The G20 has made a quantum leap in creating the new premier global economic group. The aspect that impresses him most about this group is the virtually universal consensus on global economic issues such as what constitutes the appropriate response to the crisis.
He said that the G20 has made a quantum leap in creating the new premier global economic group. The aspect that impresses him most about this group is the virtually universal consensus on global economic issues as for instance the appropriate response to the crisis.
There is agreement that macroeconomic policies at the domestic level need to be consistent with the objective of global financial and economic stability. Medium-term and long-term sustainability in domestic macroeconomic policies will have to prevail. A renewed medium-term perspective should guide macro-economic policies from now on. Like financial regulation, policies should not amplify economic fluctuations.
He also mentioned that there is a need for structural reforms as it is ultimately the responsibility of individual economies. The crisis has reduced some of the imbalances almost automatically. In the euro area, economies with wide current account imbalances – including Spain – have suffered relatively more than others.
He remarked that the complexity of the international financial crisis and the synchronized weakening of the real economy have put banks in a complex and exceptional position. In the short-term, with the economic slump and the high levels of unemployment, non-performing loans will be on the rise. And pressure on banks’ balance sheets will keep increasing. The business model will have to adapt to the new competitive reality and the international conditions. This may translate into stricter cost management and the use of new technologies. One of the most important tasks will be to embark on a profound restructuring of a number of medium-sized institutions. Restructuring processes ought to aim at tighter synergies and economies of scale. The effort that needed is formidable, but Spain has witnessed numerous processes of this type in the past, which have resulted in highly successful business models.
He concluded by saying that the crisis has debilitated the real economy and has deprived our citizens of confidence. Every business activity is by its very nature an act of trust, an expression of confidence. As regards bankers, by granting loans more actively to entrepreneurs they can contribute to transmitting and inspiring confidence to the economy at large. Being part of the euro area and the European Union will help in this process.”
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