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Is Europe finally returning to growth?
Growth has returned, but it is certainly not very strong. It is modest, fragile and unequal. Germany is doing well; France, Italy and Spain are improving; things are not going so well in the Netherlands; and Greece and Portugal remain under pressure. Unemployment is still too high, but it seems to have stabilised at an average of around 12 per cent. We forecast that growth in the euro area will be 1.1 per cent next year and 1.5 per cent in 2015.
What is driving the recovery?
Looking at the figures, we can see that exports are picking up again and – this is a new development – consumption is recovering. Various factors have played a role in that. First of all, our monetary policy, which has remained accommodative since 2011, is in the process of bearing fruit. The commitments that we have made regarding the future direction of our monetary policy and our decision in November to reduce the rate on our main refinancing operations to 0.25 per cent, the second reduction in 2013, have also contributed to that.
Do you believe that the bitter pill of austerity that was imposed on the countries of the euro area in order to tackle the debt crisis was the right solution, the only acceptable response?
Austerity was essential, as it was the necessary solution to one of the most serious financial crises that we have ever seen. When people began having doubts regarding Greece’s solvency, all of that came to an end. Institutional investors began re-evaluating the risk profiles of all the countries of the EU. The crisis has taught us that we cannot generate either sustainable growth or a fair distribution of prosperity by amassing debt.
What are the prospects for Europe, given that growth is no longer creating jobs?
Unemployment is indeed the number one problem for the governments of EU countries – starting with youth employment. We are too inclined to think that industry remains the key driver of employment, when in reality it is services that create the most jobs. That is partly because services have been less exposed to competition than the industrial sector.
Banks are being criticised for ceasing to finance the economy. What are you doing to encourage them?
Two years ago we provided them with €1,000 billion in the form of three-year loans, some of which has already been repaid, and since then we have reduced our key interest rates several times. Banks are able to refinance their loans to firms using funds obtained from the ECB. That has given them breathing space. Some of them have been given assistance, and they have been able to increase their capital. We now have to convince them to take the kinds of risk that are beneficial to the economy, notably by lending to SMEs. It should also be noted that demand for credit has declined.
Has the ECB done all it can to stimulate growth?
In the context of our mandate, yes. And we are always ready and able to act at a later stage. We have already deployed some of our instruments in the context of our accommodative monetary policy, despite the fact that certain people accused us of taking enormous risks and endangering price stability. We have seen nothing of the sort. On the contrary, our actions have had the desired effect.
Which is to be feared more: deflation or a return to inflation?
Neither one nor the other. We are not experiencing deflation. Prices are not falling in a sufficiently strong or generalised manner to entail the postponement of purchases and investment, and thus the kind of economic slowdown that we saw in Japan. Inflation is at a low level, well below the 2 per cent threshold, and should remain weak until 2015. That was why we decided to reduce our key interest rates, in order to have a buffer to curb the decline.