MONETARY AND FISCAL INTERACTION As we know, the ECB’s monetary policy is now very accommodative; in parallel, the euro area Member States are providing very substantial fiscal stimulus. Importantly, monetary policy and fiscal policy now work hand in hand and reinforce each other, providing a safety net until the COVID-19 crisis phase is over, and hopefully a trampoline for stronger growth beyond it.
The smart coordination this time around reminds me of what Tommaso Padoa-Schioppa used to say about central banks, “Independence does not mean isolation.” It is a better policy mix that serves Europe now. Since early March, the ECB has used a number of instruments to ensure easy financial conditions, thus securing access to finance for households and businesses.