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I cannot say which of the two sets of arguments is stronger, the economic or the political ones, but what I can say is that Europe needs a more European UK as much as the UK needs a more British Europe. To limit myself to matters that are close to my own professional capacity, let me note a few reminders of the depth of the interconnection:
In late 2011 and early 2012 we launched two three-year long term refinancing operations (LTROs). Our LTROs gave banks sufficient reassurance that access to liquidity will not be a problem over a relevant planning horizon. Without these operations, banks would have defaulted on their maturing obligations or would have discontinued and withdrawn existing credit lines to companies.
Similarly, my second example, the Outright Monetary Transactions (OMTs) have been designed with a view to combating fragmentation while preserving the credibility of the ECB’s monetary policy objective. The OMTs are aimed at eliminating “redenomination risk” – the unwarranted perception of a risk of euro break-up. OMT interventions in government debt markets are tied, however, to an effective macro-economic adjustment programme. This prevents them from becoming a subsidy for unsustainable national policies. It therefore safeguards the monetary policy nature of the interventions and bolsters the independence of the ECB in pursuing its medium-term objective
To maintain and expand the productive capacity of our societies, national governments need to improve the structural functioning of their respective economies. Let me outline some examples. First, competition in product and service markets needs to be enhanced without regard for the vested interests that are fighting to supress it. This is necessary in its own right – but it is also important to temper the social consequences of the required adjustment in labour markets. Second, narrowing the gap between labour compensation and productivity growth, also across countries, is absolutely essential for improving competitiveness in euro area countries.
This is a time when the strength of all our institutions is being tested; first, by the financial crisis, then by the recession. The European Union and the European Monetary Union are no exceptions. The choice is between adapting them to the new conditions or doing nothing and risk their dissolution. These institutions were created through the efforts of millions of European citizens since the end of World War II. These institutions have lifted Europe from the darkness of its past. They have given Europe peace and prosperity. Today, I am certain that our democracies have the determination and the cohesion to find a common way to strengthen these institutions further so that they will remain for our future generations the same source of peace and prosperity that they have been for us.