The euro zone needs to press ahead with structural reforms and closer integration, including a euro zone finance ministry, to deliver sustainable growth, the heads of the French and German central banks wrote in a German newspaper on Monday.
In a guest article for the Sueddeutsche Zeitung entitled “Europe at a crossroads”, they said the European Central Bank (ECB) was not in a position to create sustainable long-term growth for the 19-country single currency bloc.
The ECB has undershot its 2% inflation target for three straight years and is unlikely to return to it to for years to come given low oil prices, lackluster economic growth, weak lending and only modest wage rises in the euro zone.
“Although monetary policy has done a lot for the euro zone economy, it can’t create sustainable economic growth,” Bundesbank President Jens Weidmann and Bank of France Chief Francois Villeroy de Galhau wrote.
Instead the euro zone needs a decisive programme for structural reforms, an ambitious financing and investment union as well as better economic policy framework, Weidmann and Villeroy de Galhau said.
The idea of such a ministry was floated in 2011 to tighten coordination of national policy after the economic crisis had forced the European Union to fund bailouts worth hundreds of billions of euros for Greece, Ireland and Portugal.
“The current asymmetry between national sovereignty and communal solidarity is posing a danger for the stability of our currency union,” they wrote.
“Stronger integration appears to be the obvious way to restore trust in the euro zone, for this would favour the development of joint strategies for state finances and reforms so as to promote growth,” they said.
Specifically, they called for the creation of a common finance ministry in connection with an independent fiscal council as well as the formation of a stronger political body that can take decisions.