For this reason, it would make sense in my view for us to remain fully committed to developing and implementing effective macro-prudential policies, but at the same time not to blindly pin all our hopes on them. Ultimately the best defence against any conflicts between financial instability and unconventional monetary policy is for that policy to last for no longer than is strictly necessary. This means that we need to maintain the pace and volume of our interventions, as we have communicated, so that inflation rises back towards 2% as quickly as possible and that monetary policy can begin once more to normalise. But it also means something more: if interest rates are low because the natural rate is low, then for interest rates to rise back to more normal levels the natural rate will have to rise as well. And insofar as a low natural rate reflects weak investment demand caused by diminishing labour supply and low productivity growth, this may only be possible in a context of structural reforms aimed at boosting supply capacity. This brings me to the second risk of unconventional monetary policy: that it could in principle delays the very reforms that are necessary for monetary policy normalisation. Let me say upfront that the evidence we can see in the euro area at the moment suggests that this is not necessarily the case. Some countries have recently taken steps in the right direction – but more can and needs to be done.
My hope is that governments are recognising that accommodative monetary policy and low oil prices, rather than removing the need for reforms, creates the perfect environment to do them. Research suggests that reforms can be more costly in a weak macroeconomic environment and, in particular, when there are serious credit constraints. With our successful credit easing policy we are progressively removing each of those barriers. More generally, however, I would question how much monetary policy decisions should be based around reform incentives. Applying again the Tinbergen rule, this creates two objectives to be attained with one instrument – and just as for financial stability, in the current environment those objectives conflict. The ECB has to prioritise price stability rather than acting as the censor of governments. Euro area governments as a community must ensure that each economy meets the requirements of membership. And it is in this context that I and other ECB Executive Board members have recently called for a stronger Economic Union in the euro area with improved common governance of structural reforms. Conclusion Let me conclude. The diminishing price pressures over recent years have required the ECB to act forcefully and repeatedly to fulfil its mandate. This culminated in January 2015 with our decision to expand our asset purchase programme to stave off deflationary risks and stop the fall of inflation expectations. In doing so we have sent a strong signal that we will safeguard price stability no matter what. This is our mandate as enshrined in the Treaty.