olli rehn : next steps towards a stronger monetary union speech by mr olli rehn, governor of the bank of finland, in the inter - parliamentary conference on “ stability, economic coordination and governance in the eu ”, session “ economic governance in the emu : what next? ”, helsinki, 30 september 2019. * * * accompanying slides of the speech. rt. hon. members of parliament, ladies and gentlemen, it is a great pleasure to discuss these most relevant topics of emu reform with a most knowledgeable audience, among old and new friends. since 2013, economic growth has continued in the euro area, and the unemployment rate has been on a downward trend. this is most welcome. however, we have major challenges of the short term and longer term now. the first ones relate to the current economic downturn, the latter to the unfinished business of the economic and monetary union. let me discuss these challenges one after another. 1. for some time by now, the world economy has been going through a downswing led by the deceleration in world trade and industrial production. that ’ s why the governing council of the european central bank decided two weeks ago on a monetary policy package that consists of mutually reinforcing elements. it aims to ensure that financial conditions remain favourable to firms and households, so that they support sustained growth and the sustained convergence of inflation to our medium - term inflation aim. however, as rightly pointed out by president mario draghi, these substantial monetary policy measures are leveraged best when also the other economic policy areas support euro area growth. monetary policy cannot be the only active player in the field. in recent years, especially as the low interest rate environment and the effective lower bound have been constraining monetary policy, more and more attention has been put on fiscal policy and its capacity to help revitalise the economies that are suffering from subdued growth that is clearly below potential. it is evident that the role of fiscal policy is stronger when the effective lower bound is binding. this calls for a better balanced policy mix in the eurozone than is the case today. policy mix does matter for both the short - term and longer - term. even though cyclical fluctuations refer to temporary movements, their effects may persist for a long time. for instance, a cyclical rise in unemployment may have long - lasting effects, especially if the labour market institutions do not support the unemployed in regaining work. while an effective, coordinated use of fiscal and monetary

of adequate transport infrastructure remains a problem in some parts of africa, and without these, economic integration is bound to remain limited. this leaves the question of the potential role to play by monetary integration, especially since the functioning of the cfa zone has been an undeniable success in the global process of african integration. this currency union has certainly yielded positive results, in terms of stability, for instance. yet this stability has largely been achieved by importing credibility from a supranational central bank and thanks to the backing of the french treasury. this is further evidenced by the respective role played by convergence criteria in the emu and in the cfa zone. the observance of those criteria was, from the outset, considered as a necessary condition to ensure the credibility of the single european currency and as a prerequisite for individual countries to join the emu. on the contrary, in the cfa zone, those criteria were introduced afterwards. this does not mean that they are superfluous, far from it. the imported credibility of the cfa zone would be greatly fostered by meeting those criteria and this would in turn help to make further progress with economic integration. however, monetary issues do not seem at present to be the main impediment to regional economic integration and this integration does not seem to be much more advanced in the cfa zone than in other parts of africa. for african countries which do not belong to a monetary union, monetary cooperation is not the most urgent issue that needs to be addressed to improve regional economic integration. pursuing monetary integration may even deflect much - needed political energy and focus away from the main priorities with regard to regional integration. those priorities should quite clearly be trade, infrastructure and good governance. as i mentioned at the beginning of my expose, i have spoken only briefly and more cautiously about africa as i do not know the region as well as my own continent. i am counting on the other participants who will now take the floor to certainly expand upon and perhaps even correct my remarks. thank you for your attention.