Interaction between Monetary and Fiscal policy – 7th ECB Simulation Conference

Training Day is the first day of each ECB Simulation Conference for university students, where distinguished representatives of institutions, the market and academia share their knowledge and experiences with the conference participants.

The Training Day of the 7th ECB Simulation Conference was held at the Amphitheater of the Karatza Megaron of the National Bank of Greece on the 15th of December 2023 (the remaining days, 16-18 of December, were held at the Troias Building of the Athens University of Economics and Business). The examined topics of the Conference were:

  • Interaction of Monetary and Fiscal Policy.
  • Inflation: causes and tools for tackling it.
  • Monetary Policy: Its response and efficiency in a Perma-Crisis environment.
  • ESG transformation in the financial sector and its challenges.
  • Challenges of adopting a Digital Euro solution.

Here we present the remarks of the speakers who participated in the second discussion panel that focused on the interaction between the Monetary and Fiscal policy, the impact of inflation, and the effectiveness of Monetary policy on perma-crisis conditions. In this discussion panel, we were honored to have Mr. Nikos Magginas, Chief Economist, Head of Economic Analysis Division at the National Bank of Greece and Mr. Apostolos Philippopoulos, Professor at the Athens University of Economics and Business.

The second panel of the Training Day of the 7th ECB Simulation Conference was opened by Mr. Nikos Magginas, Chief Economist and Head of the Economic Analysis Division at the National Bank of Greece.
Mr. Magginas delved into the global economic environment, highlighting that the world is entering a period of heightened volatility, marked by a series of successive crises. Continuing Mr. Magginas asserted that European inflation is mainly due to external factors, such as the rise in energy prices and disturbances in the global supply chains, adding that the ECB has raised interest rates to historically high levels to combat inflation.
He then shifted his focus to the Greek economy, where he pointed out that the Greek government faces a challenge in balancing the need to control inflation with the need to alleviate its debt burden. Mr. Magginas concluded by mentioning that inflation is unlikely to return to the levels it attained in the previous two years and that the challenge Greece faces is to manage its debt in the new, high-interest rate environment.

Mr. Apostolos Filippopoulos, Professor at the Athens University of Economics and Business, concluded the second panel by providing a comprehensive overview of the economic landscape in the European Union (EU). He began by noting that despite the stagnation observed in 2023, a mild economic recovery is expected, especially for Greece, which has a robust growth trajectory. He then pointed out that fiscal policy in the EU is expected to follow a less expansionary approach in the coming years to constrain fiscal deficits, as the current high-interest rate environment increases the cost of servicing new debt issued.
Mr. Filippopoulos then presented the challenges of the Eurosystem and the criticism that has been leveled at the ECB regarding Quantitative Easing (QE) and particularly the Asset Purchase Programs (APP), assessing that the ECB’s policy had a positive outcome and acknowledging the complexities of conducting Monetary Policy in a Monetary but not Fiscal Union. In his concluding remarks, stressed that the key to addressing future challenges and asymmetries in the Eurozone and the EU is economic growth and cooperative decision-making.

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