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European round-up

Jean-Philippe Cotis

October 2007 | Issue 8
OECD highlights ‘pivotal woes’

While swift and forceful interventions by central banks have helped contain turbulence on the global financial markets it is too early to gauge their effects, said OECD Chief Economist Jean-Philippe Cotis. Presenting an interim assessment of the economic outlook for OECD countries on 5 September, Cotis highlighted the fact that this is happening against a global background of strong economic momentum, so OECD growth projections are not heavily revised even though the future may be less buoyant and more uncertain. Uncertainty in the US, upbeat expectations in the euro area, and continued expansion in Japan will provide the framework for growth in the near future, according to the report.
ECOFIN meeting in Porto, Portugal © Portuguese presidency

October 2007 | Issue 8
Stability in the face of volatility

The Ecofin Council’s informal meeting of 14 and 15 September 2007 in Porto, Portugal, brought together finance ministers and central bank governors from the 27 Member States to discuss the recent wave of volatility sweeping across the Atlantic from the United States, as well as the role of public finance reforms in boosting competitiveness. “We are experiencing a period of volatility and reappraisal of risk in global financial markets, triggered by difficulties in the sub-prime mortgage market in the United States,” the ministers said in a statement. “However, macroeconomic fundamentals in the EU are strong. World growth is robust, with sustained dynamism in emerging economies and in Europe expected to continue to balance the [US] slowdown.” The gathering also discussed the reform efforts Member States are making in the area of public finance and IMF governance issues.
6th Euro-Med Ministerial Conference © Portuguese Presidency

October 2007 | Issue 8
Euro-Med discusses common challenges

Finance ministers from the EU and their Mediterranean partners met in Porto on 15 September 2007 to discuss co-operation and coordination in the fields of sustainable growth and job creation. “Our discussions demonstrate that we share common challenges and have much to learn from each other in the implementation of structural reforms,” observed Portuguese Finance Minister Fernando Texeira, whose country currently holds the EU presidency. Despite challenges, the countries of the southern Mediterranean have recorded impressive economic growth rates consistently above 4% in recent years. However, this has not translated into enough jobs to dent unemployment figures among their young populations. The EU has its own challenges of dealing with its ageing population and speeding up its economic growth.
Shock absorber

October 2007 | Issue 8
Absorbing the shocks of a market correction

In August, the European Central Bank took a series of extraordinary measures to inject liquidity – some €300 billion worth – into short-term financial markets and restore general investor confidence, as the crisis in the US sub-prime market showed signs of crossing the Atlantic. “The euro system has shown its capacity to react both promptly and effectively to these challenges. I am convinced that, given the circumstances, we did the right thing at the right level at the right time,” ECB chief Jean-Claude Trichet told the European Parliament’s Economic and Monetary Affairs Committee. He described the recent turbulence as “a market correction with a significant reappraisal of risk”, due to “an under-appreciation of risk in general”. Given the EU economy’s fundamental health, President Trichet saw no reason to raise interest rates at present but did not exclude the possibility of doing so once financial markets had calmed down.