But when the appropriate time comes, there should be no concern about the ECB’s determination and ability to exit. As I said on behalf of the Governing Council, looking ahead, not all our liquidity measures will be needed to the same extent as in the past. Accordingly, we will make sure that the extraordinary liquidity measures taken are phased out in a timely and gradual fashion and that the liquidity provided is absorbed in order to counter effectively any threat to price stability over the medium to longer term. By so doing, we will continue to ensure a firm anchoring of medium-term inflation expectations. Such anchoring is indispensable to supporting sustainable growth and employment and contributing to financial stability. On the institutional side, the Governing Council has the unfettered capability to decide and institute appropriate policies whenever circumstances warrant. Fiscal authorities, too, need an exit strategy. Their response was instrumental in avoiding a collapse of the financial system. It helped to halt the sharp decline in economic activity and build general confidence. But that response also entailed significant fiscal costs. Only the additional fiscal burden that is associated with the workings of automatic stabilisers will reverse by design once economic conditions improve. Discretionary interventions will need discretionary action to unwind. In any case, the additional fiscal costs that governments have shouldered will be carried forward in terms of higher debt for years to come. This is why there is an increasingly pressing need for ambitious and realistic fiscal exit strategies and for fiscal consolidation.

Third, there is also an urgent need to improve the functioning of the current fiscal policy framework, so that it delivers an aggregate stance that is consistent with national constraints and the needs of the euro area as a whole. On the one hand, the current fiscal policy coordination device, the Stability and Growth Pact, has not stood the test of time very well. Our fiscal rules have proven to be hard to enforce in a timely manner, not least because of their complexity, and have also been unable to avoid procyclical fiscal policies at the national level. On the other hand, and more importantly, the past decade has shown us that lacking a centralised fiscal tool to target an appropriate euro area macroeconomic policy stance is a serious limitation for the functioning of our monetary area. I strongly believe that a central fiscal capacity at euro area level could contribute, in particular, not only to tackling asymmetric, country specific shocks, but also to macroeconomic stabilisation. In this respect, monetary policy would not become overburdened, as it might be in the current economic juncture. Finally, let me advocate the need to explore the introduction of a common safe asset for the euro area. In my view, a well-designed safe asset would contribute significantly to addressing some of the root causes of the euro area’s institutional weaknesses. In particular, it could increase the effectiveness of monetary policy, improve financial integration and complete the Banking and Capital Markets Union, by breaking the banksovereign doom loop and facilitating diversification.