The second way out of the crisis is the “classic” IMF prescription, that is to say, fiscal discipline, debt restructuring and currency devaluation. Note that to make such a scenario easier some aid is also very desirable at least in the form of support for the drachma from the ECB and/or European authorities (among others) to avoid an overshooting after the exit from the eurozone. Note that we are currently seeing a rather disorderly effort along the lines of the first scenario of keeping the current eurozone together. In the same spirit we could see an orderly exit from the eurozone, if there is the political will. In short, to minimise the costs, either scenario needs to be carried out in an orderly way, while disorderly implementation results in dramatically increased costs in both cases. Therefore, instead of the current muddling through, one of these two ways should be chosen and clearly communicated to markets, voters and others. Otherwise, we risk a further loss of credibility for everyone involved in Europe and very likely for the IMF as well. Further continuation of the current uncertainty will  BIS central bankers’ speeches  3  continue to cause significant economic costs for the EU and Europe in particular. At present, the risk of an event pushing Greece (and/or others?) into unexpected default is shooting up. That would surely be the most costly outcome, at least in the short term.
“Recent developments in the Chilean Financial System and Challenges ahead” Rosanna Costa, Governor of Central Bank of Chile Chile Day – December 12 and 13, 2022 – London, United Kingdom Good morning distinguishes authorities and dear friends. I am going to talk about the recent developments in the financial system in Chile and the view of the Central Bank of the challenges ahead. Introduction In December of last year, the former Governor of the Central Bank of Chile (and nowadays the Minister of Finance) presented in this very same forum in London about the developments and prospects of the Chilean economy. By then, our country was going through a process of strong recovery from major shocks that affected our economy: first the social unrest of 2019 and then the pandemic of Covid-19. Therefore, the discussion last year focused on the aftermath of the pandemic and the different measures that were adopted by the Central Bank and the government to mitigate its effects on the real economy. Since July 2021, the Central Bank has been hiking the monetary policy interest rate, due precisely to strong pickup of household consumption driven by governmental aids and pension funds withdrawals. A year ago, the Central Bank also raised a note of caution for 2022 and 2023 due to the weakening of the capital markets, identifying several factors including the reduction of long-term savings due to pension withdrawals and its impacts on access to long-term financing for companies and individuals, risk of fiscal deterioration and persistent uncertainty, among others.