Eurosystem and Mediterranean central banks meet for third Euro-Mediterranean seminar

The third Euro-Mediterranean seminar, which brings together Eurosystem and non-euro area Mediterranean central banks, was jointly organised by the Bank of Greece and the European Central Bank (ECB) and held in Nafplion on 25 January 2006. In preparation for this seminar, a workshop was held at the ECB in Frankfurt on 21 and 22 September 2005, bringing together senior experts from the central banks of the Eurosystem and the Mediterranean partner countries.

Seminar participants were welcomed by Jean-Claude Trichet, President of the ECB, and Nicholas C. Garganas, Governor of the Bank of Greece. The seminar was attended by governors and high-level representatives of the entire Eurosystem, including Lorenzo Bini Smaghi, member of the Executive Board of the ECB, as well as by governors and high-level representatives of the central banks of Algeria, Cyprus, Egypt, Israel, Jordan, Lebanon, Libya, Malta, Morocco, the Palestinian National Authority, Syria, Tunisia and Turkey. The seminar was also attended by the Vice President of the European Investment Bank and a high-level representative of the European Commission.

The Eurosystem attaches great importance to international contacts and exchanges of views with other central banks at the global level, and its relationship with the central banks of the Mediterranean region is no exception. This Euro-Mediterranean seminar was the third at the level of central bank governors. The first meeting was held in Naples in January 2004 and initiated a multilateral dialogue between Eurosystem and non-euro area Mediterranean central banks, which was continued in the second meeting in Cannes in February 2005. This third seminar showed the continued commitment to these meetings as a regular forum for pursuing an active and ongoing dialogue with the central banks of Mediterranean countries. The seminars thereby cement the Eurosystem’s bilateral contacts with the Mediterranean central banks within a framework for multilateral discussions on issues of common interest.

This year’s seminar focused on recent economic and financial developments in Mediterranean countries, issues and challenges relating to the process of capital account liberalisation, and the reform of monetary policy instruments in Mediterranean countries.

Seminar participants underlined the fact that economic and financial developments in the region were generally benign in 2005, with robust growth observed and inflation remaining under control, despite some upward pressure on prices. Nevertheless, participants also agreed that the Mediterranean region is facing a number of economic challenges, in particular unemployment and, in some cases, substantial fiscal deficits and debt. Against this background, participants continued their exchange of views on the need to further encourage structural reforms in order to raise the region’s growth potential.

Seminar participants reviewed the experiences of Mediterranean countries with regard to the process of capital account liberalisation. While countries in the region are currently at different stages in this process, participants agreed that the sequencing is important when opening the capital account in order to reap all the benefits of liberalised capital flows. They also pointed out that the macroeconomic framework and the domestic financial system need to be solid to deal with the challenges associated with the liberalisation of capital flows.

The participants also exchanged views on the reform of monetary policy instruments in Mediterranean countries. They took stock of progress made in the region in the further development of money markets and market-based operational frameworks. Participants also discussed the best tools with which to conduct monetary policy in the presence of a structural liquidity surplus in the banking sector, which is an issue commonly encountered by non-euro area Mediterranean central banks.