"Financial regulation" with John Eatwell and Jonathan Portes

Wednesday, May 15, 2013 - 12:15 to 14:15

Our May roundtable was organized in FEPS premises, on 15th May 2013. It was chaired by Stephany Griffith-Jones and Antolin Sanchez Presedo MEP (replacing Liem Hoang Ngoc MEP).

Lord John Leonard Eatwell is one of the founders of the Institute for Public Policy Research (1988). He joined the House of Lords as a life peer in 1992 and is today Labour's frontbench spokesperson for Treasury and Economic Affairs in the House of Lords. He is also currently a director of SAV Credit Limited and an adviser to the private equity firms Warburg Pincus & Company International Ltd and Palamon Capital Partners.  He made a presentation on "Growing the Eurozone", underlying the financialization and the growing instability of the economy. He also stressed the two serious errors of the euro system and the repo market: first, the assignment of all eligible euro-denominated sovereign debt instruments issued by the Eurozone central governments to the same (highest) liquidity category; second, the excessive increase in the valuation haircut when the remaining maturity of the collateral increases. In his view, requirements of a workable monetary union include a strong central bank; a treasury function to manage an all-union bond market, “Stealthy” transfers from the prosperous to the poor via a substantial budget, an all-union employment provider and easy migration.

Jonathan Portes started his career in HM Treasury in 1987 before becoming Speechwriter and Private Secretary to the Chancellor of the Exchequer in 1991. After having held an advisory position on debt management issues at the U.S. Department of the Treasury, he led an influential project on migration for the Prime Minister’s Strategy Unit (1999) and later became Director of the National Institute of Economic and Social Research.

In his presentation, he stressed the need to restore (balanced) growth in periphery, especially through public sector reform (Greece, Italy), labour market reform (Spain, maybe Ireland). He called on a sensible Eurozone macro policy that would balance needed consolidation in periphery with expansion elsewhere and put in place (much) looser monetary policy from ECB. He underlined that although there is increasing consensus that euro requires fiscal union and banking union, there is no consensus on what either means and what degree of political union is required to make this work. Growth strategies for the medium term need to meet 3 challenges: People (education, transition to work, and youth unemployment), the welfare state (public service productivity, financing, and working longer) and Economic dynamism (innovation, investment, and immigration).

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