Benoît Cœuré: Making our monetary union stronger and more resilient Speech by Mr Benoît Cœuré, Member of the Executive Board of the European Central Bank, at the Finanzmarktklausur of the CDU Wirtschaftsrat, Berlin, 14 March 2018. * * * Let me thank the organisers for inviting me here today. Our common monetary policy has been much discussed in recent years, also here in Germany, where the highest court has been asked to examine the lawfulness of some of our measures. While the European Court of Justice has confirmed that the ECB has acted at all times within its mandate, many of the institutional failings which caused and perpetuated the crisis, and which contributed to the ECB adopting a series of unconventional policy measures, remain unresolved. These shortcomings are well known. When there’s growth and the sun is shining, euro area Member States have few incentives to pursue sound policies and keep their economies productive and flexible enough to prosper in a monetary union on a sustainable basis. This leaves them vulnerable when rainy days come. In such an environment, where the governments of the 19 Member States have retained core responsibilities in crucial areas such as fiscal policy, business environments and labour market policies, the central bank can quickly become a scapegoat or be the focus of unrealistic expectations. Worse, there is hardly a single European public discourse in which the common monetary policy can be communicated. Take the title of this panel as an example.
The connotation that people attach to the term “Nullzins” will likely be different from, say, “geldpolitischer Impuls” – although both terms in essence describe the same thing. Worse, monetary policy can quickly become overburdened if national fiscal and economic policies fail to internalise the effects they have on the common currency. The temptation to freeride is always present in a monetary union. It is easy to see that if fiscal policy is loosened during an expansion, or tightened during a recession, the burden on the central bank to stabilise the economy increases mechanically. Even today, euro area growth still relies too much on monetary policy support. According to ECB staff estimates, the contribution of our easing measures to annual euro area GDP growth was half a percentage point in 2017 and will still be around one-third of a percentage point in 2018. And monetary policy can do little to lift the long-term growth rate of our region. All of this means that our currency union needs further reform – both at Member State and euro area level. I believe there is wide agreement on this. Where we still lack agreement, however, is on how these reforms should look in practice. I have described elsewhere the requirements of reform from the perspective of the single monetary policy. 1 As the central bank of the euro area, we have a stake in the success of the current discussion.