Vítor Constâncio: The future of the international monetary system

23 November 2011

Speech by Mr Vítor Constâncio, Vice-President of the European Central Bank, for the Golden Series lecture at the Official Monetary and Financial Institutions Forum (OMFIF), London.

Will the changes in the international monetary system (IMS) which, based on current information, we are likely to witness over the next 10-15 years, be sufficient to make it resilient and sustainable? What further changes are indispensable? Will the road towards the new multi-polar system be smooth or very bumpy? Another question is whether the new IMS would be steady in nature or whether a new hegemon would emerge possibly to accomplish the “hegemonic stability theory” promoted by Kindleberger. These questions were raised Mr Constáncio in his speech.

As regards the necessary changes to international cooperation, there will be the need to see a greater awareness among global partners about their interlink ages and the ensuing responsibilities to ensure the stability of the whole system. Without a minimum spirit of multilateralism and a minimum degree of cooperation, no future IMS will remain stable for long. It is to be hoped that countries, especially those with systemic relevance, understand that it is in their best self-interest to consider externalities and cooperate. But such “enlightenment” alone will not be sufficient to ensure stability. If the IMS as such does not deliver the right incentives, the international community will eventually have to agree on enhanced adjustment mechanisms, e.g. in order to foster the traction of policy recommendations. It is to be hoped that we do not need another global crisis to instil the necessary incentives.

Full speech

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