benoit cœure : interview with the robert schuman foundation interview by mr benoit cœure, member of the executive board of the european central bank, with the robert schuman foundation, conducted by mr jean paul betbeze, president of the scientific committee of the robert schuman foundation, 8 september 2014. * * * what is your analysis of the situation in the euro area? the euro area is at a crossroads. on the one hand, it has come through the financial crisis. on the other, it faces major challenges in terms of growth. if we consider, first, the financial crisis, the most crucial point came mid - 2012. it was passed successfully thanks to a series of support messages sent to the countries in difficulty. thus, after the commitment made by all the political leaders about the future of the euro and the integrity of the euro area, came that of the president of the european central bank, mario draghi ( “ whatever it takes ” ) and the introduction of the omts ( outright monetary transactions ), to re - establish the efficacy of monetary policy in countries which find themselves under serious financial pressure. of course, this support is conditional on a country ’ s commitments in terms of improving its accounts and of reform, which are monitored by the european union and the imf. but it allows the ecb to purchase treasury bonds from this state on the secondary market. these two messages have led to a decline in speculation everywhere. and they were credible because the countries were oriented towards reform. then there is banking union. in just two years, this organisation that brings together a harmonised banking surveillance within the ecb ( ssm : single surveillance mechanism ), a harmonised bank crisis resolution system ( srm : single resolution mechanism ), which has a single resolution fund, and investor bail - in rules before any call is made for public funds, have greatly strengthened the structure of the euro area. it might even be said that the banking union, owing to its long term effects on the functioning of the european economy, is as important as the creation of the euro. and it was set up in two years! so, from a financial point of view, the worst of the crisis is behind us, with extremely strong, credible commitments on the part of the authorities, as well as these new institutions which strengthen the solidity of monetary union. on the other hand, however, we have to admit that growth is too weak and unemployment far too high,

by providing economic players with long term visibility : the ecb is expecting to maintain short term interest rates close to zero for an extended period whilst at the same time rates are due to rise again in the us and the uk ( forward guidance ). the reduction in key rates decided on 4 september supports this visibility : at 0. 05 % it is clear that the refinancing rate has reached its limit. second, by fostering the recovery of lending to the economy. this means improving bank balance sheets in the first instance, which the ecb is setting in motion this year as part of the banking union and the results of which will be published in the second half of october. this also explains the decisions taken in june to offer targeted long term refinancing operations ( tltro ) to support the recovery of credit. finally the ecb is encouraging the development of a new form of securitisation ( i. e. the refinancing of household and business loans on the loan markets ), on condition however that these new products are simple and transparent – in other words that they do not make the same mistakes that led to the crisis. we are going to launch a conditional ecb purchasing programme of asset - backed securities ( abs ) and covered bonds. basically we are using all means possible to repair the banking channel to finance the economy and to develop the capital markets, at the same time increasing significantly the liquidity provided by the central bank to the economy. but with these initiatives we are still within the framework of monetary policy and the ecb cannot be asked to undertake sectoral policies, by supporting the financing of one sector or another, which would in effect be an industrial policy outside of its remit. if the governments want to do this they can use the instruments over which they have some control like the public investment bank ( bpi france ) or the european investment bank ( eib ). for example these institutions can guarantee securitised assets, enabling the ecb to purchase them as part of the programme that we have announced. will giving credit to smes be enough? of course not. the potential gdp growth of the euro area is undoubtedly below 1 % per year at present, it could possibly rise to 1. 5 % over the longer term but it is clear that we have to be more ambitious. monetary policy can and must support short term growth but it cannot change long term growth which depends on investment, the mobilisation of work and the