yves mersch : are the economy and monetary policy at a turning point - and where are the european and us economies headed? speech by mr yves mersch, member of the executive board of the european central bank, at the panel at the petersberger sommerdialog, konigswinter, 30 june 2018. * * * economic outlook the euro area economy is still growing, albeit at a slightly slower pace. euro area growth stood at 0. 4 % in the first quarter, following growth of 0. 7 % in the previous four quarters. this moderation reflects some pull - back from last year ’ s exceptionally strong growth as well as some temporary and supply side factors. at the same time, concerns about increasing trade protectionism may have dampened business sentiment and expectations. nevertheless, the underlying strength of the euro area economy persists. it has now been growing above potential for 21 quarters. both the non - accelerating inflation rate of unemployment ( nairu ) and the output gap are in positive territory and sentiment indicators – while weaker – are still above long - term averages for most sectors and countries. the monetary policy measures introduced since 2014 have played a central role in supporting euro area growth and employment. in the euro area, there are now around 8. 4 million more people employed than during the trough in mid - 2013, which implies that all of the jobs lost during the crisis have been recovered. furthermore, unemployment is at its lowest level since december 2008, despite an increase in the labour force of more than 2 %. private consumption continues to be supported by these favourable labour market developments as well as by the solid growth in households ’ disposable incomes, higher asset values and an accommodative monetary policy that has contributed to a lower debt burden for borrowers. looking ahead, private consumption growth is expected to remain favourable as anticipated improvements in the labour market should support consumer confidence. the business investment outlook continues to strengthen and is supported by the favourable financing conditions, an improvement in profitability and solid demand. the euro area fiscal stance is expected to be expansionary in 2018 and should be broadly neutral in 2019 - 20, in order to avoid procyclicality. in addition the broad - based expansion in global demand is expected to continue, which should support euro area exports. more specifically, in the united states growth remained robust, expanding at an annual rate of 2. 0 % in the first quarter of 2018, having increased by 2. 9 % in the fourth

to contend with the advent of the csm and the csme. the question would be how can the eccu successfully integrate itself into the wider regional arrangements? these arrangements will encompass the following : • regional currency arrangements which facilitate cross border movements of commodities, services, capital and labour at lower transactions cost without unnecessary exchange rate risks. • inter bank transfers which are completed expeditiously at low transactions cost. • a government securities market which has a range of maturities and allows for a regional listing of such securities. • a regional market for equities quoted on a single exchange. • a regional legislative framework to regulate the financial sector which is uniform and supervised by a single authority or a consortium of such bodies. • the development of a range of financial institutions whose scope is regional as opposed to national. at the national level, eccu member countries have some very challenging issues including : • low productivity in both the public and private sectors ; • high debt levels and fiscal imbalances ; • a secular decline in growth ; • severe diseconomies of scale and scope in public administration, production, marketing and distribution ; • there are also increasing social and environmental challenges in such areas as crime, social alienation among the youth, particularly males, hiv / aids, coastal erosion and traffic congestion. the countries of the oecs, of which the eccu is an integral part, have signaled their intention to establish an economic union in response to these various challenges. the economic union, as conceived, will create new political arrangements to support a single financial and economic space. this new domain, so to speak, will have common socio economic objectives encompassing the following : • economic transformation • growth • employment • poverty reduction • human development indices it will also identify the various policy instruments which would be appropriately applied to the achievement of these objectives. the areas of monetary and financial integration, development and regulation would be our primary concern. an objective assessment of the current circumstances of the eccu would indicate that with respect to comparative and competitive advantage, services are somewhat superior to the production of commodities. the analysis would also reveal that while tourism is the main foreign exchange earner, finance is critical in two areas. firstly, in its normal role as intermediator between savers and investors, and secondly, as an earner of foreign exchange in its own right. it is possible to identify a number of factors which gives the financial sector in the eccu a significant edge over other sectors. • the underlying