer maturities. these euro area indices were swiftly accepted on the market and form a common basis for pricing. market participants are now able to manage their day - to - day funds in an efficient manner, incurring relatively low costs. the rapid integration of the euro area's money market was also supported by the developments in the payment systems infrastructure, above all the establishment of the target system operated by the escb, which links the national real - time gross - settlement systems with the ecb's payment mechanism. the smooth functioning of the settlement of cross - border payments allows banks to trade safely throughout the euro area. therefore the money market has gained a clear cross - border orientation, and some large banks have started to act as " money center " banks, based on a euro areawide scope of activity. the broadening of the market and the increasing share of cross - border transactions have had a positive impact on the provision of liquidity : the wider euro area money market can now absorb liquidity shortages more easily than before, as banks can borrow more readily from foreign institutions or vice versa. when the terrorist attacks in the united states triggered some threats to the short - term