Benoît Coeuré and Jörg Asmussen: Interview with Süddeutsche Zeitung
and Le Figaro
Joint interview with Benoît Coeuré and Jörg Asmussen, Members of the Executive Board of
the European Central Bank, conducted by Andrea Rexer (Süddeutsche Zeitung) and
JeanPierre Robin (Le Figaro) on 23 July 2013 and published on 29 July 2013.
* * *
Mr Coeuré, your colleague Jörg Asmussen has criticised the French Government
various times, asking them to speed up their reforms. The French Government wasn't
amused. Were you, as a French citizen, amused?
Coeuré: I am not here to support the French Government, neither is Jörg here to support the
German Government. As central bankers, we have to say what is good for the stability of the
euro area, irrespective of our nationalities.
Does being German or French make a difference when working for the ECB?
Asmussen: No, in day-to-day business, nationalities do not play a role.
I understand that this is the theory. But in real life, can you really be free of your
national background? Once you go to your home towns, you are facing criticism - and
that differs from country to country.
Asmussen: As an Executive Board member you have to be independent and you will not see
any flags on the table at Governing Council meetings, only name tags, because the
members do not represent a state. It is true that what a central bank is expected to do, or not
to do, differs enormously in the euro area. In some countries they ask, "Why don't you do
more?" And in other countries they say, "Why do you do so much? You are overstepping
your mandate." The answer is always the same: our task is to guarantee price stability in the
whole euro area.
Mr Asmussen, you say that nationality doesn't matter. Not long ago, there were
reports that you had voted against lower interest rates, what would be expected from a
German hawk. Some people say that you seem to be becoming more German the
longer you are in office.
Asmussen: That is perhaps what some people say, but I am not sure whether it is correct. I
doubt that the assessment that too low interest rates for too long may give rise to risks is a
specific German view as it is shared by others, for example, by the Bank for International
Settlement.
Coeuré: We all come to the ECB with our national history, shaped by our national politics. We
come here with our own DNA. But once we are here, we work for all euro area countries.
Both of us have travelled extensively around Europe in order to learn about the different
views, and to explain the European view to the general public.
That is right, you communicate a great deal - but on the other hand, what was said at
the meetings of the governing council is still a big secret. How does that fit together?
Coeuré:
Transparency is important for the effectiveness of monetary policy and for trust in the
central bank. There was a time when the ECB was ahead of the curve in its communications
and transparency as first central bank with regular press conferences by its president. Now
the ECB is the only large central bank that does not publish its minutes of meetings. There is
a demand in society for transparency and accountability. Therefore, I personally think that
the ECB should start publishing its meeting minutes soon.
Into how much detail would these published minutes go?
Asmussen: The minutes should include who voted for what, and the reasoning behind that
vote. Publishing the minutes will sharpen the European mandate, because the ECB will then
have to explain why its decisions are in line with the European mandate.
If you publish who voted for what, the Board and the governors of the national central
banks might face enormous pressure from the financial industry.
Coeuré: The other side of the coin is, as Jörg has said, that the Governing Council has a
European mandate. The governors of the national central banks come here in a personal
capacity - they do not represent their institutions or their countries - and should be
accountable for what they do.
You said that change might come soon. Is there a majority for it in the Council?
Asmussen: Every majority starts as minority. It is an ongoing discussion in the Council.
One field where central banks are not very transparent is the Emergency Liquidity
Assistance (ELA) that is given to banks in trouble. Although this entails huge risks,
you never publish any details. Don't you think that the European public should be
informed about that?
Coeuré: It is the national central banks that provide that liquidity assistance, so that they have
to decide on this issue. To give you another example, the so-called TARGET2 balances
measure how money created by the ECB is distributed across the euro area. They are useful
indicators and there is no reason why they should not be published regularly.
Asmussen: I would prefer national central banks to be more transparent about the ELA, but,
as Benoît has said, that is not for the ECB to decide.
The ECB will take over banking supervision next year. How transparent will you have
to be once the new system is in force?
Asmussen: At the national level, banking supervision bodies are fully accountable vis-à-vis
the national parliament. When supervision shifts to a European level, it is in the interests of
the ECB to have the highest possible accountability vis-à-vis, and democratic control by, the
European Parliament. That is the logical counterpart to this task.
Coeuré:
Banking supervision can lead to fiscal costs if a bank has to be restructured. That is
why we need even more accountability in banking supervision than in monetary policy.
The ECB said recently that interest rates will stay low for an extended period of time.
Is that also part of the plan to be more transparent?
Coeuré: Yes, of course. Forward guidance discloses more information on our view of the
economy and the conclusions we draw. And it not only concerns interest rates - it is also
concerns our liquidity policy. We have been clear that banks can have as much liquidity as
they want for an extended period of time.
Even though you are providing banks with that much liquidity, in southern Europe,
they seem to be unwilling or unable to handle it through to real economy. Some
countries are facing a credit crunch.
Coeuré: I would not speak of a credit crunch, but some countries are indeed facing tight
credit conditions, and this has not improved much recently. That is one reason for keeping
interest rates low.
But that is obviously not enough. Can a banking union perhaps help to stabilise the
banks in southern Europe, so that they can reassume their task of financing the real
economy?
Asmussen:
Yes, in particular the asset quality review that the ECB will undertake, together
with national supervisors and external controllers, next year is crucial. The United States
have been earlier and faster in cleaning banks' balance sheets than Europe. This is one of
the main factors that hold back lending. This review will start at the beginning of next year.
And, as market participants usually anticipate developments, that will have an immediate
effect.
Do you think that banks will have to recapitalise?
Asmussen:
This is precisely what we do not know as yet. Every figure that is floating around
is mere guesswork. But we need to have sufficient back-stops in place. There are several
layers: The first is private capital, the second are national budgets and the third layer is
formed by the ESM that recapitalises banks as part of a banking sector programme with
attached conditionality, as it was done in Spain. As a last layer and only in very rare
occasions, there can be a direct recapitalisation of banks through the ESM.
A credit crunch is a problem for growth. What other impediments can you see with
respect to a recovery in the euro area?
Asmussen: Fragmentation has decreased since last year, but it is indeed still a matter of
concern.
Coeuré: Trust in the euro has now been restored and it is an important basis for confidence
and an economic recovery in Europe. What is now needed is further economic reform in all
countries.
But isn't the exchange rate of the euro itself too high, vis-à-vis the US dollar or the
Japanese yen?
Asmussen: We do not have a target exchange rate and we have to say that again and again.
In any case, it is a sign of confidence that capital flows from outside have returned to the
euro area.
Coeuré: When you look at the export performance of various countries, you can see many
differences, so that the exchange rate of the currency as such cannot be considered an
impediment to growth. That said, it is one of the indicators that we follow closely.
However, it is a common complaint in France...
Coeuré: Here, I can speak from past experience. There is a particular fascination for currency
matters in France that is not shared by other countries. It cannot be used as an excuse not to
address the issues of structural competitiveness that French companies are facing.
In France, there are fears that the risk of deflation might be very high...
Asmussen: We cannot see any risk of deflation. We see inflation expectations as being well
anchored below, but close to, 2% for a longer period of time.
Coeuré: And that is a major difference to the situation in Japan. There have been
comparisons, but whereas in Japan, low growth has led to deflation expectations, this has
never been the case in the euro area and, as Jörg has said, expectations there have
remained very well anchored.
But as in Japan, people in Europe are talking about a lost decade.
Coeuré: There is a risk of a lost decade in Europe, if the right reforms are not undertaken. But
the challenges and answers are very different from those in Japan. It is true that the crisis
has been a step backwards [a setback] for the European economy, but the underlying
problems, such as declining trend growth and unsustainable social promises, were there
before. The crisis has only uncovered them and has shown the need for answers more
clearly and more urgently.
But the high level of unemployment is certainly worrying ...
Asmussen:
Yes, the level of unemployment is unacceptable. But the question is what we can
do about it. We have a strategy in Europe that is based on stable prices, sound fiscal policies
and growth and employment-enhancing structural reforms. It will take some time to see the
positive effects, but I don't see any viable alternative.
Coeuré: The high level of unemployment, particularly youth unemployment, shows the
urgency of taking forward-looking reforms at the national level and, collectively, at the euro
area level.
With the crisis, differences between countries are becoming clearer and larger. Is it a
challenge for friendship between European nations?
Asmussen: We must acknowledge the resurgence of national stereotypes. That is worrying.
The cliché that the Greek people are lazy, whereas all Germans are hard-working, is simply
false ... Reality is more differentiated.
Coeuré: We see the risk of nationalism in European discussions as well, with the temptation
to defend narrow national interests. But politicians can overcome this temptation and make
progress. Take the banking union, for example. It is the most important step to be taken in
European integration since the inception of the euro, perhaps more important than the single
currency itself. It will have far-reaching consequences for national economic models and
national legislation. So there is room for optimism if we succeed in taking that quantum leap
forward.
Isn't that overly optimistic? What can Germany and France do to overcome these
challenges?
Asmussen: You have described the challenges rightly, but the answer to them can only be
more integration. France and Germany have a leading role to play, because they stand at the
core of European integration. They jointly, but only jointly, fulfil the definition of a superpower:
if you take action, everybody criticises you for acting. If you don't take action, every one
criticises you for not doing so. There are certain projects in which the two countries can take
the lead. A joint seat of France and Germany in the IMF Board would be a good idea. But it is
vital that this newly formed constituency is open to others and forms the starting point for a
European seat at the IMF.
So, if France and Germany are the core of Europe, that is where you will also spend
your holidays?
Asmussen: Yes, for my part and, as always in the summer, in a renovated farm house in
Normandy.
Coeuré: I will also spend my holidays in France - and enjoy living in Frankfurt the rest of the
year!