"Significant problems of coordinating macroeconomic adjustment in response to Europe’s persistent economic crisis exist in the European Union (EU) including the following: Germany's reluctance to use macroeconomic policies to stimulate domestic spending, France's weak fiscal expenditure management and the resulting excessive fiscal deficit, and major fiscal problems of peripheral countries in the EU. These developments are signs of weakening cooperation in macroeconomic policy within the EU. These problems would be seriously exacerbated if political tensions between Russia and Ukraine induced Russia to implement policies such as disruptions in supplies of natural gas to Western Europe, which would create additional macroeconomic policy coordination problems in the EU member countries over the coming winter.

Macroeconomic policies in key emerging market countries, while now tending to be overly expansionary, do not appear to be a major source of serious macroeconomic disruptions over the next few years.

In the United States, in the context of a slow but noticeable strengthening of output growth, employment is improving, inflation remains low, and the federal government's fiscal position has strengthened more rapidly than most analysts had expected.

With regard to international financial institutions, the IMF is engaged in a major strengthening of bilateral and multilateral surveillance of its member countries’ economic and financial policies in the context of its 2014 Triennial Surveillance Review, which will be completed by its executive board later this month. With the bolstered procedures that are likely to result from this review, the Fund could be positioned to play a stronger role in the governance of international macroeconomic policy coordination. It is also noteworthy that the Fund has explicitly recognized that major financial system crises such as that of 2007 – 2008 lead to severe and prolonged macroeconomic recessions. Therefore, deeper analysis of emerging financial system vulnerabilities by the Fund staff are crucial to its ability to predict and address major financial crises that could lead to severe and prolonged periods of weak macroeconomic performance.

In terms of monetary policy, the situation in the key reserve-currency countries and regions remains uncertain. The US appears to be giving some signals that it will begin to withdraw the excessive stimulus that it has pumped into the global economy since November 2008. However, there is a significant risk that the withdrawal of this monetary stimulus will be implemented too slowly to maintain price stability in the US, as well as in other economies that link their currencies closely to the dollar over the medium term. In these circumstances, the degree of maneuverability for both the Bank of Japan and the European Central Bank will remain narrow. Thus, the ability of US policymakers to 'get it right' in their timing of the withdrawal of monetary stimulus and the return to an orthodox stance of monetary policies over the medium term will be crucial to the progress of macroeconomic policy cooperation.

For the above reasons I have given a guardedly positive assessment of 45 %, which basically anticipates that there will be some modest progress in fiscal and macroeconomic policy cooperation over the longer term, though not necessarily over the next two or three years."

"In order to reduce the risk of another international financial crisis, it is crucial to implement reforms that strengthen the solvency and liquidity of key financial institutions, limit the scope of shadow banking institutions and increase their robustness , greatly strengthen market infrastructures, and institute a bail-in type intervention and resolution regime for large cross-border financial institutions. It will be essential that these rules are harmonized internationally. These have been the fundamental objectives of the G20 program to reform the global architecture of financial regulation that was launched in November 2008.

However, the past two years have seen growing fragmentation of the G20 regulatory reform program, as supervisors and regulators in the key financial jurisdictions have proved themselves to be less than fully willing to cooperate with each other on issues such as: information and data sharing, implementation of an internationally consistent bail-in intervention and resolution regime, risk-weighted capital and leverage rules, liquidity rules, and the oversight of shadow banking.

Additionally, a serious problem in the European Union is the vicious circle of sovereign debt and weak bank solvency. Hopefully, the upcoming Asset Quality Review and stress test, together with the European Central Bank's assumption of its new responsibilities to oversee the Single Supervisory Mechanism, will help to address and alleviate these problems.

Nevertheless, many obstacles stand in the way of achieving a true globally harmonized financial regulatory system, particularly the development of an internationally-harmonized ‘bail-in’ restructuring and resolution regime for systemically-important financial institutions that become illiquid or insolvent. The extraterritorial extension of US legal penalties and regulatory sanctions to other countries is also detracting from international cooperation in this area.

All in all, progress to achieve the comprehensive reform of financial regulation seems to have ground to a halt at the present time. Without renewed momentum, the G20’s initiative to achieve a globally harmonized financial regulatory regime may not succeed, creating the prospect of future financial crises."