vitor constancio : interview with bloomberg tv interview with mr vitor constancio, vice - president of the european central bank, and bloomberg tv, conducted by mr paul gordon on 17 may 2018. * * * i ’ m here with vitor constancio, a man who has been at the heart of ecb policymaking basically since the birth of the euro almost two decades ago. for the last eight years he ’ s been vice - president. his term expires this month, but over that period, dating back to the all - too - brief period of calm between two recessions, he ’ s been through the unfortunate rate hikes of 2011, quantitative easing, negative interest rates and the rescue of the euro area from deflation – or the threat of deflation at the very least. today, when the governing council is almost, but not quite, ready to talk about exiting stimulus, vice - president vitor constancio is with me today. it ’ s been quite an eight years, and here we are : you ’ re about to go at a critical moment, because the economy is slowing. how worried are you? just a slight slowdown so far – which, by the way, was expected. you may recall that the staff projections that were published, after the high growth of last year, already pointed to a certain deceleration. so, what is happening is still within the bounds of the staff projections for the whole year, which nevertheless forecast growth above 2 %. the deputy governor of the finnish central bank, olli rehn, who is tipped to, is likely to join the ecb, has been nominated to do so, he says the medium - term outlook is tilted towards the downside. that ’ s not quite the same as the ecb says. i have not read what he said, but let me remind you : the projections that have been published, they foresee a growth rate for next year around 2 % and then 1. 7 % for 2020. indeed, on a path of deceleration, because for demographic reasons and other reasons, potential growth is not very high in europe – by the way, not also in other advanced economies. we have been growing above potential, especially last year, this year also. of course, as the output gap closes, we are reverting to potential growth. are you still comfortable with market expectations, which are roughly for an end to qe – to net

run your models and you crunch your data. it ’ s less quantifiable. so markets turn to central banks to seek some reassurance on what lies ahead. do you have the feeling that among the political risks you mention could be various threats to the independence of central banks? that ’ s not my impression. the importance of independent central banks is well understood. but there may be some tensions, because there may be a level of expectation for central banks that is too high after years of financial crisis. there may be a temptation to make central banks responsible for things that governments should address through fiscal policy, for example. just because central banks had to invent new monetary policy tools to face unexpected shocks in the last decade doesn ’ t mean they can do everything. it ’ s very important for central bankers to refrain from hubris. central bankers are technocrats with narrow mandates ; the counterpart of their authority is that they strictly abide by their mandates. ours is to maintain price stability. some things we shouldn ’ t and can ’ t do, for example redistributive policies, or tackling our economies ’ productivity slowdown. market operators wonder about what will happen to europe ’ s monetary policy once mario draghi is gone next november. how much does continuity matter here? our own monetary policy committee is the 25 - strong governing council. just like the fed, and contrary to other central banks, we have many people taking part in the decision, so that in and of itself is an element of continuity. most of our decisions in recent years have been taken unanimously, or by large consensus. the president has an important role, of course, but the overall approach and philosophy of the ecb is unlikely to change at the end of the year. some european politicians deplore that the lack of speedy progress on eurozone reform means that the monetary union is ill - equipped to face another potentially serious shock. do you share their pessimism? ever since the euro ’ s creation we ’ ve had economists predicting the end of the euro for the next year, and it ’ s still here. and investors know by now that it ’ s always a mistake to underestimate the strength of the european project. it is a long - term political construction. it being political doesn ’ t mean it is easy, and it has both positive and negative consequences. on the positive side, it means that it is resilient when tested by short - term economic shocks. on