Of course, by its very nature clearing is an activity that generates major economies of scale, and thus encourages concentration. But greater competition is absolutely necessary to stimulate financial innovation. Fortunately, LCH SA will centralise repo transactions at the beginning of 2019. More generally, we would like to see the development in Paris of an enhanced and extended clearing services offering in the area of interest rate derivatives. More broadly, Brexit represents an opportunity for Europe to effectively transform its own savings, in order to enhance its ability to finance the real economy: what I call the Financing Union for Investment and Innovation. This involves better steering the euro area’s abundant savings to absorb shocks within the euro area more effectively and to meet investment and innovation needs in fields such as digital technology, energy transition and the equity financing of SMEs. In practice, the creation of a true Financing Union requires the acceleration of the Capital Markets Union and the completion of the Banking Union. The second pillar on the resolution of failing banks is more important still than a possible common deposit guarantee scheme. And it is essential to remove barriers for pan-European banks. This was the policy agenda of the FrancoGerman declaration in Meseberg in June 2018: but I insist on the urgent need to make it a reality today.
Irrespective of the uncertainties currently surrounding the timing and pace of policy normalisation in the euro area, it will eventually gain momentum and the impact on the emerging EU economies, to which I will come back later, should not be underestimated. It is debatable if the forthcoming normalisation process involves going back to the pre-crisis normal or rather moving forward to a “new normal”, characterised by lower interest rates and possibly by larger central bank balance sheets. What is certain is that future policy actions of central banks in CEE countries will definitely depend on the way monetary policy normalisation unfolds in Europe. What happened in the emerging economies that are part of the US dollar sphere of influence following the FED’s policy normalisation is quite relevant. Higher interest rates in the developed world would trigger a capital flight away from emerging economies, thus generating depreciation pressures. The response of policymakers in emerging economies will depend on the specific strengths and weaknesses. Where adequate policy buffers are in place and investor confidence is elevated, market mechanisms, countercyclical macroeconomic and prudential policies may be relied upon to tackle a slowdown in capital inflows. Where there is less room for manoeuvre, tightening monetary and fiscal policies may be required to lower financing needs and attract additional inflows. Where foreign reserves are adequate, they may be used to moderate or smoothen exchange rate depreciation.