ECB MONETARY POLICY AND THE RESILIENCE OF THE EUROZONE Franois - - PowerPoint PPT Presentation

François Villeroy de Galhau, Governor of the Banque de France Columbia University, 19 April 2017

ECB MONETARY POLICY AND THE RESILIENCE OF THE EUROZONE

Citizens’ support for the euro

2

70% 68% 81% 10 20 30 40 50 60 70 80 90 100 S2 2016

Euro area France Germany Strong support for the euro

Source: European Commission, Standard Eurobarometer 86, Autumn 2016.

Benefits of the euro: better controlled inflation

3

4.6% 1.7% 2 4 6 8 10 12 14 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 pre-euro average post-euro average euro area inflation %

Inflation

Source: ECB AWM database, INSEE 1 January 1999

Benefits of the euro: lower interest rates

4

1.9% 5.1% 4.0% 0.4% 1.4%

• 2

2 4 6 8 10 12

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Spread France-Germany Spread Italy-Germany Average France Average Italy 1992: Maastricht Treaty

• 3.7%
• 1.5%

10 Y interest rate spread France-Germany and Italy-Germany

Source: Eurostat.

Monetary policy: successful crisis management

5

Monetary policy: financial conditions have eased

6

2 2,5 3 3,5 4 2 2,5 3 3,5 4 janv.-14 janv.-15 janv.-16 janv.-17

Interest rates on bank loans to non-financial corporations

Germany France Italy Euro area % % EA: -100 bp

• 8
• 6
• 4
• 2

2 4 6 8

• 8
• 6
• 4
• 2

2 4 6 8 2011 2012 2013 2014 2015 2016 France Italy Germany Euro area % %

Credit growth

Source: ECB

Spread IT-FR:

• 60 bp

Growing convergence of growth rates

7

GDP growth rate (%)

2,6 1,6 2,1 2,2 1,8 1,8 1,6* 1,7 1,8 0,5 1 1,5 2 2,5 3 2015 2016 2017

United States United Kingdom Euro area

*not taking into account exceptional accounting effects for Ireland (+0.3%). Domestic sources: National sources for the US and the UK (Bureau of Economic Analysis and Office for National Statistics); Eurostat and March 2017 ECB staff projections for the euro area.

Requirements for action in Europe: domestic reforms give results

8

Aggregate GDP growth 2014-2016 (%) Aggregate growth in market sector employment 2014-2016 (%)

Source: Eurostat.

• Several euro area countries have succeeded in carrying out in-depth reforms:

Germany, Netherlands, Spain,… while preserving the European social model.

2 4 6 8 10 1 2 3 4 5 6 7

Requirements for action in Europe: the “growth triangle” of Economic Union

9

Microeconomic dynamics (competitiveness) Convergence / macroeconomic stabilisation Collective economic strategy Euro area policy-mix Financing Union for Investment and Innovation National structural reforms