To ensure sustained higher growth, reforms are needed to remove any obstacles to development, foster innovation and help modernise the productive system. Acting in isolation, monetary policy can do nothing but continue along the path of “non-standard” measures. This increases the risk of adverse side effects, which, in turn, need to be kept under control using instruments of an increasingly administrative nature.
As the former President of the ECB recently recalled, “we need a euro area fiscal capacity of adequate size and design: large enough to stabilize the monetary union”. This is no subversive statement.