1. THE INTERNATIONAL REFORM AGENDA: AN INSTITUTIONAL VIEW Pablo Moreno Madrid, June 2015

2. INTERNATIONAL AFFAIRS INDEX 1.The international policy response: The role of the G-20 2.The response of the IMF 3.The response of the EU 4.Challenges 2

3. INTERNATIONAL AFFAIRS 3 G-20 (Reforming the three pillars pf Bretton Woods) (New Pilar) Informal institutions : ▪ Meetings: Summits, Ministers & Governors, Sherpas, Deputies ▪ Ad hoc working groups MACROECONOMIC POLICY COORDINATION : ▪ Framework, G-20 MAP G-20 members Europe Asia / Oceanía EU Australia France China Germany India Italy Indonesia UK Japan [Spain] South Korea America Other Argentina Russia Brazil Saudi Arabia Canada South Africa Mexico Turkey USA IMF World Bank Development Banks Economic stability Growth adn Development Trade WTO Financial Regulation and Supervision Financial Stability Board, FSB (BCBS/BIS) Strategic direction (1) THE INTERNATIONAL POLICY RESPONSE: NEW WORLD ECONOMIC ORDER

4. INTERNATIONAL AFFAIRS 4 (1) THE INTERNATIONAL POLICY RESPONSE: The growing weight of emerging economies (BRICs) Source: IMF, WEO Database (April 2012)

5. INTERNATIONAL AFFAIRS 5 (1) THE INTERNATIONAL POLICY RESPONSE: FINANCIAL SAFETY NETS

6. INTERNATIONAL AFFAIRS 6 ( 2) TRANSFORMATION OF THE IMF  GOVERNANCE Changes in the informal structure - From G7 to G20 - Institutional culture: end of Washington Consensus Changes in formal structure - New quota formula after 60 years of statu quo - Increased weight for EMDCs  SURVEILLANCE: INTERCONNECTIONS AND FINANCIAL SECTOR SURVEILLANCE

7. INTERNATIONAL AFFAIRS 7  LENDING: MORE REALISTIC AND FLEXIBLE  RESOURCES (financial engineering)  2009: tripling, 1 trillion bn US$ threshold  2012: 460 bn US$ more in temporary resources Crisis ResolutionNew Insurance function: - Higher flexibility, - Doubling of limits - More realistic conditionality (no structural performance criteria) FCL with no conditionality (ex-ante qualification criteria) (2) TRANSFORMATION OF THE IMF

8. INTERNATIONAL AFFAIRS 8 Short term  Single Supervisory Mechanism  Single Resolution Mechanism Banking Union (3) REFORM OF EURO AREA: GOVERNANCE/SURVEILLANCE Fiscal Union Economic Union Medium termLong term Political Union  Full banking union, Common Deposit Guarantee Scheme  Ability to soften asymmetric shocks  Full fiscal union: European budget and introduction of Eurobonds  Full implementation of previously agreed measures  Greater coordination of employment and tax policies  Greater coordination of economic policies  Increase in democratic legitimacy; improvement in accountability before the European Parliament  Reinforcement of budgetary policy surveillance mechanisms Strengthening of the Stability and Growth Pact Creation of the Macroeconomic Imbalances Procedure Introduction of the Fiscal Compact  Surveillance of systemic financial risks: macroprudential policy European Systemic Risk Board (ESRB)  June 2012 European Commission and Council proposals: new institutional architecture  2015?

9. INTERNATIONAL AFFAIRS CHALLENGES  Governance  New G-20 reality, but open questions: legitimacy, G-2, effectiveness, rotating presidencies  Informal structure: New paradigm (New Keynesian Economics)  IMF: New formula and quota increase in 2014; more parity advanced-EMDCs (How much is enough?); a non-European MD  Surveillance  G-20 MAP and framework for growth, still to deliver: : strengthen peer pressure  Surveillance conundrum: internal and external coordination IMF, OECD, FSB, Regional bodies. Emphasis on policy recommendations more than risks. [Importance of Independent Evaluation Office]  Regulation and supervision  Implementation of regulatory reform agenda, effective supervision  Financial strength: coordination among FSNs  Equilibrating traditional concerns: signaling/moral hazard  Cooperation with third parties (Euro area programs as precedent): RFA; PSI (Vienna Initiative)  More Europe 9

10. THE INTERNATIONAL REFORM AGENDA: AN INSTITUTIONAL VIEW Pablo Moreno Madrid, June 2015