Benoît Coeuré: Interview in Le Figaro
Interview with Mr Benoît Coeuré, Member of the Executive Board of the European Central
Bank, in Le Figaro, conducted by Ms Alexandrine Bouilhet on 4 April 2014.
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Le Figaro: Isn't the strong growth seen in the financial markets out of touch with
economic reality?
Benoit Coeuré: Markets are anticipating economic recovery. That is a good sign, and we
think they are right! It is not a bad thing in itself to anticipate a recovery! We at the ECB
believe that the recovery is already underway, albeit a gradual and fragile one, and so we
want to accompany it with low, or even lower, interest rates for a prolonged period.
Is this strong growth not already creating bubbles?
In our opinion, no - not in the euro area. But, in a period of very low interest rates, there is a
need for vigilance. If this risk were to materialise, supervisory authorities in the Member
States have new "macro-prudential" instruments at their disposal, not to mention the other
macroeconomic measures.
Is the ECB really ready to start quantitative easing (QE)?
Yes, the Governing Council is unanimous in its commitment to using unconventional
instruments, including QE, if the current period of low inflation extends for longer than
expected. We do not consider that necessary at present, because the low level of inflation is
partly due to temporary factors and we believe in the recovery: inflation should therefore
increase. But we will continue to monitor developments very closely and act if required.
How can QE help to increase lending?
That is the question! Even if QE means there is more liquidity on banks' balance sheets,
there is no guarantee of that increasing lending. The ECB cannot be a substitute for putting
the banking sector back on a sound footing. The review of banks' balance sheets that we are
carrying out in 2014 will help. QE in the European context would inevitably be different to the
approach taken in the United States.
On that issue, Mario Draghi has weakened the euro. Why?
Market participants have now fully understood that the exchange rate is not an objective of
our monetary policy, but it is nevertheless an important variable in our decision-making
because of its influence on price developments. In a period of low inflation, the effects of
exchange rate developments are closely monitored.
What should be done to weaken the euro further?
Another reason why the euro is at this level vis-à-vis the US dollar is that the euro area has
recorded large and growing current account surpluses - [Editor's note: forecast at
€286 billion for 2014]. This is new. Before, the current account of the euro area was generally
balanced. It is not the case that Germany, for example, exports too much, as is sometimes
argued, but that euro area domestic demand is weak. From this perspective, the best
solution is therefore to support domestic demand by investing, and that is also a way of
preparing Europe for the future! But, these exchange rate issues go beyond just the
European framework.
At USD 1.37, isn't the euro overvalued from a French perspective?
France's situation within the euro area is exceptional in that it is the only country, at present,
with such a large current account deficit - [Editor's note: €36 billion in 2013]. The solution is
to increase competitiveness, as foreseen by the government.
France has asked for more time to reduce its deficit: does it risk being punished by
the markets?
Europe has high expectations of France, because France is the euro area's second largest
economy. The euro area needs a strong France. France also has its own responsibility: to
make credible the economic government of the euro area, which it itself called for and which
is gradually being put in place. This governance sets out targets for both nominal and
structural deficits. As the European Commission reiterated, France has already had two
extensions. It must live up to its commitments. It is all about credibility and trust.
Can France manage without the euro?
Without the European Union and without the euro, France would be an average, vulnerable
power, over-indebted and with declining productivity. The euro and Europe give France
protection that enables it to remain in charge of its own destiny, while managing its own
reform process.