OMFIF’s attention swings back to Europe in October with Economists Meetings in Prague and Madrid, a European governors’ session at the International Monetary Fund/World Bank Meetings in Washington and a visit to London by William White, formerly of the Bank for International Settlements. These coincide with fresh question marks over Europe thrown up by the ambiguous outcome of the elections in Germany and doubts over Enrico Letta’s government in Rome.
As the US hesitates over its monetary policy stance and lurches towards a new compact on public debt and deficits, Europe should be providing a more confident voice on the world stage. Many had hoped for a more resilient Germany after the September poll. Chancellor Angela Merkel has bucked the trend of most other heads of government by confirming her place as Germany’s (and Europe’s) undisputed leader. But, as Michael Stürmer writes in our cover story, we will have to wait before any decision-making force emerges in Berlin. We may once again see central banks moving (reluctantly) towards centre-stage. Francesco Papadia, Ruud Lubbers and Paul van Seters provide contrasting analyses of the Berlin result. Harald Benink explains how implementation of the planned European banking union has become both more urgent and more difficult. Tim Oliver says the much-mooted departure of Britain from the EU would have grave implications for the European Union itself. On a wider front, Gabriel Stein deciphers the contortions of broad money growth in the major advanced economies. Seung Je Hong explains how the Bank of Korea has been using a range of financial indicators to chart a path to stability. Darrell Delamaide describes the back-and-forth debate at the US Federal Reserve on the issue of reining back quantitative easing. John Kornblum reflects on the inevitability of Lawrence Summers’ withdrawal from the race to become next Fed chairman. Luis M. Linde, Governor of the Bank of Spain, explains steps taken for Spanish economic revival including a roadmap for restructuring and recapitalisation of the Spanish banking sector. Eva Zamrazilová and Vilém Semerák focus on new signs of problems in the Czech economy after an initially encouraging recovery from the European recession of 2009. Rahul Shah shows how the fluctuating history of reserve currencies suggests China’s renminbi will come into prominence, while Simon Derrick ponders People’s Bank liberalisation plans. Philip Turner dwells on the implications for monetary policy in emerging market economies of greater integration with the advanced economies. Niels Thygesen outlines difficult challenges ahead as emerging market economies grapple with risks of lower exchange rates and higher inflation. On a more positive note, Fabio Scacciavillani describes how Arabian peninsula states offer considerable benefits for investors seeking stability amid international turbulence.