It has been a very, very long day. Especially since we gained 6 hours on our flight back from Frankfurt. We departed Germany at 11am arrived in Philadelphia 9 hours later at 2pm Eastern Standard Time. So right now, its 11pm at Haverford, but I feel like I just pulled an all-nighter. Anyways, enough of my sleep deprived complaints; I need to catch you up on everything that has happened since Thursday.
Friday we woke up for our last day of meetings at the European Central Bank (ECB), and it did not disappoint. We had four lectures and they were all held in the Governing Council Room on the top floor of the ECB. The environment and tone of the lectures was similar to the European Commission: serious, official and informative.
Our first lecture, presented by Mr. Jonathan Yiangou, was a basic overview of the role and functions of the ECB, especially in the current crisis. Unlike the U.S. Federal Reserve, the ECB does not have a dual mandate. It’s primary objective is to maintain price stability, while the Federal Reserve tries to both maintain price stability and encourage maximum employment and increase production. The ECB wants to keep the rate of inflation in the Euro Area below or close to 2%. Yiangou then talked about the financial crisis of 2008-2009, triggered by the collapse of Lehman Brothers. He detailed the ECB’s “enhanced credit support” response to the crisis in which they basically contributed to conditions enabling banks to focus on lending despite the financial crisis. Finally, Yiangou discussed the ECB’s role in the current sovereign debt crisis. The ECB cannot ensure that sovereign government’s maintain proper fiscal policies. It is the job of members of the Euro to police themselves, but Yiangou did mention the new 6-pack plan, which allows the European Commission to fine countries not following fiscal responsibilities. The main problem he see’s with the new policies is that they are not automatic enough, although they are an improvement from previous measures. The ECB thinks like a bank, exclusive of what national strife or tendencies are.
Olga Arratibel, a principal economics for the EU Countries Division of the ECB, presented the next lecture. Arratibel broke her lecture into three major sections. The first was the benefits and risks of euro adoption. The benefits include a stable exchange rate with a country’s most important trading partners, price transparency and increased competition and higher growth and living standards. Some of the risks, like a problem with competitiveness, suboptimal interest rates and local bubbles and crises and an inability to adjust to changes in shocks can occur when a country adopts the euro prematurely. The second part of the lecture was a basic macroeconomic background in Central and Eastern Europe and the third part of the lecture was the enlargement process of the Euro Area, which discussed the Exchange Rate Mechanism II and convergence criteria.
After a delicious lunch of chicken and cauliflower (one of the best meals I’ve ever had) we attended a lecture by Thierry Bracke on ECB relations with the neighboring regions. Basically countries the ECB monitors the financial situations of countries that are trying to enter the European Monetary Union and eventually adopt the Euro in order to give banks and countries guidance on how to develop the economy and prepare for EMU accession.
Our final lecture of the day was on economic imbalances and adjustments with in the Euro Area by David Sondermann of the EU Countries Division. Sonderman first discussed the development of imbalances within Europe. One of the main causes was a failure by fiscal institutions to build up surpluses and buffers during normal, good economic times in order to avoid the development of fiscal imbalances. Sonderman also analyzed potential issues and vulnerabilities caused by government debt and a weak labor market. He touched upon the new ways that the EU will be surveying the development of future imbalances in order to prevent them early. This has been done by a revised Stability and Growth Pact, and a new Excessive Imbalances Procedure. This lecture was a good reinforcement of our previous lectures at the European Commission. One thing that I enjoyed about all the lectures at the ECB was the use of graphs and images. Often the lectures would present just a slide of graphs or data charts, and help us analyze them. This was an experience that I had not really had before and found helpful for my future approaches towards economic analysis.
After the ECB we went out together as a group for dinner one last time. Over dinner we reviewed our day at the ECB with Professor Banerjee as well as the trip as whole. We also just talked about life. I’ve think we have all enjoyed getting to know one another at a deeper level, What I love about Haverford is that despite the fact that it is on the “small side” of colleges, there are still plenty of people to meet and learn more about and this trip has allowed me to make 16 new friends. It was pretty much bedtime by the time we paid the bill. Today we woke up at 6 am and hustled to catch our flight home. The flight was less eventful then the first one (Professor Banerjee didn’t try to instigate a pillow fight- it might be because of the selection of movie that US Airways offered). And now I’m right where I started this post: we’re back!
What’s the next step? Where do we go from here? Over the next month we will be writing project reports on the various lectures we attended, and I will try to provide occasional updates of our progress. Additionally I will try to post some more photos later this week. What’s on my mind (and I think everyone else’s) is what is going to happen to the Euro, the European Union, and Global Stability (I could also say the same things about the U.S.)? This is a crucial juncture in the economic crisis, and it is up to officials in the European Commission, the ECB, the United States, and all over the world to create positive growth and prepare for future possible crises. At the same time, we as individuals need to continue to be responsible at a more micro-level. The decisions from the top cannot be executed if we’re not focused on balancing our own budgets and ensuring that we are financially stable.
It has been an exciting week, and I am off to bed. Our research papers are due in a month, and I am ready to get started. This experience has been intellectually inspirational. My mind has certainly been pushed and pulled in ways that I had never experienced before and I can’t wait to build off of this trip.
Of course I would like to thank both Professor Banerjee and Parker Snowe for their tireless efforts in making this trip happen. Everything was executed perfectly. We had no hiccups in traveling and the lectures we attended were superb. I and my peers are forever grateful to both Parker and Professor Banerjee for this experience.