This parliamentary assembly is an embodiment of the special relationship between our two countries and their commitment to European integration....Europe’s citizens must be at the centre of the debate about the Europe that we want to build as we emerge from the crisis.
As President of the European Central Bank and a French citizen living
and working in Germany, it is an honour to speak at this historic
forum. This parliamentary assembly is an embodiment of the special
relationship between our two countries and their commitment to European
integration. I find it essential that the ECB constantly engages in
two-way communication, especially with citizens’ representatives. We
need to make sure that the ECB’s voice is heard by the people and that
the people’s voice is heard by the ECB. This is why events like today’s
are so important for me.
Our regular interlocutor is the European Parliament, to whom we are accountable under the Treaty for our monetary policy tasks.
Transnational
settings like this one give us a further chance to look past
nation-specific concerns as we discuss Europe’s future.
The
coronavirus (COVID-19) pandemic is a crisis of unprecedented magnitude.
Many of you will recognise the famous words of Jean Monnet, one of the
founding fathers of the European project, who said: “Europe will be
forged in crises and will be the sum of the solutions adopted for those
crises”. This pandemic has proven him right once more. Undoubtedly, Europe has been strengthened during this crisis.
But
Europe now has the opportunity to show that it can be more than the sum
of the solutions adopted in this crisis. Once again, Monnet’s words
offer inspiration: “Europe itself is only a step towards the forms of
organisation of the world of tomorrow”.
With
these words in mind, we must seize this invaluable opportunity to
strengthen our Union. We must shape the recovery from this crisis in
such a way that our economies are fit for the world of tomorrow.
The unique strength of the European project
The
pandemic and the measures to contain the spread of the virus have
caused a contraction in euro area economic activity that is
unprecedented in peacetime.
While incoming data suggest that we will see a strong rebound during the third quarter,
the strength of the recovery remains very uncertain, as well as uneven
and incomplete. It continues to be highly dependent on the future
evolution of the pandemic and the success of containment policies.
One
major reason why we can expect a rebound in activity in the second half
of the year is because, when faced with the largest economic shock
since the Second World War, Europe and its leaders showed the unique
strength of the European project: by acting together, we can achieve
more.
The ECB has played its part in this collective effort in the face of an unprecedented crisis.
The
nature of the pandemic shock called for an extraordinary monetary
policy response. We launched the pandemic emergency purchase programme
(PEPP) to help stabilise financial markets and ease our monetary policy
stance considerably. The PEPP is temporary, targeted and proportionate.
It addresses the specific shock at hand, and aims to repair the economic
damage and the resulting downward pressures on inflation wrought by the
pandemic.
In addition, it was also vital that we limited the
risk of a credit crunch. So we substantially eased the conditions under
which banks can obtain liquidity under our targeted longer-term
refinancing operations. Banks can now borrow from the ECB at interest
rates which can reach -1%, under the condition that they are lending to
the real economy.
Six months after we introduced our measures,
our policy package has stabilised markets, protected the supply of
credit and supported the recovery. This, in turn, should support the
return of inflation towards our medium-term objective and safeguard
price stability.
At the same time, the uncertainty of the current
environment requires a very careful assessment of the incoming
information, including developments in the exchange rate, with regard to
its implications for the medium-term inflation outlook. The Governing
Council continues to stand ready to adjust all of its instruments, as
appropriate, to ensure that inflation moves towards its aim in a
sustained manner, in line with its commitment to symmetry.
When
you look at the past six months, the ECB has not been the only game in
town. Our measures have been complemented by forceful fiscal responses
at both national and European levels. This has been a critically
important factor in alleviating the impact of the pandemic on the labour
market and on banks’ lending. We judge that the economy still needs
that support if the recovery is to continue and strengthen further.
Ambitious
fiscal measures by national governments were complemented by a €540
billion European safety net. And with the Next Generation EU fund,
Europe took a decisive step forwards as the crisis evolved. For the
first time, a common budgetary instrument at European level can be used
to complement fiscal stabilisers at national level, even if it is
currently only temporary.
As a result, we now have an aggregate
policy mix in which fiscal and monetary policy reinforce each other in
supporting the recovery, and thus underpin medium-term price stability.
The case for jointly shaping Europe’s future
We
must now carry this positive momentum forwards. It is time for Europe
to move beyond the initial priority of containing the immediate impact
of the crisis and shape a common vision for its future.
The
pandemic has the potential to accelerate trends that were already
emerging before the crisis; trends that will lead to structural changes
in the global economy.
In a world where technological change and
geopolitical tensions are transforming the geography of value chains, we
should make full use of the size and diversity of the European economy.
If
we strengthen Economic and Monetary Union and deepen the Single Market,
we do not only benefit all Europeans by improving the way we produce,
distribute and consume. We also increase our autonomy and ensure that
Europe is better protected in the world of tomorrow. As legislators, you
have a crucial role to play in designing policies that can revitalise
our economies.
Digitalisation is a case in point. We need to
fully reap the potential gains from digital technologies and, at the
same time, make sure labour markets remain inclusive. If we don’t, we
risk creating a new divide, and we can already see gaps opening up when
we look at differences in wages, education levels and gender.
By
implementing the right set of national and European policies, we will
achieve more together than we can alone. At national level, we need to
make the necessary changes to labour, product and financial market
regulations, and invest in education to reduce digital exclusion. At
European level, this should be complemented by accelerating progress
towards the Digital Single Market to help deliver economies of scale for
digital firms, while addressing key concerns around cybersecurity and
data protection.
In a more digital economy, we also need to ensure the strength and autonomy of European payment systems.
The Eurosystem is actively pursuing initiatives to achieve this. We are
also exploring the benefits, risks and operational challenges of
introducing a digital euro. A digital euro could be a complement to, not
a substitute for, cash; it could provide an alternative to private
digital currencies and ensure that sovereign money remains at the core
of European payment systems.
The pandemic has also clearly refocused people’s attention on the environment. We cannot miss this opportunity to reduce and prevent climate risks and finance the necessary green transition.
All
of the available evidence shows that climate-related risks are real and
have major consequences for our economy. A disorderly transition to a
low-carbon economy could pose systemically relevant risks. Given how interconnected our financial sector is, we need to address these risks together.
The
transition to a carbon-neutral economy will also provide new
opportunities for growth, which can be unlocked by ambitious investment
programmes. The EU will need up to €470 billion of additional investment
every year to reach its current climate and environmental policy goals. Next Generation EU will strengthen the role of public budgets in green infrastructure financing.
At
the same time, the transition can only be successful if the private
sector contributes as well. The financial system should be a catalyst
for this change.
Policymakers should thus create the necessary
conditions for the financial sector to do what it does best: allocate
capital where it is most needed. The renewed sustainable finance
strategy announced by the European Commission should help to ensure that
externalities associated with climate change are correctly reflected in
prices. At the same time, we need to remove all obstacles to the
development of a cross-border market for sustainable financial products.
In other words, we need to finally complete the banking union and
create a genuine capital markets union. And deep and liquid capital
markets will also go a long way towards strengthening the international
role of the euro and bolstering Europe’s strategic autonomy.
Everybody needs to be ready for the profound changes currently sweeping our economies and our societies.
The
ECB’s ongoing strategy review will ensure that its monetary policy
strategy is fit for purpose, both today and in the future. Listening to
European citizens’ expectations and better understanding their economic
concerns and expectations before making decisions is an important part
of this review.
If
the right actions are taken now, this crisis can be an opportunity for
us to create the conditions for more inclusive, greener and more digital
growth. To come back to Jean Monnet’s words, this crisis can be an
opportunity for Europe to take a step towards the forms of organisation
of the world of tomorrow.
Conclusion
Let me conclude.
Almost
60 years ago to the day – on 23 September 1960 – the Europe Bridge
crossing the Rhine between Kehl and Strasbourg was inaugurated. It has
become a symbol of how close our two countries have become. The success
of the Franco-German “bridge” was clearly reflected in the pain caused
to families, businesses and commuters by the closure of the
Franco-German border at the height of the pandemic, as many of you know
all too well.
The challenge in front of us is not only to build
“bridges” between European countries. We also need to build bridges to
the future and shape a recovery that makes our economies fit for the
future.
But bridges need solid foundations. Europe’s future must be built on strong democratic legitimacy.
Europe’s
citizens must be at the centre of the debate about the Europe that we
want to build as we emerge from the crisis. As their elected
representatives, you, together with the European Parliament, have a
crucial role to play in making their voices heard.
I now look forward to our debate.
ECB
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