European Central Bank (ECB) Governing Council member and OeNB governor Ewald Nowotny addresses a news conference in Vienna, Austria, June 9, 2017. .
(photo credit: REUTERS/LEONHARD FOEGER)
Ewald Nowotny, the experienced governor of the National Bank of Austria and member of the European Central Bank’s (ECB) governing council, is no stranger to an economic crisis.
Indeed, Nowotny first took the reins of Austria’s premier financial institution on September 1, 2008, a mere two weeks prior to the infamous collapse of Lehman Brothers. A decade later, the ECB is preparing Europe’s banks for various potential Brexit outcomes
The worldwide banking system has become considerably stronger in the years that followed the last global economic crisis, Nowotny told an audience at Tel Aviv University on Monday, emphasizing the need to strengthen institutions while they are strong.
“You have to repair your roof when the sun is shining,” he said, jesting that Israel has plenty of opportunity given the tense Middle Eastern climate.
Nowotny discussed with The Jerusalem Post
a range of topics affecting the European economy, including the uncertainty over Brexit, trade tensions, digital currencies and the management of central banks.
“We are not directly involved in the Brexit negotiations. But of course, at the ECB we offer our expertise and we have to prepare ourselves and the European banks for different varieties of outcomes, including the worst case,” he told the Post
“For quite some time, there have already been meetings in different working groups so we will not be unprepared. These working groups cover different aspects, ranging from insurance to derivative clearing, for potential different outcomes.”
Nowotny said tensions surrounding US-China trade
has the potential to impact the European economy, partly due to cases of trade diversion in third-party markets.
“We are following this closely. We have no way to influence it, but it is a good reason for closer cooperation between the European and Asian markets. In fact, the European Union just recently signed a large trade arrangement with Japan which might be a model for other trade treaties,” Nowotny said.
In addition to broad political and banking experience, Nowotny, like the Bank of Israel’s incoming governor Prof. Amir Yaron, has an extensive background in academia. Different financial backgrounds might lead to different perceptions of markets and their importance, he said.
“A governor is usually part of a team, so it is always very important that you have a team that brings in different elements of expertise. I think it is essential for central banks to have full information about market developments, but in my view the policy of central banks should not be led by markets. There should be independent policy according to the mandate given to the central bank,” he said.
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