We have to meet these challenges in order to avoid a medium-term trade-off between monetary policy and financial stability. Such a conflict would give rise to the danger that, given the build-up of risks to financial stability, monetary policymakers would put off the appropriate normalisation measures for far too long – the precise effect of which would be to cause further risks to accumulate.
Here, the answer depends on governments themselves. The truth is that they are not out of options when it comes to growth. There are new sources of growth that can be tapped, even while budgets are being cut. But to do so, they have to implement the other pillar of the European strategy.