peter praet : interview in neue zurcher zeitung interview with mr peter praet, member of the executive board of the european central bank, in neue zurcher zeitung, conducted by by ms claudia aebersold szalay and mr peter a fischer and published on 19 september 2015. * * * mr praet, you have been chief economist of the ecb for the past four years now. during this period, the policy of the ecb has changed somewhat. does it make a difference who the chief economist of the ecb is? both the president and the chief economist have changed, but what has changed most of all during this period is the economic environment in which we find ourselves. at the onset of the crisis in 2007, we still thought we were simply dealing with an external liquidity shock. so, the central banks across the globe reacted accordingly, and at the time the ecb also focused on providing liquidity to banks. i can still remember the headlines back then, saying that the ecb was providing €100 billion in liquidity, which seemed an incredible sum at the time. the crisis nonetheless escalated. yes, it quickly turned into a credit crunch, which in 2012 escalated into a euro crisis. however, to come back to your first question : the circumstances have changed dramatically ; the identity of the chief economist plays a minor role in that sense. ecb decisions are not a “ one - man show ”, but rather the result of discussions amongst the members of the governing council. that is an open, professional and collegial exchange, and this is the basis on which the ecb ’ s governing council makes its decisions. you give the impression, however, that you take a more anglo - saxon approach, whereas your two predecessors, issing and stark, were rather more of the tradition of the deutsche bundesbank and were, therefore, more stability - oriented in their thinking. i would firmly disagree. i and the entire executive board of the ecb have utterly committed ourselves to price stability. that is our mandate, the task enshrined in the european treaties. we see price stability as symmetrical ; it works in both directions. we fight inflation – when prices rise too quickly – with the same determination as when prices rise too slowly. and with our policy we have certainly been successful in terms of counteracting fears of deflation, i should like to think. all of our policies, including the less conventional ones, are

only important thing is to emphasise our readiness and our resolve to act if necessary. at the moment, that would be premature, but the risks in the world economy have grown significantly. we have had to lower our economic forecasts, and we simply want to be ready to act if the circumstances so demand. were you too optimistic with your economic forecasts in the spring? we were accused of that, but i don ’ t think so. the downward adjustment in september was not large and was mainly due to the correction in the emerging markets. the economic recovery in the euro area itself is intact. on thursday, the us federal reserve system decided not to raise interest rates. does this decision make life easier or more difficult for the ecb? the euro area is in a very different cyclical phase from the us economy. therefore, our monetary policy cycles are also not synchronised. nonetheless, we share the concerns about the prospects for the global economy. if we judged that shocks were sufficiently severe and persistent to weaken the inflation outlook for the euro area, we would not hesitate to act. how much of its growth potential did the euro area lose during the crisis? the potential had already weakened before the onset of the crisis, because productivity growth had slowed down. the crisis then made everything even worse, so today the euro area is on a much lower growth path. but monetary policy cannot change that. monetary policy can only cushion the problem by, for example, making liquidity available and thereby helping to avoid a banking crisis. monetary policy cannot create sustainable growth. for that, it is necessary to have intelligent structural reforms which strengthen the growth potential of the economy. however, that is not the task of the central bank, but of the governments. what should the latter do specifically? they must undertake structural reforms to lay the foundations for higher productivity and growth. europe needs intelligent reforms. but these reforms seem to be taking a long time. you are being too pessimistic. we can see encouraging signs in the euro area, particularly in countries like spain and ireland, but also in portugal. italy was admittedly late in starting reforms, but is now on the right track. are you also as confident about greece? the situation in greece is still difficult, but with the new programme we have made a step forwards. and will the new programme bring relief? the programme is indeed demanding, but we are convinced that the reforms will help greece to create growth again and make its way out of