2 Feb 2015
Strong Framework Constraining Discretion is Needed - ECB Cœure
FXStreet (Mumbai) - European Central Bank (ECB) official Benoît Cœure delivered a speech at the Lamfalussy Lecture Conference in Budapest on Monday, in which he said the euro area needs stronger rules to regulate the many different forms of policy dominance that emerge due to the bloc's interdependence.
Key Quotes:
"In the euro area, we consciously built our framework around 'monetary dominance' - ensuring that the central bank could pursue price stability unconstrained by fiscal considerations. We did this by giving full independence to the central bank, while constraining fiscal policies through the rules of the Stability and Growth Pact, and now of the Fiscal Compact,"
"The lesson is that dominance is always a multidimensional problem. There is a triangle of monetary, fiscal and financial policies that requires a strong coordination framework. And the Banking Union has gone a long way to providing this,"
"If structural reforms do not happen, there can be a form of “structural dominance” over fiscal policies. When a shock hits fiscal policies are forced to do all the heavy lifting to stabilise the economy and, over time, fiscal space becomes progressively exhausted. Indeed, this is one explanation for why the Stability and Growth Pact (SGP) rules have not been as effective as we hoped."
"Looking further ahead, stronger governance of structural reforms is also in the enlightened self-interest of all countries that want to see a deepening of our monetary union."
Key Quotes:
"In the euro area, we consciously built our framework around 'monetary dominance' - ensuring that the central bank could pursue price stability unconstrained by fiscal considerations. We did this by giving full independence to the central bank, while constraining fiscal policies through the rules of the Stability and Growth Pact, and now of the Fiscal Compact,"
"The lesson is that dominance is always a multidimensional problem. There is a triangle of monetary, fiscal and financial policies that requires a strong coordination framework. And the Banking Union has gone a long way to providing this,"
"If structural reforms do not happen, there can be a form of “structural dominance” over fiscal policies. When a shock hits fiscal policies are forced to do all the heavy lifting to stabilise the economy and, over time, fiscal space becomes progressively exhausted. Indeed, this is one explanation for why the Stability and Growth Pact (SGP) rules have not been as effective as we hoped."
"Looking further ahead, stronger governance of structural reforms is also in the enlightened self-interest of all countries that want to see a deepening of our monetary union."