mario draghi : challenges of surveillance and coordination introductory comments by mr mario draghi, governor of the bank of italy and chairman of the financial stability board, at the vith international symposium of the banque de france on “ which regulation for global imbalances? ”, paris, 4 march 2011. * * * the recent crisis has greatly raised our awareness of two processes that have been shaping the world economy : first, the growing interconnections between economies, that make the global system vulnerable even to local shocks ; second, the move towards a multi - polar setting in which no single dominant politico - economic power exists and new subjects, such as the fast - growing emerging economies, are coming to the fore. both processes are a reflection of fundamentally benign developments, such as free trade, free capital movements and the spreading of technological innovation which have brought enormous benefits to the world economy. however, as the crisis has forcefully shown, the potential for inherent instability is greater ; and the damage that may result from this instability is too large to ignore. in the past decades, after the end of the bretton woods regime, weak forms of policy cooperation prevailed. in terms of the international monetary arrangements in place, it was a “ non - system ”. for a long time, stronger forms of international policy coordination were deemed unnecessary : many theoretical and empirical analyses in the 1980s converged to show that any gains from such macroeconomic coordination were likely to be of modest size. however, we may now need to revisit that fairly sceptical conclusion. in the new global environment, policies ( and policy errors ) in individual economies can have substantial spillover effects. moreover, the costs of uncoordinated policies may increase in a non - linear fashion if those policies lead to large systemic breakdowns. in my view there is one main, simple lesson we should take from the crisis : if we want to preserve the gains brought by open, competitive markets on a global scale, we need stricter and more effective international cooperation. the common response to the crisis was a quantum leap forward in international economic relations. with a coordinated, prompt and synchronous set of policy measures we managed to avoid the worst consequences for the global financial system and the world economy. as the situation improves, it would be naive to think that we can now go back to the previous loose coordination. there continue to persist underlying “ fault lines ” ( to use the words of raghuram rajan ) that

ambitious and comprehensive discussions on possible avenues for the reform of the international monetary system. let me conclude by saying that in all the above fields europe can and should bring to the international debate a wealth of experience. in europe, we have come – in some cases rather belatedly – to the realization of the close interdependence among our economies and of the consequent need for effective rules and governance. the single currency is acting as a powerful device to reinforce surveillance, coordination and the peer review process in an institutional setting where economic policy decisions remain to a very large extent in the national domain. this makes europe a natural laboratory for experimenting solutions that can be of use at the global level as well. bis central bankers ’ speeches