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Europe is not just a semi-innocent bystander here: we have a big stake in this context, for as a re-emerging economy, Europe faces the prospect of rising interest rates potentially hampering her still nascent recovery.
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The importance of a smooth normalisation of monetary policy was underlined in the conclusions of the International Monetary and Financial Committee. They point out that the phasing out of unconventional monetary policy by major economic powers has global ramifications. All agreed to take into account the impact of their action on their international partners in light of possible feedback effects.
This leads me to two main policy conclusions.
First, it is better to be safe than sorry when exiting the monetary stimulus. In other words, while the phasing out of monetary easing will need to gradually happen, an excessively speedy or rushed exit from monetary easing would have clearly negative ramifications for the still weak and fragile economic recovery. A carefully calibrated phasing out of monetary stimulus will be more appropriate and eventually indeed necessary for the sake of sustained recovery and growth.
Second, it is essential that we in Europe – both the individual Member States and the Union as a whole – stay on the reform course. Especially, it is crucial to maintain the momentum in rebuilding the economic and monetary union, most concretely through the construction of a Banking Union. But the same call for structural reforms to strengthen economic fundamentals is likewise fully valid for the (other) emerging economies.