European finance in the new international monetary and financial system
I have been asked to say something about the future of European finance. Since I cannot remotely predict how things will turn out, I shall instead sketch some of the forces that will shape the environment for the European financial system over the next couple of decades. Rather than attempting to be exhaustive, I will concentrate on four areas in which politics is intertwined with policy: the legacy and longevity of the crisis; the geopolitics of the evolving world system; the fragilities in the European monetary and credit system; and the problems inherent in a rules-based regulatory regime. That leaves out technological change, but will be more than enough to ground my central points.
They are that the fortunes of European finance will be precarious unless there reform goes broader and deeper. Internally, reform is imperative in order for the monetary union to be sustainable. Externally, reform is needed to ensure a place for European policymakers at the new world’s Top Table. Those in the financial industry and elsewhere who resist reform because of the distribution of its short-term costs and benefits need also to weigh the medium-to-long term prospect.