yves mersch : european economic governance - early lessons from the crisis keynote speech by mr yves mersch, member of the executive board of the european central bank and vice - chair of the supervisory board of the european central bank, at the conference “ the werner report, 50 years on ”, organised by the luxembourg centre for contemporary and digital history in cooperation with eui, 8 october, 2020. * * * introduction in my remarks today, i will focus on three elements which i believe could outlast the eu crisis response – and could perhaps form pierre werner ’ s legacy. a substantial crisis response at european and national level with a threefold legacy europe ’ s historic response to today ’ s unprecedented crisis not only coincides with the 50th anniversary of the werner report. it also puts the report ’ s economic reasoning into practice. in werner ’ s view, monetary integration had to be accompanied by a partial europeanisation of fiscal policy. such europeanisation does not necessarily imply full harmonisation. as set out in the treaty on the functioning of the european union, it means that countries coordinate and conduct their national economic and fiscal policies in a manner that contributes to maintaining the stability of the eu as a whole. the policy responses to the pandemic respect these principles and hold important lessons for the future. the european - level response has been substantial. the ecb has taken far - reaching exceptional monetary policy decisions. the pandemic emergency purchase programme, targeted longerterm refinancing operations, and pandemic emergency longer - term refinancing operations have provided over €2 trillion in liquidity since march – and we also decided on changes in the collateral framework. we estimate that, by the end of 2022, all of these measures will have increased real gdp growth in the euro area by around 1. 3 percentage points and inflation by around 0. 8 percentage point. our crisis - related supervisory decisions are freeing up some €120 billion of bank capital which could be used to absorb losses or potentially finance up to €1. 8 trillion of lending. the european commission and the member states in the council took decisive measures to support national governments, firms and workers, helping to cushion the immediate impact of the crisis ( especially through three safety nets, namely the european stability mechanism pandemic crisis support instrument, the european investment bank pan - european guarantee fund and the european instrument for temporary support to mitigate unemployment risks in an emergency ( sure ), which together amount to up to €

markets union would lead to deeper and more diversified sources of financing for european businesses and households. for that to happen, financial market regulation first needs to be further harmonised. however, applying the rules of civil law should not be mistaken for financial regulation. and the completion of the banking union, notably through the creation of a european deposit insurance scheme, would make the euro area banking system safer while promoting healthy competition among banks. third, a clearer understanding of the delineation of responsibilities between the national and eu levels would improve political accountability and legitimacy all round. this is well reflected in two important political principles identified in the werner report. werner argues that the degree of european integration should be proportionate to the objective, and that any transfer of power to the eu level should go hand - in - hand with a corresponding transfer of parliamentary responsibility. so far, the political dimension of the eu ’ s integration has been the most neglected. shifting competences to the european level needs to be accompanied by further political integration and democratic accountability. ensuring that everyone plays by the same rules is an important component of our european democracy. the eu is built on the principles of equal and fair participation in economic and political life, which can only be guaranteed through strict enforcement of the rule of law. any shift in powers to the european level must not come at the expense of the representation of eu citizens. in particular, democratic participation at the national level cannot simply be replaced by indirect participation at the eu level. if public risk - sharing, for example, is to become a permanent feature, the roles of the european parliament, the european commission and the council would have to be reviewed. these are constitutional issues that would – if we were to go down this road – require a rethink of the fundamental structure of the eu and would ultimately need to be reflected in the treaty. the fact that the crisis response has been designed within the eu institutional framework shows that our framework is flexible. it leaves the eu and its member states scope to tailor policy responses to specific situations. but it also leaves a grey area of blurred responsibilities between the national and eu level. this ambiguity may undermine the eu ’ s full potential. a treaty change, if there were appetite for one, would be an opportunity to incorporate in our common framework the tools used in the last crisis, such as the european stability mechanism. it could also confirm whether the instruments used in this crisis – such as the possibility to issue common debt in exceptional times – would be at the eu