The macroeconomic effects of a transfer of resources from debtor to creditor 1/5  BIS central bankers' speeches  countries is an old issue, going back to the debate between Keynes and Ohlin about Germany’s international obligations after World War I. In recent decades, Maury Obstfeld and Ken Rogoff 4 have pointed out in a series of papers that the basic mechanism of the adjustment results in a transfer of real resources from debtor countries to surplus countries, regardless of the drivers of global rebalancing. In the debtor country, there is a clear macroeconomic cost related to a drop in domestic spending and welfare, leading to large negative output gaps and high unemployment rates, and in turn putting strong downward pressures on wages. This is typically what we saw in the euro area, where the adjustment contributed to the very different dynamics of unit labour costs across countries [Slide 5], and therefore led to relative price adjustments. In cumulative terms since 2007, Germany has seen real exchange rate appreciation of about 8% relative to France, and 20% relative to Spain, although we should take into account in these dynamics the large gains in German competitiveness before the crisis. The adjustment relied mainly on nominal adjustment in deficit countries. The link between the current account and the real exchange rate is still subject to considerable debate among academics.
CMU would help significantly to foster private risk-sharing by: First, providing incentives for cross-border investments – preferably in equity – through the harmonisation of accounting, taxes and insolvency laws; Second, developing pan-European savings products more oriented towards long-term investment. This could be done through a variety of savings vehicles, starting with the creation of European venture capital funds; Third, completing the Banking Union. * * * To conclude, global imbalances are not inevitable and we always need fresh ideas to improve the functioning of our globalised economies. In this respect, I would like to quote George Bernard Shaw, the famous Irish writer, who said once “You see things; and you say ‘Why?’. But I dream things that never were; and I say ‘Why not?’” Thank you for your attention. 1 Milesi Ferretti, G.-M. and A. Razin (1998). Current account reversals and currency crises: Empirical regularities,  NBER WP No. 6620. 2 Lane, P. and G.-M. Milesi-Ferretti (2012). External adjustment and the global crisis, Journal of International  Economics, Elsevier, vol. 88(2), pages 252–265. 3 Gourinchas, P.O. and M. Obstfeld (2012). Stories of the Twentieth Century for the Twenty-First, American  Economic Journal: Macroeconomics, American Economic Association, vol. 4(1), pages 226–265. 4 4/5  BIS central bankers' speeches  4 Obstfeld, M., and K. Rogoff (2001). The Six Major Puzzles in International Macroeconomics: Is There a Common  Cause? in NBER Macroeconomics Annual 2000, ed. by Ben S. Bernanke and Kenneth Rogoff, Vol. 15, NBER Chapters, National Bureau of Economic Research, Inc.: MIT Press, pp. 339–412.