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Report on the 2015 conference

Summary of the Conference programme

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Opening address by György Matolcsy the Governor of the Magyar Nemzeti Bank - opening address video

After welcoming all invitees György Matolcsy stated in his presentation: Now, as the European Central Bank has launched its monetary policy programmes, Europe needs a new narrative. The Governor stated that in 2010 the new Hungarian government had to face the dilemma of choosing between orthodox or unorthodox measures to manage the crisis. He believed that using only conventional measures would have destined Hungary to fail; successful crisis management needed three elements: structural reforms, new jobs and political stability.

 Presentation of Benoît Coeuré, Board Member of the European Central Bank: Monetary policy in a genuine European Monetary Union

The further integration of the European Economic and Monetary Union – commonly known as the euro area – and the deepening of the monetary union is inevitable – said Benoît Coeuré, Board Member of the European Central Bank. If the fiscal policy, together with the government debt, is not constrained, and also if the fiscal policy is inefficient, all parties will lose out, as such debts may accumulate that generate immense problems in certain countries. The French financial expert believes that it was unavoidable to strengthen the banking supervision role of the ECB. Based on its broader powers as a supervisor, the ECB will be able to uncover weak banks, which helps reduce the risk of financing so-called “zombie banks", thereby strengthening the operational efficiency of the banking system – he pointed out.

Presentation of Ewald Nowotny, Governor of the National Bank of Austria: CESEE 25 years after the fall of the iron curtain – European integration remains a win-win strategy - video of the presentation

Ewald Nowotny, the Governor of the National Bank of Austria conferred at the conference about the huge transformation that the eastern and southern regions of Europe have undergone in the last 25 years. Many investors – particularly those from the US – have not recognised this fact to date and treat the countries of the region uniformly as the "developing European" portfolio, despite the fact that there are major differences between the economic situation of even two neighbouring countries - stated Nowotny.

Presentation of Erdem Başçi, Governor of the National Bank of Turkey: On the value of price stability

Erdem Bas¸çi, the Governor of the National Bank of Turkey, elaborated on the importance of inflation management – at the Lámfalussy Conference. He emphasised that there were wide-ranging and well-known instruments to crusade against high inflation. On the other hand, it is less obvious how to manage deflation, i.e. the economic phenomenon that at present threatens the European economy the most. The Governor of the Central Bank of Turkey is of the opinion that a central bank can do the most for the benefit of its country's economy by ensuring stability in any case.

Presentation of Carlos da Silva Costa, Governor of the National Bank of Portugal: Reform and prosperity in the monetary union

Carlos da Silva Costa, the Governor of the National Bank of Portugal, made a presentation on the risks of the various measures. He emphasised the responsibility of the economic experts in developing sustainable measures that do not lead to social conflicts within 6-7 years. He also pointed out: the reforms to be implemented in the European economies will have an unfavourable impact on the EU member states that are slow to react.

Presentation of Boštjan Jazbec, the Governor of the National Bank of Slovenia: On the effectiveness of non-standard monetary policy measures in Slovenia

Boštjan Jazbec, the Governor of the National Bank of Slovenia, recalled Slovenia's experiences and the lessons learnt from the introduction of euro in 2007. On the one hand, he considers it as a lost opportunity that a vast part of the capital that poured in at that time was not used properly, the weight of which is still felt by Slovenia. Since then they have learnt how to "utilise other people's money" efficiently. The Governor of the Slovenian central bank mentioned as an interesting point that state ownership in the Slovenian Banking sector had been high from the outset, therefore at present they were contemplating privatisation.

Presentation of Boris Vujčić, the Governor of the National Bank of Croatia: Crisis and central banking paradigm

Boris Vujcˇic´, the Governor of National Bank of Croatia illustrated on the example of Croatia that – contrary to the textbook example – it is possible to pursue an anticyclical monetary policy even in a small open economy with fixed level of interest rates. However, he also emphasised: this alone is not much, if no other structural measures – belonging to the government's competence – are taken, as the central bank's powers are limited.

Presentation of Erkki Liikanen, the Governor of the National Bank of Finland: The independence of monetary policy and the banking union

Erkki Liikanen, the Governor of the National Bank of Finland, was also concerned about the threat that the governments of the member states may interpret ECB's bond purchase programme as a measure that relieves them of introducing the necessary reforms. At the same time he also urged closer integration that would entail the development of a new and stricter regulatory framework, which may help avoid that the currently available liquidity flows to risky areas, e.g. contributing to another property market bubble.

 Panel discussion

Moderator: Csaba Lentner, professor

 Participants:

    • Agnes Bénassy-Quéré, Professor CES, Centre d'Economie de la Sorbonne

    • Dániel Palotai, Executive Director of the MNB in charge of monetary policy

    • André Sapir, University Professor, Université libre de Bruxelles

    • György Szapáry, Ambassador, former Deputy Governor of the MNB

 Dániel Palotai, the executive director of the MNB said at the panel discussion of the conference: if the large central banks continue the quantitative easing, the Hungarian monetary policy will also have wider room for manoeuvre. Dániel Palotai emphasised: One of the key duties in Hungary is to integrate the small- and medium-sized enterprises (SME) tighter in the global production chains. Roughly two-thirds of the employees work for SMEs, therefore it is extremely important to make as many Hungarian SMEs as possible to become the suppliers of large multinational enterprises – he pointed out.

André Sapir, a teacher of Université libre de Bruxelles – who also used to be the advisor of two former chairmen of the European Commission – stated: it is a correct, albeit somewhat belated, decision of the European Central Bank (ECB) to commence on the quantitative easing (QE) as the last one of the world's large central banks. Under the present circumstances unconventional measures, such as the ECB's asset purchase programme, are unavoidable – he said.

György Szapáry, former Deputy Governor of the MNB, noted: as regards the accommodating monetary policy of the world's large central banks it is to be feared that the present abundance of liquidity may lead to an asset price bubble over time.

 Closing summary by György Matolcsy the Governor of the Magyar Nemzeti Bank - video of the closing speech

In his closing speech György Matolcsy, Governor of the central bank, recalled the remark of Ewald Nowotny, Governor of the Austrian central bank, according to which the present circumstances require unconventional thinking from the central banks' managers. In his closing remark he thanked the participating lecturers for raising the professional quality of the Conference with their presentations.