A question floats among the experts: the current policy modell, with independent fiscal, monetary and regulatory authorities each with their own mandates and without explicit coordination “is it still appropriate?”.
This question, which arises after the crises caused by the covid pandemic and the Russian invasion of Ukraine forms part of the fifth bank report of the ‘Banking Initiative‘ of the IESE entitled ‘The international economic and financial order after the pandemic and the war’, which has been analyzed during a session at the Cercle d’Economia with its authors Giancarlo Corsetti, from the European University Institute; Barry Eichengreen, from the University of California, Berkeley (via telematics); Jeromin Zettelmeyerfrom Bruegel and Xavier Vivesfrom IESE, moderated by the deputy director of EL PERIÓDICO, gemma martinez.
Corsetti explained that it has been shown that the Extraordinary crises cannot only be dealt with monetary policies but fiscal onesbut they have created a growing debt. Eichengreen has warned that the sanctions against Russiathe use of the dollar as a weapon, can cause central banks to opt for other currencies for their transactions, although the alternatives, including the goldThey usually don’t work. All of this would redound in favor of China, which is moving quickly to build an alternative to the system around the dollar, but has not gone mainstream.
Zettelmeyer has affirmed that the European countries will have to make a fiscal consolidation effort, but that, in principle, it is feasible unless there is a recession. Among those who will have to make the most efforts are the “usual suspects” such as Italy, France and, to some extent, Spain. Greece and Portugal, on the other hand, will no longer require it, he has affirmed.
tax adjustments
The report, published by the Center for Economic Policy Research (CEPR) from the United Kingdom explores the way in which pandemic and the war in Ukraine will cause most countries to have to adjust their fiscal and monetary policies. Some countries will have to take ambitious measures to manage their debt, which has grown to deal with different crises.
Related news
According to the report’s authors, while debt remains sustainable in most advanced countries and emerging economies, there are “a subset of countries of the European Union (EU) that will have to make a significantly greater adjustment, in the medium termthan what is currently planned”. In fact, they point out that “the EU tax rules must be reformed to reconcile debt sustainability and stabilization policy while preserving incentives for investment”.
The study highlights the potential threat to the dominance of the dollar as an international reserve currency. But the alternatives to the greenback have, they say, “limited utility” to it. In any case, China has been the first to advance in the global race to develop a digital currency for cross-border transactions” and consolidate its currency as an alternative to the dollar, US banks, and Swift (a messaging platform, communication standards, and products and services that facilitate access and integration, identification, analysis, and compliance with the prevention of financial crimes).