Olli Rehn Member of the Board of Bank of Finland At the the Reinventing Bretton Woods Committee seminar “The Quest for Normality in an uncertain World?”, Washington, 13 October 2017 Opening remarks in the session “The European Spring?”

1. Bank of Finland
"The European Spring?"
Reinventing Bretton Woods Committee
Washington, 13 October 2017
113.10.2017
Olli Rehn

2. Suomen Pankki – Finlands Bank – Bank of Finland
Euro area has grown since 2013 – now
growth is stronger and broad-based
13.10.2017 Olli Rehn 2

3. Suomen Pankki – Finlands Bank – Bank of Finland
Inflation still subdued, especially core
inflation
13.10.2017 Olli Rehn 3

4. Suomen Pankki – Finlands Bank – Bank of Finland
Rebalancing in the Eurozone
Balance of current transactions with the rest of the world
13.10.2017 Olli Rehn 4
-3
-2
-1
0
1
2
3
4
5
-6
-4
-2
0
2
4
6
8
2005 2010 2015
Surplus countries* (in 2008) Deficit countries** (in 2008) Euro area (right scale)
% of GDP % of GDP
* Surplus countries: AT, BE, DE, FI, NL
** Deficit countries: FR, IT, ES, PT, IE, GR
Sources: European Commission, Macrobond.
34020@Chart9
Forecast for 2016 -
2018

5. Suomen Pankki – Finlands Bank – Bank of Finland
Lessons of the crisis for the Eurozone
reform
1. Financial stability was underestimated: the “neglected stepchild
of Maastricht”. Breaking the bank-sovereign link is crucial.
 First priority: complete the banking union
– a European Deposit Insurance Scheme – co/-re-insurance
– backstop for Single Resolution Fund (SRF)
2. Going further: combine the best elements of “German” and
“French” thinking
• incentives and rules
• insurance and stabilization
 a European synthesis
Olli Rehn 513.10.2017

6. Suomen Pankki – Finlands Bank – Bank of Finland
Lessons of the crisis for the Eurozone
reform
3. EMU needs a sufficiently large and agile common
stabilisation function (ESM+) that helps prevent and
mitigate panic on the financial markets.
4. The real economy matters. Member States’ own economic
policies remain vital. Coordination necessary to support
this and reform.
5. Further steps: functioning of the Stability Fund; improving
policy coordination; fiscal stance for the whole euro area.
13.10.2017 Olli Rehn 6

7. Suomen Pankki – Finlands Bank – Bank of Finland
Concluding remarks
 Given we are in the euro, we’d better make it work well.
 Not ”federation or death”
 Third way:
– Ensure financial stability through insurance and risk-
sharing
– Any steps towards increased solidarity combined with
steps towards increased responsibility
 Continue to reform and modernize the European social
model.
 No catenaccio defence – move on with Eurozone
reform.
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8. Suomen Pankki – Finlands Bank – Bank of Finland
Thank you!
13.10.2017 Olli Rehn 8