yves mersch : introductory remarks for the discussion panel “ the future of the euro ” speech by mr yves mersch, member of the executive board of the european central bank, at the ambrosetti forum “ intelligence on the world, europe, and italy ”, villa d ’ este, cernobbio, 3 september 2016. * * * as we are in the quiet period, i am speaking in general terms and not on future monetary policy stance or economic developments. as the european union ( eu ) approaches the 25th anniversary of the maastricht treaty, it finds itself at a crossroads. the multiple crises that have challenged europe ’ s stability, prosperity and security have undermined people ’ s trust in the eu. but this is not only a european phenomenon. nationalistic and xenophobic movements in other parts of the world are vigorously opposing mainstream politics and established politicians. let ’ s not forget churchill ’ s remark that a referendum tells us less about the question and more about the questioner. after eight years of crises and subdued growth the issue is about the divide between the haves and the have - nots. on the one hand, globalisation and open borders have created benefits that are perceived to have been appropriate by the well - connected few. on the other hand, the burden - sharing needed to keep our financial systems afloat and preserve our regional community is also perceived as being unfair. the easy way out is to blame eu institutions. indeed, the eu commission, the eu council and the council of ministers take many decisions that affect our daily lives. but they are not democratically elected and they cannot be sanctioned either. in this context, the outcome of the uk ’ s eu referendum is triggering a debate not just on the future relationship between the eu and the uk, but also – and perhaps more importantly – on how to improve the functioning of the eu and of economic and monetary union ( emu ) as one of its key elements. i have a central banker ’ s perspective, and i believe that the stability of a currency requires trust, cohesion and an ability to act as and when necessary. so today i will be considering how we could boost support and strengthen the institutional arrangements for european integration. when thinking about what needs to be changed, it is also important to build on the eu ’ s strengths and to protect our collective achievements. they are too often forgotten : some people ask, what has the eu actually achieved? as if there was no good response. we

respect national interests. the risk is however that decision - making becomes a diplomatic exercise, resulting bis central bankers ’ speeches in protracted and opaque negotiations, a lack of long - term strategies and national interests being pitted against each other. however, it is an outdated belief that the nation state is the sole locus of legitimacy. the eu is not only a union of member states but also of citizens. where competences are assigned to the european level, they should be part of the union method, with clear executive powers, full democratic accountability and rigorous judicial arrangements at that level. this also means that the eu ’ s agenda should be set by those who were duly elected at european level rather than by a few large member states. in my view, this would also have to be an essential principle guiding any future treaty revision. • decision - making on taxation and public spending is the core prerogative of national parliaments, and for good reason, but that does not mean that we should shy away from further fiscal integration in the long run. we just need to get it right. one of the ideas currently being discussed is a euro area treasury that would be responsible for fiscal policy decisions at european level. such a treasury or finance ministry would clearly need a high degree of democratic legitimacy and strong parliamentary control. any college with powers delegated from intergovernmental forums would hardly satisfy those requirements. in my view, the european parliament convening in euro area composition would be the right body to undertake this task. it would ensure that the actions of a european finance minister are legitimised at the same level at which decisions are taken. a common mistake is to underestimate the eu ’ s achievements and the strength of support for tangible european projects such as the euro. but for the eu to regain the trust of its citizens, it needs to be properly equipped to handle destabilising events and respond to people ’ s expectations. trust in the currency can also be undermined by extreme measures which have unacceptable side effects. an independent central bank must be able to explain its actions and take account of political economy considerations. some academic proposals seem to prefer sophisticated models to social psychology. we cannot fulfil our mandate with mathematical equations, but only with instruments that maintain trust in the currency. extreme measures or legal violations of our mandate are not among those instruments. bis central bankers ’ speeches