We can’t fix Europe on our own.
That was the the loud and clear message coming out of the European Central Bank on Monday.
Benoit Coeure, a member of the ECB’s executive board, said that the bank can’t “single-handedly create the conditions for a sustainable recovery in growth” and issued another call to governments in the eurozone to implement what he called “ambitious reforms” to their economies to help boost growth.
But the ECB cannot single-handedly create the conditions for a sustainable recovery in growth. This requires a concerted effort in terms of economic and fiscal policies. While unemployment started to decline in the euro area in January (10.3% compared with 11.9% two years earlier), ambitious reforms are still needed in most of the euro area economies, given the low growth potential and high structural unemployment.
At a time when so many European citizens express doubts about Europe, the duty of European institutions is to strengthen their legitimacy both by reinforcing their democratic accountability and by showing that they meet the objectives they have been entrusted with.
Along with its huge programme of QE and consistent cuts to rates, aimed at boosting growth and inflation, the ECB has been urging governments across the eurozone to put in place reforms — including altering tax structures, and funelling more public spending into areas like education.
The idea is that implementing reforms would help boost growth — which was just 0.3% in Q4 of 2015 — across the continent, and help to create inflation, something that has baffled eurozone countries in recent years. As Coeure put it on Monday morning “measures to raise productivity and to improve the business environment, including public infrastructure, are essential to increase investment and boost job creation.”
The ECB has been urging reforms for some time now, but in the past couple of weeks several senior figures have reiterated their desire to get Europe’s most powerful economies to reform.
At the ECB’s latest meeting, when it cut all its base rates, and extended its programme of bond buying, president Mario Draghi also called for reforms, arguing that they will help boost flagging growth in the eurozone. Here’s what he said:
The swift and effective implementation of structural reforms, in an environment of accommodative monetary policy, will not only lead to higher sustainable economic growth in the euro area but will also make the euro area more resilient to global shocks.
The day after Draghi’s announcement, the ECB’s vice-president Vitor Constancio reiterated Draghi’s arguments for more structural reforms, calling efforts made at reforms made during the 2014 G20 conference in Brisbane, “embarrassing” adding that “reforms are essential for long-term potential growth.”