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Commentary

From Finance in Bari to the Summit in Taormina

Chiara Oldani, University of Viterbo
May 23, 2017

When the G7 finance ministers and central bank governors met in Bari, in the south of Italy, on May 11-13, 2017, with Pierre Moscovici, the European Commissioner for Economic and Financial Affairs, Taxation and Customs, and Jeroen Dijsselbloem, Eurogroup president, as well as the heads of the International Monetary Fund, the World Bank, and the Organisation for Economic Cooperation and Development.

This meeting, hosted by Italy's G7presidency, achieved extraordinary results in terms of policy proposals. International economic and financial coordination will be pursued, in particular on taxation, on growth-enhancing policies, and on fiscal policies that should safeguard stability and growth. Policy proposals, however, need to be translated into domestic rules to be effective and to achieve their goals.

Certain hot topics, including cyber security and web taxes, were discussed, but the communiqué issued by the finance ministers and central bankers does not address them in depth, since G7 leaders will deal with them at their summit in Taormina on May 25-26.

The need for deeper coordination with financial regulation has not been addressed by finance ministers and central bank governors and will not be dealt with by the G7 leaders either, since positions are still way too far apart. In particular, the new U.S. administration wishes for a weaker global financial architecture to gain flexibility and market shares for its operators; the continental European G7 members (France, Germany and Italy), on the opposite side, cannot destroy the complex financial architecture implemented after the subprime crisis, because of the financial risks also posed by the growth of public debts and of systemic international financial institutions. The need for coordination will not be supported by the British, who are extremely upset with the European regulatory system.

In fact, a different degree of competition among financial centres can favour the mispricing of risks, and undermine stability, but can create profitable opportunities that the United States is likely to exploit.

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Chiara Oldani is professor of monetary economics at the University of Viterbo and director of the G7 Research Group's Rome office. She is a member of the scientific committee of the Fondazione Ugo La Malfa, a research associate at the Centre for Applied Macroeconomic Analysis at Australian National University and the director of research at the Rome-based Assonebb. She was a visiting scholar at CIGI in 2014, the Cambridge Endowment for Research in Finance at the University of Cambridge in 2007 and the Wharton School at the University of Pennsylvania in 2005. She has taught at Luiss Guido Carli University and the Italian Society for International Organization in Rome. Chiara's research currently focuses on over-the-counter financial derivatives and the complex web of counterparty risk, widely considered a major precipitating factor of the global financial crisis. She has published dozens of academic papers and book chapters, both in English and Italian, on topics including Greek sovereign risk, derivatives and fiscal policy, and the global financial crisis. She has a Ph.D. in monetary and financial economics from Tor Vergata University and an M.Sc. in economics from the University of Warwick

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