ANNUAL REPORT 2008 - Polymer Bank Notes of the World

On a number of occasions in 2008, theEurosystem stressed the risks and distortionsrelated to the persistence of global imbalances. Italso confirmed its full support for a cooperativeapproach to ensure an orderly adjustment ofglobal imbalances. In particular, the Eurosystemrepeatedly called for policies aimed at increasingprivate and public savings in countries withcurrent account deficits, the implementation offurther structural reforms in mature economieswith relatively low potential growth, measuresto increase domestic demand in emergingmarket economies with large current accountsurpluses, improved capital allocation in thesecountries, and a better appreciation of risksmore generally. In the context of the ongoingreflections on how to improve the internationalfinancial architecture (see below), in which theECB and other Eurosystem central banks areparticipating, the Eurosystem has underscoredthe importance of ensuring that such animprovement also enhances macroeconomicpolicy discipline, in addition to fosteringfinancial market discipline. A strengthenedmultilateral economic surveillance frameworkshould help to ensure that economic policies,especially in systemically important countries,are stability-oriented and sustainable.Finally, the euro area itself is subject tointernational policy surveillance exercises. In2008 both the IMF and the OECD conductedregular reviews of the monetary, financial andeconomic policies of the euro area, as acomplement to their reviews of the individualeuro area countries. The Article IV consultationsof the IMF and the review by the OECD’sEconomic and Development Review Committeeprovided an opportunity for useful discussionsbetween these international organisations andthe ECB, the Eurogroup presidency and theEuropean Commission. Following thesediscussions, both the IMF and the OECDproduced individual reports assessing the euroarea policies. 5INTERNATIONAL FINANCIAL ARCHITECTUREThe financial turmoil led to a wide-rangingdebate on the set-up and functioning of theinternational monetary and financial system.The EU Heads of State or Government agreedat their informal meeting in Brussels on7 November 2008 to coordinate their responsesto the financial crisis and to implement commonprinciples upon which to build a new internationalfinancial system. On 15 November the leadersof the G20 countries convened in Washington,D.C. for their first ever summit on financialmarkets and the world economy. They calledfor action in the areas of financial regulation andmacroeconomic policies and underlined theircommitment to free trade. The follow-up workto this summit has been organised through fourworking groups reporting to the G20 finance andcentral bank deputies, who prepared the meetingof the G20 finance ministers and central bankgovernors in spring 2009.In response to calls from the IMF’s members,concrete changes were made to the Fund’sfacilities for financial support. In October anew financing instrument was created, theshort-term liquidity facility. The purpose ofthis instrument is to provide quick-disbursingfinancing for countries with strong policies anda good track record that are facing temporaryliquidity problems arising from developments inexternal capital markets. As well as establishingthis new instrument, the Fund embarked on areview of the various aspects of its lending role.Furthermore, it provided financing to some of itsmember countries, including Belarus, Hungary,Iceland, Latvia, Pakistan and Ukraine, throughits regular standby arrangements.Various efforts to reform the IMF continuedin 2008. Key areas for reform which werediscussed included IMF surveillance, theFund’s lending role, the governance of the Fund(including quotas and voice), and its income andexpenditure framework. Agreement on theseissues has been pursued through discussionsboth inside the IMF and in other fora, suchas the G7 and G20, with the ESCB and theEurosystem playing their part by monitoring and5 “Euro area policies: 2008 Article IV consultation – staff report”,IMF, August 2008 and “Economic survey of the euro area”,OECD, January 2009.178 ECBAnnual Report2008