In order to fully ensure the effectiveness of monetary easing, it is important for the government to ensure market credibility of fiscal consolidation. In this regard, the joint statement has profound significance in showing that the government and the Bank have clearly acknowledged each other’s roles and that they will work together to overcome deflation and achieve sustainable economic growth.
And yet a clear division of responsibilities is vital for a stability-oriented monetary policy in the euro area if Eurosystem central banks are not to wind up dancing to the tune of fiscal policymakers. This is why I called for a quick end to government bond purchases at the end of October.