Complementarity and coordination of macroeconomic and financial policies to tackle internal and external imbalances

Policy responses to the global crisis have helped stabilise the economies and contained the threat of financial instability. But growing sovereign indebtedness, a weakened financial system and uneven economic growth prospects at the global level pose risks of new imbalances and vulnerabilities. To limit those risks it is essential to address both macroeconomic and fi nancial market failures. Important changes in financial market regulation and banking supervision are already being introduced. In the macroeconomic area, an effort is being made to strengthen the coordination of economic policies in the context of the G20. New institutions, such as macroprudential authorities, are being set up in many countries to monitor and contrast the emergence of systemic risk. There are, however, several areas where policy frameworks need to be further strengthened. At the international level we need surplus and deficit countries to rebalance global demand and ensure a return to sustained global growth, without conflicting policy actions leading to potential instability. Effective acroprudential policies require a clear definition of responsibilities, and need to be consistent with the conduct of monetary policies. In Europe, more effective economic governance is needed to proceed on the route towards greater economic integration and to fortify the euro, including tighter rules on fiscal policies, a broader surveillance over macroeconomic imbalances and an effective mechanism for crisis management.