Europe

1
Europes Monetary Union in practice
José Manuel González-Páramo Member of the
Executive Board and Governing Council of the
European Central Bank
14th Osaka City University (OCU) International
Academic Symposium Osaka, 27 October 2006
2
Introduction

• EMU will contribute to the creation of a large
  zone of monetary stability in Europe. The euro,
  in particular, will be a strong and stable
  currency that will foster further economic and
  financial integration among member countries
  (Duisenberg, 1997)
• Has EMU fulfilled these expectations?

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Outline

• Assessing price stability
• Assessing financial integration
• Conclusions

4
Assessing price stability. Establishing
credibility. The ECBs approach

• Full independence
• Specific quantitative definition
• Medium-term horizon
• Two pillars economic and monetary analyses
• Communication - Publication of monetary policy
  strategy- Press conference- Monthly Bulletin

5
Assessing price stability. Inflation expectations
6
Assessing price stability. Predictability
7
Assessing financial integration Its benefits

• Enhances the smooth and effective transmission of
  monetary policy
• Contributes to safeguarding financial stability
• Contributes to smooth operation of payment
  systems
• Fosters financial development

8
Assessing financial integration. The role of the
Eurosystem

• Enhance knowledge and raise awareness
• Regular publication of quantitative indicators of
  financial integration in the euro area
• Act as a catalyst for private sector activities
• STEP initiative, SEPA, European Master Agreement
  for financial transactions
• Provide central banking services
• TARGET, Single list of collateral, CCBM
• Give advice on the legislative and regulatory
  framework

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Assessing financial integration. The current
status (I)

• Money market

10
Assessing financial integration. The current
status (II).

• Government bond market

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Assessing financial integration. The current
status (III).

• Corporate bond market

12
Assessing financial integration. The current
status (IV).

• Equity market

13
Assessing financial integration. The current
status (V).

• Banking markets

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Conclusions

• Has EMU been effective in promoting economic
  stability?
• Yes, the response has allowed the anchoring of
  inflation expectations and a high degree of
  predictability
• But other economic policies are needed sound
  public finances and structural reforms
• Has EMU been effective in fostering financial
  integration?
• Yes, money market is a good example
• But financial integration is still lagging behind
  in some areas (retail, clearing and settlement
  infrastructure)