andreas dombret : in and out, up and down – the future of europe speech by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the german chamber of commerce and industry, tokyo, 15 june 2016. * 1. * * introduction ladies and gentlemen it is a great pleasure for me to be with the german chamber in tokyo. thank you for inviting me back. in my remarks today i would like to take a closer look at european issues. starting with the economic outlook for the euro area and germany, i will then touch on the topic of monetary policy. after that, i will discuss how the european monetary union can be made more stable in the future. the most exciting event in europe this month is, without doubt, the european football tournament. but there is also a political issue which will also be thrilling. it is the uk referendum on 23 june, in which britain will decide whether it will remain in the european union or go it alone. if the uk were to exit the eu, germany would lose a close ally that shares its marketoriented economic view. indeed, i am in no doubt that the european union has benefited from having the uk as a member. the eu is stronger today because of britain ’ s contribution to it. and the european economy is more open and more dynamic as a result of britain ’ s commitment to open and flexible markets – a position which is very much in tune with the bundesbank ’ s, i might add. but not just that : a brexit might also sway public opinion across the eu on european integration and add fuel to the current sentiment that is opposed to deepening the union. and in this regard, the mere fact that a brexit is even being debated might itself cause some damage. it is clear to me, however, that the risk of a brexit is weighing primarily on the uk economy and only to some extent on the rest of the eu. while projections assessing the economic impact of brexit are fraught with uncertainty, i would agree with the bulk of economists who say that uk membership is fruitful for both the uk and the rest of the union. that being said, a “ leave ” vote next week would also take its toll on the prospects for the economy in the euro area. in its most recent world economic outlook, the international monetary fund argues that a brexit has the potential to do “ severe regional and global damage by disrupting

smp programme in august 2011, the outcome of the meeting of the euro area heads of state or government on 9 december, which led to the adoption of the “ fiscal compact ”, and finally to the ecb decisions to reduce key interest rates and organize two 3 year long term refinancing operations. finally, progress has been accomplished to reinforce the economic governance framework of emu – both as regards crisis prevention and crisis resolution. the eu rules guiding the design and implementation of national fiscal policies have been strengthened as well as in the legal frameworks of member states. a new macroeconomic surveillance framework has been created. the new provisions included in the elements for eu fiscal governance framework are important steps in the right direction. however, the devil lies in the details of the implementation. most notably, the 2012 european semester should be used to enforce rigorously the reinforced fiscal and macroeconomic surveillance mechanism. the ecb will play a significant role in the crisis management framework. together with the commission and the imf, ecb staff will undertake a rigorous debt sustainability analysis of a member state requesting financial stability support in the context of the european stability mechanism ( esm ). the ecb will also be involved in the programme design and monitoring. efsf and esm interventions in the secondary bond market will be performed on the basis of an ecb analysis recognising the existence of exceptional financial market circumstances and risks to financial stability. the ecb welcomes the eurogroup ’ s recent decision to increase the total size of the euro area firewall to around 800 billion. however, let me be clear on one point : no firewall will be high enough to be a substitute for the required fiscal and structural adjustments in euro area member states. bis central bankers ’ speeches financial sector issues as regards the on - going financial regulatory reform, the eu has taken important steps in 2011. i would like to highlight three areas. let me start off with banking regulation. with the introduction of the crd iv / crr the european union will be among the first to implement the basel iii framework, a cornerstone development for strengthening financial stability. as the crd iv is advancing towards finalisation, i would mention that the ecb strongly supports the establishment of a single european rulebook for financial institutions – mitigating regulatory arbitrage and competitive distortions – which at the same time allows for flexibility at national level by member states to apply more stringent prudential requirements where systemic risks arise. to this