Benoît Coeuré: Interview with France 24
Interview with Mr Benoît Coeuré, Member of the Executive Board of the European Central
Bank, with France 24, conducted by Ms Stéphanie Antoine on 8 June 2016, and broadcast
on 9 June 2016.
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The pound sterling took a further hit following news that the Brexit camp might win
the EU referendum. The IMF believes that a Brexit would cause the UK's GDP to fall
between 1.5% and 9.5%. What would be the impact of a Brexit on the British and
European economies? Have you quantified it?
It is not the job of the ECB to make this kind of calculation. The IMF does that very well
already. I think they have clearly explained the possible mechanisms. We believe that it is in
the UK's interest to stay in the European Union and in the EU's interest to keep the United
Kingdom in the EU. Together we are stronger, and we will all be stronger, including the UK, if
it stays in. Of course, it's now a sovereign choice and the decision of the British people must
be respected, whatever it may be.
Are you concerned about a Brexit?
The competent authorities are preparing for all scenarios, as they should. In this context, the
ECB's responsibility is quite limited. It is to provide reassurance on the possible impact of a
Brexit, if that came about - which we hope not - on the confidence of economic players and
on the stability of the financial markets. From that perspective, the ECB is preparing itself for
all eventualities, as it has always done in such circumstances, and preparing to take steps to
stabilise the markets, notably by providing liquidity, as we have always done in such
circumstances. It's simply what we do.
So a Brexit could have an impact on the ECB's monetary policy?
No, not necessarily on monetary policy, but on the access of economic players to liquidity,
even if I firmly believe that won't be necessary, because everything has been well prepared.
If it did prove necessary, and we will do what we have to, in coordination with other central
banks, as we have always done in these circumstances.
Turning to Greece, an agreement was reached on 24 May between Athens and its
creditors, and the tug-of-war to release the next tranche continues. What do the
Greeks have to do to obtain this new loan?
No, there is no tug-of-war. There are a number of commitments that were made by the Greek
government vis-à-vis the Eurogroup, as you pointed out. The Eurogroup asked the Euro
Working Group and the institutions concerned to verify the implementation of this agreement,
and we are almost at the end of this process. I am very confident that in the coming days
they will dot the i's and cross the t's of the agreement, which will open the way to disbursing
this tranche of aid to Greece. This will be the culmination of much hard work on the part of
the Greek government to comply with the terms of the agreement made in summer 2015. It is
really significant effort, with very substantial reforms, and I think we can all be pleased that
we are approaching the end of this phase of the discussions.
People are asking, and rightly so, if the Greeks are doing enough to satisfy their
creditors...
We are checking the details. I am not worried about the fact that the decisions can be made
in the coming days.
As long as there is no growth in Greece, won't it be very difficult to make reforms?
Yes, that's true and that's what's making the situation difficult for the Greek government and
for the Greek people in general. But, on the other hand, if there's no reform, there's no
growth. So the reforms are vital - the sooner, the better. That's why I am glad that we are
now very close to an agreement. The faster the agreement is concluded, the sooner
confidence can return to the Greek economy, including depositors' confidence in Greek
banks, foreign investors' confidence in the Greek economy. I believe there is a real chance
now to enter a positive spiral of confidence for the Greek economy. We are very near to it.
Olivier Blanchard, the IMF's former chief economist, is calling for a fresh restructuring
of Greece's debt. What does the European Central Bank, as a very large holder of
Greek debt, think of this?
He's right. To begin with, let's not forget that Greece's debt has already been restructured. It
is sometimes said that Europe waited for too long and that it is now time to start restructuring
Greece's debt. Let's bear in mind that Greece's debt was already restructured twice in 2012,
with its private debt cut in half and its public debt undergoing extensive restructuring, with a
prolongation of maturities and a cut in rates, which already represents an improvement of the
terms of the debt.
Therefore the question is: "Is a third round of debt relief for Greece necessary?". And the
answer is: "yes". Moreover, during the Eurogroup discussions and the discussions that we
are having at the moment, the ECB has approved an analysis of the sustainability of the
Greek debt which was carried out with the European Commission and the European Stability
Mechanism, which shows indeed that there are serious concerns about the sustainability of
the Greece's debt, if there are no relief measures. So the ECB agrees with this diagnosis:
relief measures are needed to reduce Greece's debt and put it back on a sustainable path.
The Eurogroup is committed to this and I welcome this decision.
It's very new for the ECB to speak out in this way...
No, we've said it, the ECB's President has said it. It's new because Greece's situation has
changed. And the longer the situation is drawn out, the more urgent the need to alleviate the
Greek debt becomes. But, again, it is no substitute for the reforms which are needed to
restore growth and productivity to the Greek economy. It is a supporting measure. What is
truly needed to put Greece back on a growth trajectory is reform.
Turning our attention to France, is the proposed new labour law, known as the El
Khomri law, a good reform?
Let me say that, seeing this from Frankfurt, and from a European point of view, the tone of
the French debate is sometimes a little surprising. This law is described in the French
debate, as an ultra-liberal law. In fact, if you look closely, there are elements of flexibility,
elements of decentralised decision-making, and there are also elements of additional rights
for employees. From a European perspective, it is somewhat surprising that people in France
are concerned about a labour market reform process which has been conducted elsewhere
in Europe, by governments of both left and right - I can think of the Italian government as an
example. The El Khomri law is in keeping with the reform of the labour market in Europe; it's
a law that will create jobs; it's not a law that disadvantages young people, as I think Laurent
Berger has said; it's a law that will create jobs, especially for the young.
So it should be done - is that what you're saying?
Yes. But it's certainly not up to the ECB to judge the details, the legal form, the various
articles... What I'm saying is that there is a dynamic under way in labour market reform
which, experience has shown, has been a success in other European countries, regardless
of their political inclination.
Should the public deficit be increased, just in order to push through a structural
reform like this one?
This is an important debate, but it's also important to draw a distinction between countries. In
general, it is true that, from the ECB's point of view, monetary policy has had a lot to do to
stimulate growth in recent years; better support by fiscal policy would allow the ECB to do the
job better. We are convinced about that. Now, the kind of fiscal support necessarily differs
from country to country depending on their budgetary and economic situation. It has to be
said that there are very few countries in the euro area that have the fiscal space, that have
the freedom to increase their deficit...
Is that the case for France, Mr Coeuré?
No, I don't think that is the case for France. France's public debt has increased very rapidly over
the past 10-15 years, regardless of the government in power, so, again, this is not a matter of
politics. French public debt has increased very sharply. Can we really afford today to advise the
French government, of whatever kind, to increase the debt still further, to incur further debt for
the French? I think the answer is "no". Therefore, the remedy differs according to the country.
In all euro area countries, however, there is significant fiscal space to have a coherent mix of
fiscal policy, i.e. make an effort to redress unproductive spending, to steer fiscal policy
towards promoting growth, i.e. either by cutting taxes when they are too high or by making
public investments, especially for young people, in research, innovation, or wherever it can
be put to good use. So this discussion on the quality of public spending is important for all
countries and it is important for France.
Aren't the monetary policies of the central banks - with their very low, even negative,
interest rates - risky? There is a real debate on this subject...
I encourage all of our critics to take a few moments, a few seconds, to consider what things
would be like now if we hadn't done what we did. If the ECB hadn't taken the measures it has
taken in recent years, there would be no growth in the euro area. Inflation, according to our
calculations, for what they are worth, using models developed by ECB economists, would be
half a point weaker, i.e. it would be negative, with all the risks of a deflationary spiral that that
entails. Thus, the alternative scenario is frankly not very attractive.
Monetary policy has helped to boost growth in the euro area. Of course, it is not enough. You
need reforms, you need productivity, you need projects to finance. We can make the
financing of projects more attractive but then there have to be projects to finance. It's up to
firms and the Member States to take care of that. But without the impetus provided by
monetary policy, growth would not have picked up. Behind your question, there is the issue
of possible risks to financial stability...
Yes, the risks of bubbles....
Well, we can't see these bubbles. There are no credit bubbles in the euro area. Moreover,
the banking sector continues to shrink in the euro area, and for good reason: the size of the
banks had become excessive. There is no overvaluation of assets, for example, on the stock
and property markets, on average, in the euro area. There may be small bubbles, some
simmering in certain segments of the markets, but that is for the national authorities to deal
with. But there is no financial stability problem in the euro area today. We are vigilant, we will
continue to keep a close eye on developments, but at the moment the assessment is clearly
positive.