 Good afternoon everyone we're going to start you know this new panel and it's a great pleasure to chair this panel And that is going to be dedicated to the topic of Monetary Sovereignty In the textbooks as you know Monetary Sovereignty includes essentially three exclusive exclusive rights for a given state first The right to issue currency which is legal tender within its territory second the right to determine and change the value of that currency and third the right to regulate the use of that currency or any other currency within its territory The first and the third rights correspond to the role of money as a medium of payment The second right reflects the role of money as a unit of account Monetary Sovereignty implicitly encompasses rights to senior age Rents from money creation or the provision of liquidity as lender of last resort More broadly the concept of effective Monetary Sovereignty is the relevant one regarding the ability to govern money to achieve policy objectives And more recently the topic of Monetary Sovereignty is much more considered in the context of central bank digital currencies CVDCs Without CVDCs it could be argued that private and foreign digital monies could displace domestic currencies such as the euro Threatening the central banks monetary policy and the lender of last resort capability In fact the utilization of finance has broadened the available of both payment options Pintech startups and big techs have entered the payment market The crypto universe has bombed and burst CVDCs would provide an anchor of stability for the monetary and payment system against possible disruptions For the euro area there could also be a strategic advantages to having a digital euro As the world's largest single market Europe cannot afford to remain passive while other jurisdictions move ahead If other central bank digital currencies were allowed to be used more widely for for cross-border payments We could risk diminishing the attractiveness of the euro Currently the world's second most important currency after the US dollar And the euro could become more exposed to competition from alternatives such as global stable coins Ultimately, this could endanger our Monetary Sovereignty The topic of this session and the stability of the European financial sector We will touch upon these and other topics in our session with the three panelists with that. I will briefly introduce now Our first speaker is Mrs. Rhoda Wicks Brown general counsel and director of the general of the legal department at the IMF She has lectured and written articles and IMF board papers on various aspects of law Under her tenure the IMF legal department has been shortlisted for two financial times awards Our innovation is strategic and risk advice a most innovative in-house legal team in North America Our second speaker is Ms. Jens Van Klooster assistant professor of political economy at the University of Amsterdam His research has a multi disciplinary orientation Ranging from governance of financial markets climate change Macro potential policy and this interplay with monetary policy and banking supervision And finally that most least This is Corinne Selber. Good next is professor of private law and economic law in the University of Basel Her research covers cross disciplinary issues between private and financial markets market law Digitalization and its impact on public and private money payment systems and the financial system at large But let's go to the to the substance of today's panel monetary sovereignty So, you know somehow skipping instructions I was told by Kiera and I always, you know follow the instructions of my legal counselor you know to the Exactly to the point that each panelist has 15 minutes for the presentations in sequence and afterwards we will open You know the floor for discussions, but theoretically according to Kiera. We will have to finalize at 5 30 So let's start and we can we can start so Let me give the floor to Ms. Wicks Brown Well, thank you It's a huge pleasure to be here. Thank you vice president again those for that and very nice introduction I'm good evening to everyone And thanks for the fortitude in still being here when we're the last session of what has been a long couple of days of intense discussion I'm delighted to be on this panel to discuss monetary sovereignty Frank that thing. It's an important topic. It's a little esoteric It's one that I think we don't reflect on often enough in some ways as we see it it's something of an evolving concept and One on which does not necessarily a unified view as I think the the panel will also bring out One of our former general councils almost two decades ago described monetary policy at least the the creation of described the general point of monetary sovereignty at least the creation of it as Having something that has evolved through customary law doctrinal sources Judicial decisions and treaties a body of international law has been developed that defines the contours of monetary sovereignty So what's the point of that the point just being that? The concept has not been static But there's certain key principles that I think have emerged over the over the decades and And that have been the the source and they cannot touch on that very briefly at present I also say that we're in the an environment of rapid evolution That's certainly it could and likely will have important implications for monetary sovereignty. However, one describes that concept VP of the Guinness has already touched on some of these but you know key developments including the widespread and I will say this still increasing and still evolving digitalization of payments and global globalization of finance more generally that's key and that's been a big topic of discussion But I'm also going to put on the table a couple of other developments that I think The jury is still out as us lawyers would say in that respect one of those for example is increasing geopolitical fragmentation It's early days yet. We've had recent developments such as the expansion of the bricks group For example, there's no IMF view on this by the wind to be clam that representing a view of the IMF But I'm simply noting the vast commentary and some with the speculation that has already emerged as a result of these recent discussions as the future evolution of International monetary system and in that context the The way that monetary sovereignty as we know it has has operated and then the third factor I would mention is kind of an old-school one as one teenagers would say But it's just the sort of sticky and persistent inflation that we've seen over recent periods again It remains to be seen but I think if we're going to step back and take a big a big look at these things these are factors that That are interesting and that one looks again at monetary sovereignty I think warrants some some at least thought to keep in the back of the mind I'm going to just briefly touch on you know, this should the traditional definition that Mr. Degundas has already reminded us off and then to highlight some challenges to monetary sovereignty and Then share some key highlights of the IMF's analytical work on these issues Just to give away the punchline at the very beginning I'm going to be very boring being the head of the IMF legal department because all of these you know Exciting discussions of digitalization and CBDCs and the digital euro. I know that gets a lot of excitement But when we step back at the IMF and look at all of these things Ultimately monetary sovereignty is about monetary credibility. It's about avoiding Currency substitution and other things of that kind. We'll talk about that a little bit more and the ultimate solution ultimate sort of defense that we advise our member countries to do in this respect is to strengthen monetary policy frameworks in That context to also strengthen fiscal Frameworks and debt and look at issues around debt and so on because the confidence effects that oftentimes can corrode and take away From monetary sovereignty are addressed if you do those things and if you get them right and conversely if you have Terrible policies and if you have weak institutions, and if you have fiscal dominance Digitalization isn't going to solve that problem a digital version of a really bad currency is not going to be any better than that bad currency Right, so I think it all comes down to fundamentals Monetary policy fiscal policy strong institutions strong frameworks. That's the sort of broad thing and I just sort of quickly Try to emphasize a few a few points in that respect So you know need for me to remind you of at least the traditional definition of monetary sovereignty Again, our chair has already done that very nicely the three key The the three key essential rights that we've always understood as being inherent in that concept But I want to even to make the point that again, it sounds very Technical it's the right to issue currency is the right to determine and change the value It's all about sovereign rights I think what gets lost sometimes in this discussion of monetary sovereignty is that that has never been an absolute context An absolute concept in terms of the sort of dominance of that sovereignty if you step back think about, you know I'm from the IMF when countries join the IMF and virtually I would say almost it's a pretty universal membership It's not every country, but it's mostly every country when you join the IMF. You give up certain rights for example Member countries of the IMF cannot impose exchange restrictions as they would like their firm rules in the articles for agreement About on the extent to which you can you can impose exchange restrictions There even requirements in the articles dealing with the conduct of exchange rate policies Their circumstances under which countries can be called upon to provide freely use of occurrences or to provide SDRs upon the demand of the IMF I could go on the point just being there a number of Aspects of membership in institutions like the IMF that involve a voluntary relinquishment of some of that sovereignty and so it's not this absolute context that I think a caricature of it can sometimes make it out to be And it's not only the IMF the OECD has codes on Invisible transactions on capital account that has similar requirements the WTO has their statutes The the GATs and the general agreement on tariffs and trade it can similar kinds of Restrictions on what would otherwise be an unfettered right of monetary policy. So the point just being It's never been absolute in the interests of a broader public good Countries have voluntarily given up some of the sovereignty And and that's just an important point to keep in mind and the issues I've just talked about it can relate to international agreements. I've sort of given a few of them I also want to make the point that also very important when you think about the concept of Monetary sovereignty is also Developments at the national level and in a country-specific context So for example a country that can issue its own currency and make it attractive to its own population Has a higher degree of monetary sovereignty as it retains control of that of this monetary policy and gives in that Intern gives the country the flexibility required to swiftly adapt to changing economic and financial Conditions including during times of crisis and to coordinate monitoring fiscal policy Countries have therefore taken different approaches in this respect again. You probably all know this with just a remind Some countries have a totally restrictive approach I would say many of our IMF member countries, especially EMDs have this approach where the only sovereign currency that can be used in the territory is the currency of that member Other countries have what we call a more of an intermediate approach where any currency can be used to settle domestic monetary Obligations, but the sovereign currency cannot be refused if it happens to be presented for payment And again, that's the case in the UK and as I understand it in most of Europe There's a third less restrictive approach where any currency can be used to settle domestic monetary Transactions and counter parties can even refuse to accept the sovereign currency itself And again the US is the classic example of that again, so the point just being that Even within when you think about the way that national laws treat these issues That's a wide degree of divergence and very different approaches The one point I haven't touched on in this whole discussion is the effectiveness of all of these again regimes I just talked about whether these restrictive frameworks are in fact effective It's a totally different issue and maybe that's a nice segue to the next point I wanted to touch on briefly, which is just some of the challenges and some of the risks Related to monetary sovereignty So be beyond the these legal considerations that I've just touched upon Excuse me The ability of a state to defend It's the privileged role of this is domestic currency and to control and to limit the use of that currency Has been challenging again in particular for EMDs, but not only for emerging markets and developing economies So just a list of few of these challenges again The obvious one the one we talk about the most the one we all worry about the most is currency substitution It typically occurs against the backdrop of on sound domestic macroeconomic policies and a lack of trust in policy institutions Times of high and volatile inflation undermines the ability of the domestic currency to function as a stable source of value in More extreme cases including hyperinflation We've seen that households and firms will typically aim to minimize exposure to the rapidly depreciating currency and Prefer to switch from that unit of account The domestic currencies medium of exchange and unit of account functions in that case become encumbered and in and the risk of currency comes Substitution rises even further in cases where there are limited hurdles the foreign exchange convertibility where you have government guarantees on Foreign-denominated liabilities where you have low foreign exchange transaction cause where there's an absence of regulatory limits on foreign exchange Exposure for banks and corporates. So again, not a new phenomenon, but it's a very important phenomenon that that impacts monetary Sovereignty the phenomenon is in you, but of course what is new now is the the new forms of digital private and public monies Everything ranging from crypto currencies the stable coins the CVDCs and the impact that these can have in terms of accelerating and facilitating monetary Currency substitution the rise of digital money could intensify currency competition providing new options and further incentives for currency substitution Moreover a certain Attributes of some of these digital monies not all of them, but some of them also has the potential to displace domestic currencies Attributes including things like lower transaction costs ease of access the potential to provide beneficial entry into a wider platform of services That was the big thing with Libra, of course as we all know and that's what Costs the consternation that it did among us in the official sector, but that already exists in other places They're payment services in China for example We chat pay that integrates the transfer of electronic money with its rather ubiquitous Social media services that anyone who visits China is aware of there's also Ali pay that sort of links its e-money to China's largest online Retail site so again these these things already exist Maybe not as widespread as would have been the case had the official sector and I've been there But these are very significant on factors I touched at the top on geopolitical fragmentation and again I there's not much more to say about that But I think it is something that is worth keeping an eye on when one steps back and look at broader trends that can Impact sovereignty on the other side of the coin I just want to to note that a few countries fortunately only a few so far, but I've gone to the other extreme in terms of Basically adopting a privately issued Money as local currency and as legal tender Giving so given legal tender status to local to to basically crypto assets This happened in a Central African Republic, but they've already repealed past legislation to repeal that and the other country of course is El Salvador the Chivo a wallet in El Salvador, which is a government managed wallet, but And that relies upon cryptocurrency The IMF has been very clear in terms of our own warning that official currency a legal tender status should not be given To crypto assets that it poses fundamental macroeconomic risks including risk to the effectiveness of monetary policy As well as capital flow volatility on stable domestic prices and fiscal risks This also raises serious concerns of a financial stability financial integrity much of this is pseudo There's pseudonyms and pseudoism that are part of that framework that raises important financial integrity concerns Of course, there's legal risks that can flow from the classification a misclassification or non classification in some cases of these Crypto assets consumer protection market integrity again, I could go on I think in this audience I don't need to make the case for why it's brought it can be very tricky to have crypto assets as legal tender, but again, I think that's We're still keeping an eye on that the fund has certainly been clear again in terms of our guidance and we had issued a paper in early 23 and that issue, so I'm just going to conclude very quickly. I think I'm still within my time period, Mr. Chair So just by touching a little bit on some of the IMF's work and advice on these issues I've already alluded to some of it We know that Central banks are continuing to explore mechanisms to enhance monetary sovereignty to enhance the effectiveness of monetary policy transmission Channels including a big focus on central bank digital currencies under the digital euro always elicits a lot of excitement when that Is discussed, so I'm not going to say anything about that. I'll leave it for other panelists but but this general idea of looking at CBDC's as Both a way to address some of these concerns about Substitution but also as a broader policy device they're striking a lot of discussions of that ongoing Just at the fund we've given Technical assistance capacity building assistance to over 48 of our Monmouth member countries so far that have been interested in the issuance of CBDC's it really varies from country to country what is motivating that interest for some countries Our members in the eastern Caribbean for example, it's as basic as having Cash because sometimes when there's hurricanes and those kinds of things you just can transport cash You can you know it just doesn't work so a lot of the interest in the sand dollar and in the eastern Caribbean region in particular is Is driven by that? And and again, it really there's there's lots of issues around financial inclusion in some of the poorer countries There's issues around just access to To a means of payment that doesn't sort of have some of the costs associated with it So again, really a wide range have been of considerations have been have been driving that We've included digital money as a key priority and IMF staff again have been working actively on these issues We've also recently published the first guidance from the IMF on capacity development work related to CBDC's And so and so that work continues again I'll mention the example of Brazil for example Juliana was just on the previous panel But Brazil is one country that we think is doing an interesting So the the central bank is in the process right now of developing a CBDC that was circulate alongside tokenized assets in a regulated DLT platform again the emphasis in that context is not on Again currency substitution in those concerns is more on the use of innovative technologies to promote the development of new business models and online Applications in an ecosystem where CBDCs will serve as a means of payment And so the national currency might become more attractive if this digital version is successful in making financial services more efficient and more Accessible but again that is certainly not the the primary goal of that and again There's this other examples of that I would just conclude by noting that taking together carefully these careful design and policy considerations Will underpin trust in CBDCs But this trust must be anchored in an autonomous central bank with credibility in delivering on its mandate It's kind of the point I made at the start it goes back to the fundamentals a key part of our work in this area It's kind of boring, but it still emphasized the importance of credible institutional frameworks And that these are the first line of defense to protect against monetary to protect monetary sovereignty and Stability there are certain key features of these kinds of frameworks that enhance trust in them in monetary policies Including transparency Proherence strong legal foundations for the independence and the accountability of the central bank and so on I would also know That is not just about monetary policy. It's also about fiscal Frameworks strong fiscal frameworks can play a key role in safeguarding monetary sovereignty Especially when monetary policy frameworks are weak and again, we see that in a number of countries Avoiding large deficits and high debt levels also protect monetary sovereignty Especially in the context again of weak monetary policy frameworks in countries where fiscal deficits are large and you have high debt levels Governments are more likely to put pressure on the central bank to provide monetary financing and to avoid tightening Monetary policy in order to avoid raising the cost of sovereign borrowing and so again The potential negative feedback loop in those kinds of cases between monetary and fiscal policies Should be addressed again by enhancing monetary policy frameworks to avoid the inflationary Consequences of fiscal dominance Which consequences of course just put further pressure on currency increases currency Substitution puts further pressure monetary sovereignty and it's completely counter counterproductive So that made the point earlier that bolstering monetary sovereignty is a policy goal and Some are issuing CBDCs to address that goal We don't see it as a very efficient solution for the reasons that I noted earlier It's not going to fundamentally change the fundamentals and ultimately That's what we have seen as as making a difference So to conclude the exclusive legal rights of the sovereign state to issue regulate and determine a value of its currency Those are well established in practice Some states do have significant challenges to defend the privileged role that you know We've sort of the traditional understanding of monetary sovereignty Presents in terms of protecting protecting its own domestic currency the rise and the of the Digitalization of finance financial globalization all of these give rise to questions as to whether a new Conceptualization is needed for monetary Sovereignty again as I said we continue to stick with the traditional But I know that my some of my fellow panelists will probably touch on that issue a little bit more again Our view ultimately is that however you define the concept again those basics are what we need to focus on at least that many of the countries that Do we deal with that's what makes a difference ultimately not the conceptual definition But what they're doing with respect of these very critical policy frameworks that ultimately determine whether you have Monetary sovereignty or you don't and so I'll stop right there. Thanks. Thanks chair Thank you. Thank you very much Rodin. Thank you very much for us to see the importance of credibility for monetary sovereignty okay with the credibility is based on a strong institutions and correct and write policies You have almost fully respected as well You know the timeline the time limit that we that we had and I suppose that Jens is going to follow suit in terms of That so now, you know is your turn Jens. Thank you. Thank you. I Have slides First thanks a lot to the organizers to care. I'm really happy to be there. It was really a pleasure the past to today's all the discussions and in my talk, I want to indeed Start off from a paper. I wrote with Stefan Murrow that came out last year in which we look at this notion of monetary sovereignty and the Starting point we have is not so much the legal notion of monetary sovereignty But this sort of widespread notion where a state has monetary sovereignty if it issues It's national currency if it can control that currency and we also talk about the sort of vision of the monetary system in that that notion of sovereignty where currencies are little islands where jurisdictions and currencies largely Overlap and where the ability to domestically regulate currency really affords states with an incredibly power for prerogative and if you use that Notion of sovereignty then to join the euro is to give up monetary sovereignty, right? You join the euro you've given up your ability to regulate your own currency and in that sense a currency union is really only a loss But that is actually one of the considerations we use to suggest that that's actually not such an appropriate way to think about monetary policy monetary sovereignty and in the Paper basically we make the case on the empirics that that notion of sovereignty Just doesn't fit the real world as it exists today certainly not the global financial system as it's taking shape after the 1970s just on a very basic level States don't control the issuance of money central banks and particularly also private financial institutions banks but also a whole range of further economic actors and and also When we then look at the phenomenon of Financial globalization we see a number of core currencies which are very very widely used And other currencies much less so specifically also money creation in core currencies specifically the dollar Happening outside the US happening more outside the US by some metrics than then in the US and that's our Argument for them proposing that really for the sort of monetary system that we have today This notion of effective monetary sovereignty is much more appropriate provides us with a much better way to reflect on the financial system and and financial policy, okay, so that that's the paper and then I for the Invitation to speak here. I thought it would be interesting to pick up that line about the euro a bit more and look at that in more detail So the the question I want to ask is whether The euro and particularly euro Internationalization has indeed Contributed to effective monetary sovereignty how the ECB has related to that set of objectives and to that and also start with a Somewhat larger historical perspective on the international role of the euro where I think also these notions of sovereignty come up at Different moments and then I want to fast forward and say something about the new strategy So from 2019 also already the ECB has taken a much more active attitude towards internationalization of the euro and Building on a paper that came out last month. We wrote with Serena Grunewald We're very enthusiastic about the new ECB monetary policy strategy I want to suggest that that strategy really provides a lot of resources to think about internationalization, okay, so So this short history short history of the euro That of course starts with Tomasso Padrescioppa and I think this is really within the process of creation of the euro the Central banker who really strongly emphasizes this perspective of effective monetary sovereignty at the European Commission He sets out in a lot of detail that in actual fact already the member states of the EU have lost a lot of ability to use their national currencies effectively for monetary policy He criticizes at the time monetarist visions of national sovereignty based on flexible exchange rates and argues that that notion really doesn't apply that national currencies only provide limited autonomy to macroeconomic policies and that exactly through monetary integration by Sharing the creation of money collectively states can have better external internal Monetary stability can do collective decision-making so no longer a monetary policy that is de facto set by the German Bundesbank and also this idea that this might be a strong counterweight against the dollar against the background of the very volatile dollar in the 70s and the 80s so I think here at this point in monetary integration this notion of effective sovereignty is very prominent but then when we fast forward to the the actual creation of the euro you Immediately you see a much more reluctant attitude to that international role This is the very first speech very famous speech that Wim Duisenberg gave to a European-American community Meeting at the Dutch Central Bank early January where he started off with this very powerful Statement the euro has arrived the ECB has taken up the reins of monetary sovereignty In the eurozone but then went on to set out quite a skeptical approach towards internationalization arguing that yes, there are clearly benefits the US exorbitant privilege of being able to fund External imbalances in this way, but also Claire Claire disadvantages pertaining to volatile capital more volatile capital flows and More difficult to follow monetary aggregates and there I think you feel the air like from the Bundesbank still very much shaping the thinking and on that basis Really the appropriate attitude for us. This is economic policies neutrality and In addition to that also relying on markets to decide international role of the euro not something that the ECB would take action on Okay, now that of course Then also goes together with a period in which the euro looking at different metrics Really doesn't take off in the way that it would be a replacement of the dollar In this graph you see the black line introduction of the euro before the black line you see the share of foreign exchange turnover of the daymark After the black line you see the euro. There's not really a break there in international role Similarly currency composition of central bank reserves. This also includes Dutch French Currency reserves, but again a very similar picture emerging With not that big a break with the introduction of the euro. So and at least in that on that metric that internationalization of the euro doesn't take up and I think that is also in various ways quite directly related. Ah, sorry. This these are the foreign currency reserves So you see here very similar picture introduction of the euro not a big break with the period before that Key reason for this I think We can we can argue about this and I think here ties in very nicely with a rodents argument is fiscal monetary frameworks in the case of the eurozone specifically the issue of spreads the absence of a Widely available euro denominated safe asset As one of the key reasons for the euro punching below its weight if you look at the importance of the euro in the global economy that Comparison to the dollar is just just striking And and here I guess there's there's a lot of things we could focus on in my own research I think One what I take to be really a core episode that we often neglect in this story But I think that also again illustrates very well this earlier attitude is the 2005 decision to impose a for a private credit rating requirement on Sovereign debt for the purposes of determining eligibility in the ECB collateral framework very technical Issue also at the time not very much decided but at this point the decision is made to rely on external providers to Navigate this very tricky issue of dealing with sovereign debt in the ECB policy framework and Florian Schuster, I think is very recently very nicely showed that the Spreads really emerge with that decision So before the eurozone crisis already from that attitude of neutrality the the comparability of different safe sovereign debt is Compromised and then that's of course very vastly exacerbated by the eurozone crisis But I think here there's a very direct line from this attitude of neutrality to the weakened status of the Euro Some people have argued that this was a punish policy about punishing profligate member states I think that's just from my attempts to interview everyone involved in this debate and talk with everyone there It's just not true. This was really about avoiding that decision and and taking an position of neutrality in relation to sovereign debt, okay and this interestingly enough already in the late 90s this was all debated at the European Monetary Institute and What we see Here is a fox that the German Bundesbank sent to the European Monetary Institute In 1997 already laying out some of the key Objections against this minimum credit rating requirement again invoking this notion of sovereignty The transfer of decision-making to a very small number of private profit-oriented rating agencies The ECB would lose its sovereignty in the eligibility procedure At least partly not even a minor level of discretionary decision-making would remain with the ECB So this idea by moving to relying on external credit ratings You give up something of the sovereignty of the euro and thereby Weaken its international Role you might add Okay, so to summarize this is the early history With Padoa Skiopa, you see this idea that member states can acquire Effective monetary sovereignty by transferring Westphalian monetary sovereignty is to a supernational European central bank, but then and we can go into much more details for all this The reasons for this a central bank very reluctant to exercise that sovereignty and focus very much on the domestic objective of price stability Okay. Now, I think that makes the new strategy so interesting Because it provides space for thinking much more in a much more nuanced way about these further economic policy objectives That are always at play in making Monetary policy and that could therefore I think also be a very powerful resource for thinking about the international role of the euro the Again going to the Paper, let me just sketch some of these considerations and I think in this sense It's not surprising that this reevaluation of the international role of the euro So directly precedes the start of the review of the monetary policy strategy right to my mind at least these are very similar developments in this 2021 strategy really Follows on this reevaluation of internationalization Not just a primary objective right if you look at 2003 strategy very narrow conception also of that primary objective in terms of two percent inflation on a two to five year time horizon, but also secondary objectives considerations priorities more prominent different ways of discussing these side effects In that context also is bells nambles qualification of the principle of market neutrality and as we argue in the paper But also already implicitly in the past years particularly starting with the omt decision more Coordination between monetary and fiscal policy, and I think this is also the right way forward for internationalization Right, this is clearly not something that the ECB can completely devise by itself But there are choices to be made here and I think in this regard also Wim Dysenberg's observation that there are benefits and and risks Has I think a very important message right there are real choices in how you internationalize not all Internationalization is desirable, and there are if you really want to as Panetta put it unleash the euros Untap potential at the global level then you need to think about these constitutional dimensions okay now Also bit in the spirit of the monetary sovereignty paper I want to look a bit more at private money creation and the ways in which a more active approach there could help Help support the broader economic policy objectives The first is about what's known as the exorbitant duty if you have an international currency You also acquire a certain level of responsibility For the broader financial system that the US has struggled with the EU today still de facto multi-currency Polity but a very heterogeneous set of arrangement for Providing liquidity support for offshore euro creation here I think a lot could be standardized more clear more credible and that would think vastly Push the international role of the euro Let me move to what I think is the more exciting big picture vision of what internationalization could look like I think throughout history you see this very tight connection between on the one hand international currencies and on the other hand energies going back to The Netherlands and Pete on some historical accounts you see international currencies rising with New energy sources and of course the dollar is very very closely intertwined with fossil fuels The offshore dollar system as we know it today originated in petro dollar recycling The reason why we get all these oil import Invoiced in dollars is because of the oil investment being invoiced in dollars There's just a I think very important link there Which in the context of euro internationalization you could look at and think about the euro as the currency of clean energy, right? So specifically on the one hand a Supervisory framework on the other hand maybe also monetary policy framework that would be much more supportive for clean energy Would also pave the way for a more international role of the euro as a International currency of clean energy. Okay, I will conclude Achieving effective monetary sovereignty I think really the way to think about that is Monetary sovereignty as achieving policy objectives by governing money, right? Not just Central bank money, but particularly also all these different forms of private credit money offshore Money and I think to summarize Today the euro can really become a powerful tool for achieving the EU's economic policy objectives. Thank you Thank you. Thank you very much the gents for you know, this reference to the international role of the Of the of the euro, but perhaps, you know, we'll have to look at as well You know the real economy part of the European economy, you know, and you know how? You know that compares with the US and other parts of the of the of the of the world So we need to have you know holistic approach with respect to the the role that the euro is going to play in the national markets And now finally go in the floor is yours Thank you very much It's a pleasure to be here. So ladies and gentlemen It's my task to discuss whether maintaining monetary sovereignty as we've just heard about is a rational For the introduction of a digital currency issued by central banks, so CBDCs For obvious reasons the answer depends on the understanding of monetary sovereignty Itself and I will base my considerations gladly on what we've just heard so far From the chair and from my co-panelists. However, I will also have in mind this concept of Effective monetary policy primarily because it I really enjoyed reading your paper and it convinced me so that as a starter So accordingly according to effective monetary policy We would say that a state is and remains Monetarily sovereign when it has the positive power when it has the normative so the value-based duty but also the efficient ability to Directly achieve monetary policy goals and indirectly contribute to further economic goals Of which we have heard a lot today as well And this all that's the important part through discretionary So through freely taking decisions and actions Now such instruments for actions, of course, obviously are Legislation regulation and followed by supervision, etc. But in the monetary field these tools encompass particular also, of course monetary policy and As a last resort, but very undecided of course financial backstops another very powerful instrument however is Anchoring and I would like to explain that a little bit more as we all know the market is very agile When it find and it finds its way around regulations that impede too much its Activities in such a situation. However, the state can Instead of simply adding more regulation decide to offer a good or a service on its own and By doing so, it sets a minimum standard that private providers cannot go below Because otherwise the public would no longer use those markets solution, but the states one as a result anchoring ensures access to essential public goods and services while disciplining the market and hence It is an effective really powerful complement to regulation Ideally it prevents market participants also from pushing the state into a situation where financial backstop Becomes unavoidable to be clear. We must not confuse Anchoring with the exclusive provision of a public good or service by the state rather Anchoring is suitable in situations where a market may very well exist however, where it is somehow inefficient for For example, because of exorbitant rent extraction for exorbitant risk-taking and the like So and in addition where regulation alone has repeatedly failed to address such an issue So this would be a complement to regulation with that in mind, then I would now look at some situations where monetary goals and among them after all A smooth settlement of payments is not efficiently achieved and by definition then monetary sovereignty Could be at risk and then I will see whether a CBDC could improve the state's capacity to in to accomplish that goal For obvious reasons, I'll do this mostly from the perspective of the European system And I'll start with an international aspect and then Move back to domestic and pan-European challenges Many of the existing systems for cross-border payments are based on correspondent banking yet correspondent banking is in crisis. We all know The crisis puts strain on international trade flows and cross-border businesses in general and the retail sector Especially remittances is even more inefficient today If time is of essence to my personal experience tech savvy actors and this relates to businesses as well as to individuals Pay with us dollar coins for example with tether You buy a stable coin you transfer it you receive it you reconvert it done So in these cases stable coins serve as a conduit for quick payment Although and not not as a kind of a euro dollar holding or something Although the problem have been known for a long time states obviously cannot solve on These problems on their own otherwise they would have done already and this leads us back to efficient monetary sovereignty because and this concept implies also Situations where constraints prevent autonomous achievement of goals that then sovereignty inherently is bound to be shared That's the idea. So it has to be Exercised jointly as a cooperative sovereignty and we've just heard of the monetary union as we all know that's an example However, this this cooperative sovereignty comes with a huge with an essential caveat as it is only permissible to promote shared values of the states involved now as a principle these shared values I'm not talking about the high-ranking were a piece, but rather all operational share shared values such as Smooth pet settlement we would agree that this could be a shared value for all the states. However already when it comes to impacts of Cross-border or cross currency payments in a free flow So these impacts that it could show on exchange rates for example values start to deviate of course So for this reason collaborative projects such as the Enbridge for example in the wholesale sector or Icebreaker in the retail sector between BIS innovation hubs and national central banks are of great value They explore how to safeguard on the one hand Domestic interests while nonetheless on the other hand central banks involved could establish with joint efforts What I've just described at the beginning Access to essential Public goods and services in this case This would be possibility to conduct cross-border and cross currency payments at the decent price in a reasonable time It's interesting to observe that CVDC is used for cross-border payments Need not necessarily be money That might sound like something surprising But I guess that at least in the beginning CVDC for cross-border use will not be designed in a classical way as we understand money comprising function of payment as well as a store of value function Let us step back Briefly and let's look at the waterfall and the reserve waterfall solution that is planned for the digital euro So if a payment decision initiated and it surpasses a defined holding limit of the pay Then automatically this triggers a transfer to the payee's private account bank or whatever and The reverse waterfall then means that if a payment exceeds the holding limits of the payer Again automatically this triggers a payment directly from his private account And now we go back to cross-border constellations where we could set this holding limit to zero and As such CVDC would not be money as I understand it at least But it would be a pure conduit to initiate and execute payments from a domestic bank account to foreign bank account And in the remittance area one could even Imagine from domestic cash to foreign cash So my point here is that the state or more precisely several states can offer a basic service Which is not intended to drive out private cross-border and cross currency solutions But rather to lead them to accommodate better to the use to the users need With that I moved to the domestic and upon European sphere several existing or potential future shortcomings in the monetary field have been highlighted in particular in the assessment report of the European Commission regarding the proposal of the Digital Euro and I would just mentioned three of them So one would be outside competition by a foreign CVDC or a global stable coin That's has been mentioned by and weeks brown as well Which comes along with a digital superiority or which pro promises access to an Very promising ecosystem for example as was the Libra case So that could be one case a second would be or is actually is the dominance of international card schemes in the field of card payment and Accordingly the lack of competition from upon European players and the last not least But last is the use of cash which has been in decline quite for some time And is no longer able to meet all the needs and the future habits of its users. So Considering time, I will just briefly discuss cash because this is the most evident area of action for a CVDC to complement cash By issuing cash The central bank ensures basic supply of easily accessible credit risk-free money in addition bank deposits and all other private money is Generally structured as a claim claim payable at side and at bar in public money and this concept of full Convertibility ensures the singleness of all the monies denominated in the same currency unit Be it private or public and very obvious central bank money and cash in particular so far Serve as an anchor for private money. So it's about anchoring again. I I first referred to the anchor function of cash in the research report I wrote with my esteemed colleagues Serena Greenewald, which was already mentioned by Jens and Benjamin Gava in 2020 this report was commissioned by the ECB legal research program and in 21 We published a paper which detailed in more precisely this idea of anchoring in September and then in November Executive board member Fabio Panetta came out and prominently discussed the function of CVDC as a monetary anchor and irrational for the digital euro as And now recently the assessment report. I just mentioned Mentioned the anchor function no less than 30 times and as the first specific goal to achieve To be achieved through a digital euro. So it's not negligible as an idea However, what needed a speech nor This assessment report has mentioned or any other publication. I've seen so far is that there is a huge difference Apparently between the anchor function as we have understood it and the anchor function as it is planned to be implemented with a digital euro Article 16 of the proposed draft will allow for holding limits and Which is not mentioned there, but which comes along with it that for example a waterfall solution could be Complimenting these limits. I Understand the idea, of course, it's preserved the financial stability of banks because banks especially in times of uncertainty could experience considerable outflows of deposits But the point I want to make is that public money that does not allow full unlimited Convertibility is not an efficient anchor So we we face some kind of a problem because the existing anchor is losing Some of its importance and its use and the anchor it to be isn't in my opinion to be Provocative not yet designed in a in a full-fledged way that it can serve the purpose my second point is that the banking system Who has obviously to be protected here seems to be too fragile for a digital euro for a full accessible digital euro and we have to think about that as well whether it is the time already to introduce the digital euro now and The third and last point concerns the draft proposal on the legal status of cash, which comes along and which accompanies the digital status of the digital euro The status of the digital euro and here I see that the mandatory Acceptance that shall be introduced for digital euros goes much further than the mandatory Acceptance for the cash. So what is more the process of ensuring access to cash? That is also foreseen in order to not have it faced out, which is important It's incredibly cumbersome to my perception and it is slow Yes, thanks You have this observation of national authorities Potential introduction of flanking measures, then you have an examination by the latter through the European Commission You have consultation with the ECB that takes time and As you may well know in the monetary fields Network effects positive as well as negative play out very quickly So it could be too late at the certain stage for the cash So I sum up the digital euro as it is planned May not be able to fully serve the anchor function of which the assessment report speaks and we have to Reconsider that and and keep it in mind whether this and and it on top of this it might also In some ways Facilated the phasing out of cash. We have to keep that in mind and we have to reconsider how this Is in line with what article 128 of the Treaty of the functioning of the European Union I Conclude It is important to acknowledge that with CBDC as well as with conventional public money Only few economic objectives can be accomplished directly That's not a direct tool But where it is possible is with anchoring and this is a very powerful instrument in this regard in particular Public money should be understood as an anchor and designed accordingly and as such it should neither subsidize nor dominate the market But discipline it through its minimum standard thus forming a sustainable and Inclusive basis for the functioning of a fair market economy Well, thank you. Thank you very much, Corinne. I understand perfectly how attractive is to talk about the digital euro CVDCs stable coins, but you know the topic was Monetary sovereignty so I'm going to take advantage of my position as Moderator of this panel to ask you one question It's about monetary sovereignty in the euro area Well, the euro area we are You know, we are not, you know a political union. Even we are not a complete monetary union Even when we are not a complete banking union because we do not have fees So do you think that you know this situation, you know really has any sort of impact on the perception about them the monetary sovereignty in the euro area So I will start with Roda and we will follow, you know, the order of the interventions well as the As the representative the IMF and the sort of non European in the room. It's this is tricky I mean, if you step back to what monetary sovereignty is again, I'm just going back to the sort of textbook Definition, you know, the three rights that you summarized at the top Again just stepping back and I'm just there's not in itself a Sort of necessary sort of urgency to protect monetary sovereignty as such with respect to the euro, right? At least not as not not as I understand it The zone is strong You're not one of those sort of the countries that we deal with that have the sort of currency Substitution and other issues that I talked about earlier There are of course other goals for which this may be You know desirable, but I'm just going back to our narrow academic position And again, I'm not espousing here at the IMF's view on these issues There may be a broader set of considerations, but I'm dressing from purely that perspective If you step back the urgency would not Seem to be there, but nonetheless, obviously, it's not just that narrow definition that controls any sort of circumstances And my sense is there's a broader set of public policy goals, including some of which Isabel just articulated and those are really Ultimately not so much. I think economic and financial decisions, but I think some of them are sort of broader public policy Decisions that need to be made by the policy makers Jens Yeah, I want to again completely agree with the point you made on this that I guess what I thought was in some ways Very interesting in this observation of Dysenberg that internationalization Isn't always desirable and I think that also true with regard to the international repercussions of internationalization right and that comes out in this notion of Exorbitant duty. I think that comes out very clearly in widespread use of euros Within the EU outside the eurozone, but that's of course also something to think about more globally so it's also not clearly in the interest of the EU if widespread use of euros outside the EU destabilizes the States in ways that we have seen happen with Dolorization, right? So I think there also this I think Beyond monitoring as currently happens in the internationalization of the euro reports the spread of Euros also really being very vigilant on ways in which in some ways expanding the Euros International role might end of the day not really help achieve the EU's objectives either Yes, thank you First I wouldn't have a different opinion from what you have said and I would add to that that the internationalization of of the euro Has to be There has to be a differentiation between Several aspects so when it comes to just small economies in the neighborhood of the euro area there I see great potential and this can be driven further whereas the geopolitical Problems that you have just addressed these are not Challenges that can be overcome with a internationalization of a currency and The third thing which seems interesting to me is the most important trading partners of the European Union are most likely to Establish their own sorry come back to the digital currency as well again, but they they're going to establish them as well So it will be rather about interoperability finding a coordinate Way forward and not kind of a dominance of the international role of the euro Okay, thank you very much, but you know, I suppose that you will agree with me that the life of a central bank of a monetary union Is much more difficult? You know the job of you know central bank of a political union with a complete fiscal and Monetary and banking and banking union You know something that you know, I do not want to To to operate much more on that but I think that is a real conclusion because you have you know, for instance, you know 20 member states with different Economic confidence of the structures and these kind of things. I think that is quite obvious that Sometimes, you know to take decisions, you know in a bank of a monetary union is something that is a little bit more complex than in other In other circumstances So I think that we have time as you know for A couple of questions from from the audience. I see a lady there Okay Yes, I think you very much for okay learning Kleiner Professor of the University Paris City, I thank you very much for the for the debate Which is a topic. I'm falling for more than 15 years I Would like to make some two remarks very short The first one is that I think it's better for the understanding of the debate of monetary sovereignty whether we distinguish the between what is sovereignty and what is competence because in international law states have Competence given by international international recognizes to states a certain competence and It does recognize a monetary competence and then whether or not the state Exercises itself. This competence is another question, but it cannot relinquish in my opinion This is what I wrote 15 years ago. It cannot relinquish to its own Sovereignty it's not possible because the state is a state and will always have sovereignty But it can relinquish to the exercise of the monetary competence. So that's two concepts. That is a bit difference and then I would like to About your a function of anchoring and and the CBDC I Think that this notion of anchoring at the end is a little bit the same than trust and And trust is really at the core of the notion of currency and so of monetary sovereignty and it reminds me of What has been reasoned more than one century ago by? Friedrich Knapp and the Recurrenta Anschluss Which is at the very beginning of the creation or the issuance of a currency which is at the end just to give Trust to people to use this medium of exchange which then can become a currency. So I think that we are playing with concept that's Unknown I mean for Centuries we are just forming them in different ways But at the end Core concept are at the competence and the trust. Thank you. Oh, thank you very much I think that we can take another question afterwards. I will give you the floor. I see Thank you, I'm Susanna Kaffer and professor at University of Salento in Italy I think we can all agree on the fact that the dominance of a currency on international markets equals to power And we saw this only 10 days ago at the BRICS Final statement in South Africa when they declare the clearly that they Won't accept for any longer as they say this dominance of the dollar So I would like to to know the opinion of the panelist and the chair if possible About this the real substance behind the statement and if this open up some space for Eventually an expansion of the space for the euro or and this is more a question for Oda if it's possible to imagine an expansion and in a reform of the of the notion of the special drawing rights as a sort of neutral Currency for international relations. Thank you. Thank you very much Several topics that I think that are quite relevant More than five minutes For all three of us or four of us. Okay. Well on the On the first one on the the first question I mean this issue of competence versus sovereignty It's kind of what I was trying to address at the beginning again The I think of monetary sovereignty and I love the effectiveness concept by the way So I don't think they're in contradiction But it's out of three rights, right the right to the right to issue the right to determine and change value and the Right to regulate the use of that currency the point I was trying in by meeting my earlier intervention was that in some ways again It's also an exercise of sovereignty to sort of have that right exercise by another Sort of entity of which you are part and so that was the point I made about members that joined the IMF they've given up some of their right to you know to Determine the value because we have Restrictions in the articles and in some of these other statues are mentioned. I don't think that's a tension I think it's a sovereign right to do that and so that's how that sovereign has chosen to Define and exercise this monetary sovereignty. It's not an incompat compatibility at all In fact, I was making the opposite argument that people usually sort of see that as being attention And it's not it's an exercise of sovereignty in itself on the second Question regarding the SDR. That's an easier one in some ways because the SDR is so sui generous At least as we know it now, right? It's this it's a basket of currencies The IMF sort of looks at which currencies are freely usable freely, you know Widely used and traded as you know, they remember you as the last currency We added to the basket several years ago, and I guess it's like in 2015 2016 If a new currency emerges that we determined is widely used and traded in the principal Reserve markets is widely used in in international transactions that currency would be eligible to be in the basket. It's a very tough standard and very few Currencies have made that test so far and so a mere sort of statement that it might be a new currency doesn't determine it I think it's too it's too early to tell right the jury is still out But certainly nothing precludes that if such a currency were to emerge So I hope that answers your question But I don't have a crystal ball that sees either breaks currency or see that currency at this point being in the SDR basket But it's possible. Thanks Yeah, I really agree with this notion that an international currency is a source of power And I guess that allows me to still maybe say it more about Lewis I think very Correct observation that the real issue here is the specific constitutional role of the Euro and I guess with this international currency That was the hope you have this immense source of international power right and you could do things with it And then on the other hand somehow as Europeans We haven't been able to really agree what to do with it and I think it's that's the tension in which also this choice for a neutral Approach is made. I don't think you need like a strong form of federal integration To make more effective choices on this topic, right? So in the piece with Serena that I emphasize And we focus very much on coordination with regards specifically to the the further objectives alongside Price stability also the things we discussed yesterday Where also for the purposes of the international role for the euro you could make much more choices, right? So if you say okay, we want the euro We want to use this incredibly potentially strong currency for pushing clean energy globally Then of course that cannot be a decision that the ECB begs by itself But I think there's a lot of scope for making these decisions without immediately Moving to a European state on the model of the US, which I think very few people at this point want I'd like to reply very briefly to what you said about trust and recurrent link because I like that very much Of course, I agree with you. This is not a new concept at all Just a new bottle for the old wine But it's an important one it has worked in the past and That is why I stressed on that point as well because we have a very topical example 100 years ago. We had the hyperinflation in Germany as you all know and They introduced an auxiliary money to overcome that it was one of the measures and it never was legal tender But it was widely accepted because the monetary policy linked to this Rentenmark was quite convincing. So the trust was not because it was kind of issued by whoever it was The way it was designed the way it was managed and this was the trust The trust reason for for this auxiliary money, so I yeah, I I agree with you well, thank you very much to the three of of you, I think that the question about the bricks is extremely interesting. I think that It's a cure a clear reflection of the geopolitical tensions that we are going through Sovereignty is a polyadric concept and perhaps, you know monetary Sovereignty is one it's a part of that That polyadric much more complex concept of sovereignty And that's why if you have tensions at the geopolitical level Immediately, you know, this is going to be reflected in in different in different aspects and perhaps, you know, the question of The monetary sovereignty having a common currency that is not only, you know, the case of the bricks as well We have seen some Some, you know, some proposals in the case of the Latin American countries now with respect to have, you know, a common currency Well, but I think that we have dealt with not only Monetary sovereignty we have dealt with with The digital euro the internationalization of the euro and with other aspects, I think that, you know I think that our three speakers deserve a very clear applause. Thank you very much