6th Anatolia IML conference

ANATOLIA IML conference on the financial crisis

28 September, 2011

The conference organized by the Anatolia Institute of Management Leadership (IML) at the American College of Thessaloniki (ACT) in collaboration with the Hellenic Bank Association (HBA) was a great success. The topic covered was the presentation of the collective volume, The Global Crisis, The Eurozone Crisis and the Greek Banking System prepared by the Hellenic Bank Association. The Anatolia IML provides advanced education and training to senior managers and leaders in both the private and public sectors in Southeast Europe and this was the 6th annual conference which they hosted. The collective volume, edited by Mr. Gikas Hardouvelis and Mr. Christos Gortsos, included 34 articles covering 7 modules.

The conference’s speakers were Dr. Archontis Pantsios, Dean for Academic Affairs and Student Services at ACT; Dr. Gikas Hardouvelis, Professor at the University of Piraeus and Chair of the Scientific Council of the Hellenic Bank Association; and Dr. Christos Gortsos, Associate Professor at Panteion University and Secretary General of the Hellenic Bank Association. The panel discussion was moderated by Mr. Paschos Mandravelis, a Kathimerini journalist.

In his speech, Dr. Pantsios covered the “Systemic Crises and Conflict in the Eurozone”. After an introduction into the history and common elements of unsuccessful fixed exchange rate systems (the Gold Standard, Bretton Woods), he presented the controversial characteristics of Euro Zone’s architecture, which render it susceptible to economic shocks. He concluded that a common currency system control, as in the case of Europe’s Economic and Monetary Union, should not be limited to the deficits in the current account balance of some member-states, but should also cover the corresponding surpluses of other members (like Germany), so as to avoid large imbalances. A sustainable solution for the Euro Zone will be feasible only when mechanisms for the transfer of financial resources from member-states with surpluses to the ones with deficits will become available along with the adoption of policies which increase the demand in member-states with surpluses. In this way, countries with deficits will avoid long and painful adjustments which potentially might lead to the diffusion of the recession.

Dr. Hardouvelis, in turn, referred to the history of the crisis and analyzed how the current deadlock has occurred. He characteristically mentioned that during the previous decade markets held a uniform view of the Euro Area member-states , as seen by the almost zero interest rate spreads over 10-year German Bunds. Until the international crisis of 2008, the well-advertised market discipline within the Euro Area was non-existent. Interest rates were low, which led to extravagant private and public borrowing, creating bubbles and pushing the countries’ competitiveness in diverging instead of converging directions. To early success and security of the Euro Area acted as a sleeping pill on politicians to procrastinate the necessary reforms in individual countries. Nowadays, markets are pessimistic on the future of the Euro Area and are focusing on all the negatives, i.e., the unsustainability of public and private debt of certain member countries, the external imbalances or the inability of European politicians to take quick and drastic actions to contain the crisis.

Dr. Hardouvelis mentioned that European politicians are belatedly fixing the Euro Area architecture with a fifteen year lag and are under the illusion, particularly the hard-liners, that the new architecture would make the crisis go away. Yet the crisis is gradually getting bigger and bigger, threatening even large countries like Italy and Spain. This is because the necessary actions to contain the crisis create moral hazard and contradict the attempted design of a new austere long-run architecture without fiscal transfers. Yet economists of all political persuasions agree on the correct strategy: First solve the crisis, which is both sovereign and banking, and then worry about the long-term architecture. Dr. Hardouvelis described ways to enhance the role of the European Central Bank and of the European Financial and Stability Fund. He mentioned the need to create a meaningful official adversary to market participants, a role which the ECB cannot play. He predicted a bigger future role for the EFSF or for Eurobonds and concluded that today European politicians are finally recognizing that the crisis requires different actions from the traditional rules of conduct, which in the past made some of the countries competitive and prosperous. The Euro Area can be saved.

Dr. Gortsos argued that the institutional strengthening of the banking system, and generally of the financial system, on an international, European and national level has become necessary due to the recent international financial crisis. He underlined that ‘regulation is not a matter of quantity’; the new regulatory measures should be appropriate and to the point. He also stated that special emphasis should be given to the qualitative upgrade of the supervision exercised in a number of states. The problem during the crisis evolution in many states, and definitely not in Greece, has been not the lack of norms but rather their diligent implementation.

Finally, with reference to the reconstruction of the European Economic and Monetary Union, he mentioned that some of the proposals on the table are not in accordance with the present Treaty governing the operation of the European Union. Their subsequent implementation might lead to the treaty’s review, revealing dangers for the Union (mainly concerning decision-making delays).

The collective volume “The Global Crisis, The Eurozone Crisis and the Greek Banking System,” is available in a .pdf version at the Hellenic Bank Association website www.hba.gr.

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