Synopsis of Training Day of the 7th ECB Simulation Conference
The Training Day serves as the inaugural day of the annual ECB Simulation Conference for university students, where distinguished representatives from institutions, businesses, and academia share their knowledge and experiences with the participants.
The Training Day of the 7th ECB Simulation Conference for university students was held at the Amphitheater of the Karatza Megaron of the National Bank of Greece on the 15th of December 2023. 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.
The 7th Conference was made possible thanks to the invaluable support of the Bank of Greece, the Hellenic Bank Association, Alpha Bank, EY Greece, the National Bank of Greece, and the Athens University of Economics and Business.
Here, we highlight the positions of the speakers of the Training Day of the 7th ECB Simulation Conference. We are greatly honoured to have speakers such as Mr. Gikas Hardouvelis, Chairman of the Board of Directors of the National Bank of Greece, Mr. Kostis Hatzidakis, Minister of National Economy and Finance, Ms. Ifigeneia Skotida, Deputy Director of the Economic Analysis and Research Department at the Bank of Greece, Mr. Gabriel Glöckler, Principal Adviser at the Directorate General Communications at the European Central Bank, Mr. Christos Gortsos, Professor of Public Economic Law and Academic Head of the LLM Program in “Financial Regulation” at the Law School of the National and Kapodistrian University of Athens, Mr. Antonis Ballis, Assistant Professor in Finance & Programme Director of MSc in Finance & MSc in FinTech at Aston University, Mr. Christos Kallandranis, Assistant Professor in Finance at the Department of Accounting and Finance at the University of West Attica, Mr. Dimitris Anastasiou, Visiting Professor at the Athens University of Economics and Business, Mr. Nikos Magginas, Chief Economist, Head of Economic Analysis Division at the National Bank of Greece, Mr. Apostolos Philippopoulos, Professor at the Athens University of Economics and Business, Ms. Phoebe Koundouri, Professor of the Athens University of Economics and Business & Technical University of Denmark, President of the EAERE, Chair of the SDSN Global Climate Hub & Co-chair of the SDSN Europe, Mr. Dimitris Kazazoglou-Skouras, Group ESG Coordinator of the Alpha Services & Holdings S.A and the Ms. Kiara Konti, Partner, Climate Change and Sustainability Services Leader – Central, Eastern and Southeastern Europe & Central Asia (CESA) of the ΕΥ Greece.
Welcoming Speeches
The opening remarks were concluded by the Mr. Kostis Hatzidakis, who highlighted the high standard of the ECB Simulation Conference and expressed his confidence in the ability of young people to safeguard the European Economic Future.
Mr. Hatzidakis continued his address by delving into the topics of the conference. He emphasized the interdependence of monetary and fiscal policy, underscoring the necessity for fiscal policy to adhere to a framework of budgetary discipline. Turning to the issue of inflation, he stressed the need to identify the root causes of inflation across Europe to better control and limit its volatility.
He emphasized the daily and international balancing act required to maintain inflation at the desired level while addressing challenges faced by traditional economic models in “perma crisis” conditions.
On the topic of the digital euro, Mr. Hatzidakis emphasized its complementary and parallel operation with existing payment methods. He deemed as essential for economies to embrace the digital euro and adapt to it, and for the technical, political, and economic groundwork to be developed to foster innovation and safeguard financial institutions’ integrity.
Concluding his remarks, Mr. Hatzidakis acknowledged that differing viewpoints are inevitable in discussions of this nature. He regarded the ‘heretics’ as the visionary builders of the future. He emphasized that “the future can indeed be within our grasp if we approach it with knowledge, passion, and determination”.
The opening remarks of the Training Day of the 7th ECB Simulation Conference began with Mr. Gikas Hardouvelis. Mr. Hardouvelis proceeded to discuss the key topics of this year’s conference, focusing on the financial sector.
Specifically, he highlighted the importance of the transformation of the financial system, which was led by the National Bank of Greece, and the challenges that financial institutions face in a continuously changing environment.
Regarding the digital euro, Mr. Hardouvelis emphasized that it will have an impact on a wide range of the economy, posing challenges for both the government and the private sector. Furthermore, he addressed the topic of sustainability, stressing that financial institutions have to integrate ESG parameters into their policies and work towards reducing carbon emissions by supporting healthy businesses and capital. He further emphasized the importance of transparency in non-financial reporting.
Commenting on current market conditions, he noted that Greece has experienced a credit rating upgrade and a surge of investor interest this year, leading to a more active role for banks in the Greek economy. This has also generated increased investor interest in the performance of Greek banks and fueled demand for their shares. Mr. Hardouvelis concluded by emphasizing that economic and geopolitical developments will impact the lives of every student in the audience, regardless of their background, and for this reason, “we should be as prepared as possible”.
Keynote Speeches
Mr. Gabriel Glöckler, delivered the second keynote speech, emphasizing the critical role of communication for Central Banks in fulfilling their mandate. More specifically, he stressed the importance of clear and understandable communication in maintaining public trust in Central Banks. Mr. Glöckler pointed out that studies have revealed a lack of awareness among the market participants regarding the workings of the European Central Bank (ECB).
Continuing his speech, he emphasized that trust is built over time through credible and consistent communication between the ECB and the public. This trust can be strengthened by fostering a broader understanding of the ECB’s mandate, ultimately aiding the achievement of its objectives and goals. Moreover, he underlined the ECB’s efforts to improve public communication by enhancing transparency in its decision-making and operations.
However, Mr. Glöckler suggested that Central Banks should give even greater emphasis on their communication with the public, utilizing other communication channels that are more accessible, such as social media, TV, and radio. He also highlighted the importance of tracking the effectiveness of the ECB’s communication strategy and adjusting it as needed. Closing his remarks, Mr. Glöckler stressed that in an increasingly complex world, Central Banks must serve as a trusted source of information and guidance.
The keynote speeches started with Ms. Ifigeneia Skotida. In her speech, she addressed the progress of inflation in the Euro Area, stressing the substantial rise in inflation rates due to various factors such as supply chain disruptions, pandemic-induced demand surges, and geopolitical tensions, notably the war in Ukraine. Ms. Skotida outlined the Eurosystem’s response to manage and stabilize price stability, discussing the gradual tightening of monetary policy through measures such as ending asset purchase programmes, adjusting interest rates, and implementing policies to protect the transmission mechanism. Afterward, she discussed future policy considerations, acknowledging the challenges posed by ongoing uncertainty, geopolitical risks, and economic fragility, highlighting the importance of a cautious, flexible, and data-driven approach, and communicating with clarity to steer market expectations while aiming to achieve price stability. Closing her remarks, Ms. Skotida referred to the environment of high inflation and the Eurosystem’s response, which involved a strategic balance between addressing inflationary pressures while minimizing the risk of a recession.
The keynote speeches concluded with Mr. Christos Gortsos, who provided an overview of the topics examined at the 7th ECB Simulation Conference.
He commenced his address by emphasizing that the debate on the digital euro is no longer conducted at an abstract level but within a certain legal framework, that is being developed by the European Commission. More specifically, he noted that the digital euro will be issued either by the ECB or national central banks, coexisting alongside banknotes, will be accessible to all, and universally accepted as a means of payment. However, he recognized that the implementation of the digital euro poses risks in terms of a) financial stability, b) price stability, c) money laundering, and d) data protection.
As far as the ESG topic is concerned, Mr. Gortsos highlighted that many problems arise from non-compliance with regulations and that from 2025 onwards it will be mandatory for banking institutions to adopt risk management systems for ESG parameters. Furthermore, he emphasized that the ECB can influence demand in the market by setting interest rates, but not supply, and highlighted that often the monetary policy pursued by the ECB and the fiscal policy pursued by national governments in the eurozone are in conflict, which prevents the desired results from occurring. Concluding his remarks, Mr. Gortsos pointed out that the tools available to the ECB have to be adapted and revised to be able to deal effectively with the “Perma-Crisis” conditions and need to be reviewed.
Digital Euro adoption challenges
The first panel of the Training Day commenced with Mr. Antonis Ballis, delving into the categories of digital money, emphasizing the Digital Euro. Initially, the Digital Euro was presented as a natural outcome of the FinTech industry, which has been rapidly developing in the past 15 years. According to Mr. Ballis, the creation of Bitcoin (whose initial goal was to replace existing forms of money was unsuccessful) triggered the rapid growth of the Fintech industry, which changed the landscape of payment systems.
Mr. Ballis then pointed out that the definition of digital currency is broad as it covers different types of digital currencies, presenting the main categories of digital currencies. In particular, the three main categories of digital currencies are as follows: (a) cryptocurrencies; (b) virtual currencies; and (c) central bank digital currencies. On the digital euro, he explained that we cannot yet provide a comprehensive description as it has not been developed and there is no clear information on how it will operate. Mr. Ballis stressed, however, that it will serve as a complementary payment option to cash (or any other payment system), without replacing it. He concluded his presentation by highlighting the potential of the digital euro in making the euro area independent of third-party payment systems.
The panel discussion concluded with remarks from Mr. Dimitris Anastasiou, who emphasized the significance of the digital euro as a complementary form of transactions.
Mr. Anastasiou delved into the Reverse Waterfall mechanism, illustrating how it can make the digital euro a convenient payment solution. He then pointed out the ECB’s commitment to enabling offline use of the digital euro, promoting financial inclusion. Highlighting the potential benefits, Mr. Anastasiou stressed that adopting the digital euro would enhance the efficiency of interbank and cross-border transactions, facilitating the free movement of capital and promoting international trade. He also emphasized the associated risks of incorporating the digital euro, including a potential squeeze on lending and deposit interest rate margins, cybersecurity risks, and the potentially high costs linked to technological advancement. In concluding his speech, Mr. Anastasiou underscored the necessity of establishing an appropriate legal framework to mitigate negative impacts and promote the positive effects that adopting the digital euro could bring to the banking sector.
The panel discussion proceeded with Mr. Christos Kallandranis, who focused on the evolution of the euro into also a digital currency that will coexist with its other forms, as a result of digital transformation.
Mr. Kallandranis highlighted the digital euro as an opportunity for the ECB, the central banks, and the economy in general, due to the added value of the services it is expected to provide and the development of a payment system that can compete effectively with third-party providers from outside the Eurozone. Additionally, he clarified that the launch of the digital euro would not expand the ECB’s balance sheet, as an equivalent amount of existing money would be “replaced” with digital euros. Furthermore, he identified as a key point the development of the necessary legislative framework for the circulation of the digital euro, stressing the need for it to function as legal tender, safeguard users’ personal data, and provide zero-cost transactions. In conclusion, Mr. Kallandranis underscored that the evolution of the currency is both inevitable and a logical progression, given the ongoing transformation of our society and economy.
Interaction between Monetary and Fiscal policy
Mr. Apostolos Filippopoulos 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.
The second panel of the Training Day of the 7th ECB Simulation Conference was opened by Mr. Nikos Magginas who 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.
ESG Transformation in the Financial System
The panel on the transformation of the financial system and ESG challenges continued with the remarks of Mr. Dimitrios Kazazoglou-Skouras, who stressed that financial institutions have a strong desire and an urgent need to adopt more sustainable practices because doing so will have a positive long-term impact on their profitability. He then pointed out that the main objective of the banks is to manage the climate risk of their clients and guide them towards more sustainable solutions while providing the necessary financial tools, as the clients are not always aware of these risks nor do have the necessary tools to address them. Therefore, in the near future, financial institutions will provide funding, incentives, and guidance for the development of sustainable investments, while potentially “penalizing” clients, who when investing, fail to take sustainable considerations, as they face higher risks.
Furthermore, Mr. Kazazoglou stressed that effective corporate governance (pillar “G”) plays a key role in the proper integration of environmental and social aspects. He then concluded by stating that the targets set by legislation to mitigate climate change are difficult to achieve based on projections but argued that “the more ambitious targets we set, the closer we get to achieving them”.
The last panel of the Training Day of the 7th ECB Simulation Conference was opened by Ms. Phoebe Koundouri. She commenced her speech by pointing out that the concept of Sustainability is not new. However, she pointed out that all policy regulations and laws, related to ESG and sustainability, have been introduced since 2015 and the Agenda 2030. At the same time, she mentioned that the sustainability issue is well-defined through the 17 Sustainable Development Goals (SDGs) that have been developed by the United Nations (UN) and formed the Agenda 2030.
Ms. Koundouri, then focused on Europe and the legislative actions promoting green transition and sustainable development, such as the European Climate Law, the EU Taxonomy, and the Corporate Sustainability Reporting Directive (CSRD). She highlighted that the future of Europe is digital and green and the crisis that we are experiencing is humanitarian and environmental. For the successful green transition and transformation, collecting the necessary data is vital because, as she said, “if we cannot measure it, we cannot manage it”. Nonetheless, she underlined that the sustainable pathways which are a mix of best practices and tools have not yet been fully developed.
Regarding companies and businesses, she stated that green transition should comply with the regulatory framework and be profitable for them. In closing her speech, she highlighted that 85% of the occupations of 2030 do not exist today. For successful sustainable transformation, innovation, acceleration, and constant reskilling and upskilling are needed.
The Training Day of the 7th ECB Simulation Conference concluded with a presentation by Ms. Kiara Konti, Partner. Ms. Konti highlighted a significant gap in understanding the impact of ESG on business models, emphasizing that each industry is affected uniquely and possesses its distinct characteristics. She also stressed the need for a paradigm shift in the way profitability is evaluated, moving from a medium to long-term perspective and incorporating non-financial information when assessing business performance.
Moving forward, Ms. Konti underscored the importance of understanding the distinction between sustainable development and ESG, as they follow different approaches. Moreover, she mentioned that the challenges of the green transition exhibit three main characteristics: a) they are multidimensional, b) they operate systemically, i.e., one affects the other, and c) they are dynamic, evolving over time.
In conclusion, Ms. Konti drew attention to the importance of connecting information, techniques, and knowledge from various departments, businesses, and sectors to address emerging challenges effectively.
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