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

The fourth Euro-Mediterranean seminar, which brings together Eurosystem and non-euro area Mediterranean central banks, was jointly organised by Banco de España and the European Central Bank (ECB) and held in Valencia on 28 March 2007.

Seminar participants were welcomed by Jean-Claude Trichet, President of the ECB, and Miguel Fernández Ordóñez, Governor of Banco de España. The seminar was attended by governors and high-level representatives of the entire Eurosystem, as well as by governors and high-level representatives of the central banks of Algeria, Cyprus, Egypt, Israel, Lebanon, Libya, Malta, Morocco, the Palestinian National Authority, Syria, and Turkey. The seminar was also attended by Joaquín Almunia, Commissioner for Economic and Monetary Affairs, and a high-level representative of the European Investment Bank.

This Euro-Mediterranean seminar, held for the fourth time, once again demonstrates that the Eurosystem highly values international relations and exchanges of views with other central banks, and in particular with those of the Barcelona Process countries. The first Euro-Mediterranean seminar 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 and in the third meeting in Nafplion in January 2006. As its previous editions, this fourth seminar provided a valuable platform for discussions and underscored the continued commitment of all participants to these meetings as a forum for maintaining an intense and open dialogue between the Eurosystem and the central banks of Mediterranean countries on issues of common interest.

This year’s seminar focused on recent economic and financial developments in Mediterranean countries, fiscal policy in Mediterranean countries’ macroeconomic frameworks and the recent developments and prospects for Euro-Mediterranean trade.

Seminar participants underlined the robustness of economic performance in the region and the capacity of its financial sectors to successfully withstand exogenous shocks. In this context, they noted that inflation broadly remained under control, despite some upward pressures on prices stemming notably from a gradual phasing out of domestic fuel subsidies in some countries. They stressed the important role of fiscal policy in supporting monetary policy to contain inflationary pressures. Participants also agreed that creating sufficient job opportunities remains the single most pressing challenge faced by Mediterranean countries, in particular in view of demographic trends. They noted that further structural reforms are warranted in order to raise the region's growth potential.

Seminar participants identified fiscal policy as playing a crucial role in ensuring macroeconomic stability. High public deficits and debt levels, including implicit and contingent liabilities, remain a key challenge for non-oil producing countries in the region. Although oil-producing countries have significantly improved their fiscal accounts in the wake of rising oil prices, their high reliance on hydrocarbon revenues was perceived as a potential source of vulnerability. Enhancing fiscal discipline in both oil-producing and non-oil-producing countries in the region would be facilitated by improving the institutional framework in which fiscal policy operates.

The participants also exchanged views on recent developments and prospects of Euro-Mediterranean trade. They noted that oil-exporting countries face the challenge of diversifying away from a sector characterised by volatile international prices, while non-oil-exporting countries face increasing global competition, in particular from Asia, in some of their most prominent export sectors. At the same time, participants dealt with the topic of how to further enhance trade opportunities between the two shores of the Mediterranean.

One of the key messages all participants insisted on was the essential role of domestic reforms and institutions for countries to be in a position to fully reap the benefits of trade.

At the end of the meeting, it was decided that the next Euro-Mediterranean seminar will take place in Egypt.