Better targeting of EU regional policies needed

Governor Nowotny opens European integration conference of Austrian central bank

EU funding can help EU Member States align their economic performance and thus stand united. “After all, cohesion and convergence form the cornerstone of European integration,” Ewald Nowotny, Governor of the Oesterreichische Nationalbank (OeNB), said when opening the two-day Conference on European Economic Integration (CEEI) on November 26, 2018. At this conference, more than 300 participants will explore strategies to foster economic, social and territorial cohesion, particularly in the euro area and in Central, Eastern and Southeastern Europe (CESEE).

Governor Nowotny offered good news and bad news: business cycles have become more similar in the euro area countries, but the gap in income levels has widened following the financial crisis. Hence, in his view, the EU’s regional policies need an upgrading to be more effective. They should specifically target skills, innovation and vulnerable regions and seek synergies with private investment flows.

As an aside, Nowotny stated that monetary policy “normalization,” namely ending the ECB’s net asset purchases and raising interest rates, would pose little risk to financial stability. “Given a reasonably robust state of the economy, a well-communicated and predictable exit might benefit the profitability of banks, insurance companies and pension funds,” he said.

Governor Nowotny moreover touched on the various issues featured at the conference, such as the right timing for CESEE countries to introduce the euro, a further deepening of Economic and Monetary Union, financial risks posed by climate change, the need for a new industrial policy and an investment-friendly environment in recipient countries.

The governor of Austria’s central bank also recalled that 2018 marks two notable anniversaries: 100 years ago, the successor states of the Habsburg empire were established, and ten years ago, Lehman Brothers collapsed. Sounding a warning, Ewald Nowotny stressed how cumbersome the process of economic and political integration has been and yet, how easy it is to undo its achievements.

These and other issues are being discussed at the CEEI 2018 on Monday, November 26, and Tuesday, November 27, 2018, by high-ranking representatives of both central and commercial banks as well as speakers from international organizations, financial institutions and academia.