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Interview with Benoît Cœuré, Member of the Executive Board of the ECB, conducted by Geoff Cutmore
Since the low of 2013 it has been Germany and Spain that have been delivering slightly better economic data and yet, in recent weeks, what we have seen is perhaps they have come off the boil a little bit. Italy is still not really knocking it out of the park but doing a little better than expectations, and France actually surprising to the upside a little bit. Do you think that tells us now that the periphery economies and France are as competitive as Germany?
[...]When you look through it you see a steady recovery momentum in the euro area, and that is exactly what we want to see. And then, yes, in the periphery of Europe we are seeing reforms finding their way into the economy at different paces, at different rhythms. But yes, reforms are working, they are delivering. [...]
How do you deliver that message from an ECB perspective?
Well, the first thing the ECB has to do is to just do our job, which is to bring inflation back towards 2% and to create an environment that makes it possible to invest and to reform. That environment is there now. The ECB is not going to create projects, the ECB is not going to create jobs. We create the environment, and the governments have to get their act together and reform. The governments have to make tax reforms and regulatory reforms and instil confidence in the business community. [...]
So we shouldn’t prejudge here. I wonder if part of the reason is that there’s still a lag effect in the existing QE programme?
Of course, we have only executed, delivered, one third of the programme. We are also benefiting from these lag effects of the previous measures: targeted liquidity tenders, forward guidance, low interest rates. It is all feeding into the economy at a slow pace, so it is certainly too early to measure the full extent of what we have done over the last couple of years. [...]
The oil price has been fascinating recently. We are back at USD 50 a barrel here. So we are starting to ask the question whether inflation expectations are being pitched too low, because people are fixated on a continuation of a very low oil price.
[...] That 2% inflation target is really the encore for the whole recovery process in the euro area. It is very important that it comes as quickly as possible. [...]
Do you think credit availability and bank lending now are on a clear upward trajectory from here? Any reason to be concerned at all that the credit taps are starting to get turned off?
No, the credit taps are clearly open everywhere in the euro area, and what we have done at the ECB has been very helpful. It is really finding its way to the end of the pipeline, that is to the corporations. Funding costs for non-financial corporations have decreased by 75 basis points over the last year, so there’s no financial obstacle to recovery. The obstacles are elsewhere. It’s really about confidence coming back and animal spirits coming back.