Economic Policy Coordination - Financial Supervision in the EMU
French-German Economic Forum
The discussion was based on two presentations: ECONOMIC POLICY COORDINATION IN EMU, by Charles Wyplosz and FINANCIAL SUPERVISION IN EMU, by Karel Lannoo. Charles Wyplosz recalled that the context of economic policy has changed since the 1980s: it is now admitted that Europe is not an optimal currency area, and the unemployment has become the prime preoccupation. He next presented two reaction functions each estimated on a panel of future members of the EMU, for the period 1980-1997. Mr Wyplosz went on to explain that the adoption of the Stability Pact and the appointment of European Central Bankers were made in view of the predictable changes in the policy mix, fiscal policy becoming more effective and externalities across countries stronger. Karel Lanoo explained that monetary unification automatically raises the question of prudential supervision: though financial markets are highly interdependent, supervision remains national, but monetary powers have been transferred to the federal level. In his conclusion, Mr Lannoo was unfavourable towards the centralisation of supervision, but in favour of coordination across the various supervisory agencies as well as with the ECB and the national central banks, at the national and European levels.
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