9th Annual Conference of Mediterranean Central Banks - Speech by Ambassador Angelina Eichhorst

9th Annual Conference of Mediterranean Central Banks - Speech by Ambassador Angelina Eichhorst

Esteemed Governors and staff from the Mediterranean Central Banks gathered here today,

Dear governor Abdalla who is hosting us, in the vibrant city of Cairo where ancient and modern life collide, and governor Escrivá of the Banco de Espana

Esteemed Representatives from the Egyptian government, the Union for the Mediterranean, the OECD,the European Institute for the Mediterranean

Dear guests, colleagues, friends,

Allow me to first thank the co-organisers, especially the UfM Secretariat, for bringing together already the ninth edition of this Annual Conference of Mediterranean Central Banks.

Today we can say there is a strong network of Central Banks representatives around the Mediterranean and this is thanks to the good work done during all these years: connecting people, learning from each other…

You know how much value we attach in the European Union to deepen collaboration in the Mediterranean and between Mediterranean countries.

It is so important, that we now have a Commissioner dedicated to the Mediterranean, Commissioner Dubravka Šuica, and we have a full Directorate-General specifically for the Mediterranean. Our DG MENA covers all of the countries in the Middle East, North Africa and the Gulf.

Commissioner Dubravka Šuica and our High Representative of the European Union for Foreign Affairs and Security Policy, Vice-President Kaja Kallas, have been working together on a Pact for the Mediterranean (the 'Pact') to deepen the EU-Southern Mediterranean partnership and integration around a common space of peace, prosperity and stability.

The PACT, as a result of intense consultations across the region, is expected to be politically endorsed by the Member States and the ten Southern Mediterranean partners when we all celebrate the 30th anniversary of the Barcelona Declaration in November. I personally have good memories of Barcelona in November 1995 when it all started and I attended representing civil society.

As you all know the European Union works based on key principles of co-ownership, co-creation and joint responsibility. In fact we are the only entity in the world putting these key principles at the core of our partnerships.

Of course we have clear interests as EU, and many of you know what our areas of key political priorities are: prosperity and competitiveness, security and defence, strengthening our societies and our social model, quality of life (food water nature), protecting our democracy, levering our power and partnerships, preparing for the future.

These priorities you will also see them reflected in the new Pact. Whilst it is built on the foundations of the 2021 Agenda for the Mediterranean and its Economic and Investment Plan, it will deepen cooperation in areas of mutual interest that can deliver tangible results for people of all ages, in particular for youth, small businesses and entrepreneurs.

Three broad areas have been jointly identified with EU MS and MENA partners:

(1) people first - focusing on higher education, developing talents, vocational training, skills and jobs, mobility, culture, tourism and sport;

(2) stronger and more integrated economies - covering cooperation on trade, investments, job creation, energy and clean technologies, water resilience and climate preparedness, agriculture, digital and transport connectivity; and

(3) security, resilience and migration management - the third set of issues.

The intention is for the Pact to evolve over time and remain an open and inclusive process. It will bridge bilateral and regional cooperation, with a flexible approach allowing for variable participation of partner countries in the implementation of the various initiatives. The Pact will be followed by Action Plans, which will operationalise initiatives and provide for regular updates.

This brings us to our conference today and the need for a change in paradigm:

We all understand the role of financial diplomacy and closer financial cooperation in particular when we need and want "stronger and more integrated economies". The Middle East and North Africa are considered one of the least integrated regions in the world economy, particularly in non-oil trade, due to structural and institutional constraints, limited market depth, and underdeveloped financial systems. The OECD reports give us ample facts and figures. While the Gulf Cooperation Council (GCC) countries have seen increasing integration and become major foreign investors, the broader MENA region faces persistent barriers to the movement of goods, services, capital, and people, hindering its economic potential. Yet interestingly enough more than 70 percent of total EU investment in Africa is in North Africa…

What is needed to reach full potential is a stable and reliable financial system that garners trust and confidence and can channel the financing for sustainable development that is so badly needed.

Let there be no doubt that EU is committed to support and facilitate further integration among MENA countries and to strengthening their relations with EU member states. We welcome the OECD's recommendation on making regional trade more inclusive and a lot has been done to integrate Mediterranean economies through trade and investments. We launched a Team Europe Initiative together with Germany, France, Spain and Italy, the EIB and the EBRD, to boost the creation of jobs by addressing sustainable trade and investment; vocational training & skills; and inclusive entrepreneurship. This initiative is conducted with a close involvement of the Union for the Mediterranean which is instrumental in helping the necessary policy convergence and design of the networks.

The well-functioning of financial markets, financial stability, and financial inclusivity is another fundamental point: Together with our Member States, we are using the full EU toolbox to foster prosperity and help stabilise fragile situations where needed - from macro-financial assistance/budget support to de-risking tools for public/private investments and capacity development. See for example our macro-financial assistance to Egypt reaching a total of 5 bn EUR, our second largest Macro Financial Assistance operation world wide. With regards to de-risking tools, we are using, among other tools, blending and guarantees to help leveraging investments considerably - which I just discussed here with one of the participants.

By doing so the EU promotes entrepreneurship, an inclusive economy targeting women boys, girls, people with disability, people from across the country and the twin green/digital transition in the region.

In order to ensure that investments have real effects on the broader economy, the region needs to make progress on regulatory frameworks such as the investment taxonomy. Further reforms are crucial for enhancing market openness and mitigating investment risks. This is where the UfM comes in to help promoting policy dialogue through its technical platforms and at political level.

Part of the legal and institutional credibility is the efficient functioning of the foreign exchange markets in our respective countries. To prevent crises and hedge against currency risks it seems to me ever so important that reserves, as well as foreign currency denominated assets and commercial invoicing currencies reflect the weight and share of trade and investment flows.

A strong factor for success is the institutional environment : Central Banks need to be independent in the formulation of their monetary policy. Current debates in different countries make it very clear: Central Bank governors need to be protected from political influence. They need to exercise prudent and sustainable monetary policies that are credible. Allow me to congratulate Governor Abdalla, for your effective monetary policy which is really helping reduce inflation in Egypt and for the way the Central Bank of Egypt has restored credibility in the foreign exchange market.

But also Banks need to play their roles. They need to play by the rules and be competitive commercial players, even if they are state-owned.

Christine Lagarde in her opinion piece in the Financial Times in June this year pointed out that a crucial ingredient for seizing a currency's full potential is economic resilience as well as legal and institutional credibility.

And in the European Central Bank's recent report on the role of the Euro in the world it has become clear that the Euro, despite numerous crises, maintains its share in the global use of currencies perfectly stable in the last 20 years while others have declined.

This shows, ladies and gentlemen that we can master the challenges of further financial integration and inclusion together !

I will not go into further technical details in this intervention. I see so many high-caliber panelists who will do this in the panels. But in these uncertain times it is ever so important that we talk to each other, help each other, exchange information and experiences, learn from each other.

Let me just reiterate, if there is one entity in the world that truly promotes collaborative behaviour and ever closer integration, it is the EU.

So count on us. Count on us to foster collaboration between central Banks. There is this truly successful programme funded by the EU with the African and European central Banks to enhance dialogue between the members of the European and the African Systems. Some of you took part in this programme. The great advantage, as one of the Central Bankers mentioned to me, is that many different partners from the European side are in this programme, so the partners get the full range of experiences, and some of them fit better to their own challenges than others.

A real result of this programme is that after a series of technical workshops people simply got to know each other better. They built trust, even friendships, so when one needs to draft a new regulation and is looking for some legal advice or maybe the experience of a bank that has already implemented it, one just calls a friend at the European Central Bank, or be it the Bulgarian central Bank, or the Bundesbank, and quickly gets advice. Or, in another case one picks up the phone and speaks to a good contact in South Africa, or in a neighbouring country and this already helps.

With the increased importance of financing for sustainable development we need more financial cooperation and as such financial diplomacy is the key.

We look forward to enhancing steps towards such financial dialogues in the future, bilaterally or through regional activities and I hope you will join us. I wish you success and mostly a very fruitful exchange.

Thank you again for inviting me today.

I look forward to stronger cooperation in the future.