luis m linde : “ the new hegemon or last country still standing ” speech by mr luis m linde, governor of the bank of spain, at the frankfurt finance summit 2014, panel iv : the new hegemon or last country still standing, frankfurt am main, 20 may 2014. * * * as a result of the crisis, the institutional and intellectual setup of european monetary union is being deeply revised. fresh views on the role of stability across several dimensions – including fiscal and macro - financial – have emerged and taken over the old approach of the maastricht treaty. several players, including, indeed, the ecb, are contributing to this overhaul. i would like to review the main elements of the old institutional setup, the weaknesses revealed by the crisis and the way a reinforced culture of stability is contributing to their repair. the monetary union designed in maastricht included, in addition to the ecb and the single monetary policy, a relatively loose governance framework for the euro area based, first, on a fiscal discipline device – the stability and growth pact – and, second, on coordination for the remaining economic policies – the broad economic policy guidelines –. the setup also relied on governments, households and firms being able to internalise the stability patterns required within a monetary union and counted on financial markets penalising those who would not do so. what we observed before the crisis, and what we became painfully aware of when it erupted was, however, that public and private agents in some countries did not change their behaviour, that financial markets did not play any disciplining role and that the loose application of the stability and growth pact and the broad economic policy guidelines rendered them ineffective as stabilisation devices. the pact and the guidelines were not strong enough to prevent the accumulation of a series of imbalances. we also discovered two other gaps during the crisis : too little attention had been paid to how financial markets work within a monetary union and no crisis management mechanism was available. to be stable, the european building needed operational repairs. the stability principles, as conceived in maastricht, were insufficient and a new culture of stability had to take over. the ecb acted on several occasions to curb the so - called “ tail risks ” – the risk of the monetary union breaking up – and to gain the time needed for others ’ actions to bear fruit. it is worth noting, however, that monetary action can hardly go beyond this as the cracks detected in the building were

. sustained rates of broad money growth reflect ongoing bank credit creation for the private sector and low opportunity costs of holding m3. the narrow monetary aggregate m1 continues to be the main contributor to broad money growth on the components side. the annual growth rate of loans to non - financial corporations remained unchanged at 3. 8 % in june 2019. notwithstanding some moderation from the peak recorded in september 2018, the annual growth rate of loans to non - financial corporations continues to be robust. the annual growth rate of loans to households also remained unchanged at 3. 3 % in june, continuing its gradual improvement. overall, loan growth is still benefiting from historically low bank lending rates. the euro area bank lending survey for the second quarter of 2019 indicates that loan growth continued to be supported by increasing demand across all loan categories. at the same time, credit standards for loans to enterprises tightened in the second quarter amid concerns about the economic outlook, while they remained broadly unchanged for loans for house purchase. our monetary policy measures, including the forthcoming new series of targeted longer - term refinancing operations ( tltro iii ), will help to safeguard favourable bank lending conditions and will continue to support access to financing, in particular for small and medium - sized enterprises. to sum up, a cross - check of the outcome of the economic analysis with the signals coming from the monetary analysis confirmed that an ample degree of monetary accommodation is still necessary for the continued sustained convergence of inflation to levels that are below, but close to, 2 % over the medium term. in order to reap the full benefits from our monetary policy measures, other policy areas must contribute more decisively to raising the longer - term growth potential and reducing vulnerabilities. the implementation of structural reforms in euro area countries needs to be substantially stepped up to boost euro area productivity and growth potential, reduce structural unemployment and increase resilience. the 2019 country - specific recommendations should serve as the relevant signpost. regarding fiscal policies, the mildly expansionary euro area fiscal stance is providing support to economic activity. at the same time, countries where government debt is high need to continue rebuilding fiscal buffers. all countries should reinforce their efforts to achieve a more growth - friendly composition of public finances. likewise, the transparent and consistent implementation of the european union ’ s fiscal and economic governance framework over time and across countries remains essential to bolster the resilience of the euro area economy. improving the functioning of economic and monetary union remains a priority. the 2 /