benoit cœure : price stability as the basis of a sustained recovery speech by mr benoit cœure, member of the executive board of the european central bank, at the wirtschaftstag 2014, berlin, 3 july 2014. * * * summary only sustainable growth via enhancing the productive potential in the euro area will lead to an environment that secures fair prices for credit and fair compensation for savers, said benoit cœure, member of the ecb ’ s executive board. cœure explained in his speech at the wirtschaftstag in berlin the ecb ’ s monetary policy in the current environment of a stagnating economy. “ in a stagnating economy savers complain about low returns while borrowers complain about too restrictive credit conditions ”. only an economy with sustainable growth and price stability can solve this dilemma. “ the only way to move on from the current low interest rate environment is to reinvigorate the productive potential of the euro are economy ”, cœure said. like ludwig erhard did by establishing the social market economy after the war, euro area countries today need to go on with fiscal, structural and institutional reforms to revive the area ’ s productivity potential. monetary policy can only facilitate that process but not change the long - term path. “ governments should not view the current period of low interest rates and favourable market sentiment as an invitation to abandon the path of fiscal prudence. ” cœure said that the measures the ecb ’ s governing council had agreed in june have been warranted because of the low inflation in the euro area as a whole and also in germany. the fall in german inflation was adding the risk of a race to the bottom for the euro area as a whole, with potentially disruptive economic consequences. “ we had to act, otherwise we would not have lived up to our mandate. ” on the complaints of german savers he said that, as shown by the bundesbank, the current low real rate of return is not exceptional historically. in fact, the real rate of return on deposits had been persistently negative during previous decades, but savers had not realised it because of higher inflation. * * * ladies and gentlemen, last year at this event president draghi quoted ludwig erhard, the father of the “ wirtschaftswunder ”, the german economic miracle. it was the principles of ordoliberalism that erhard applied to put this country on the road to

markets, and notably their cross - border integration, will depend on europe ’ s success in giving itself a sounder, more complete and resilient economic governance framework. this effort is ongoing ; some steps have been taken, others are under way, but more will need to come. conclusions : restoring financial integration on a stable basis let me conclude. financial integration has made good progress in the eu, and particularly in the euro area, and has brought with it substantial benefits. however, recently, it has been severely affected by the crisis. the effect is unfortunately proving to be pervasive and persistent. the ecb ’ s measures targeted at financial markets have helped to mitigate the problem, but the problem is far from solved. hence, further action is needed. to restore and preserve financial integration, the euro area financial stability framework needs an urgent overhaul. despite important recent improvements, it is still marked by the cross - border openness of private financial markets and highly mobile capital flows on the one hand, and by the supervisory, regulatory and crisis management arrangements which, on the other hand, remain essentially national. this dichotomy is detrimental in two ways ; it prevents, in normal conditions, a reaping of the full benefits of the removal of barriers to cross - border movements of capital and financial services ; and it impedes, in crisis times, even - handed action to maintain financial stability that is consistent across the euro area. the resulting fragilities become more apparent under stress. it is now clear that these weaknesses in the eu ’ s crisis management framework, exposed during the crisis, are largely responsible for the partial re - nationalisation of several important financial market segments. significant reforms are already under way in the eu. the economic governance framework is being overhauled on the fiscal and macroeconomic sides. the establishment of the european financial stability facility and the european stability mechanism and the adoption of the “ six - pack ” are important milestones. also, financial supervision has undergone significant, though still partial, reform : three european supervisory authorities were established, and the european systemic risk board now adds a macroprudential perspective. regarding financial regulation, the current reforms address the need for stronger resilience, better infrastructure, and greater harmonisation of rules. the commission has also announced proposals in the area of crisis management and resolution. while these are important steps, more is needed for the euro area to break the link between fiscal imbalances, financial fragmentation and financial instability. europe