Monetary policy cannot replace reform

Maintaining a low and stable inflation rate is the best contribution monetary policy can make to sustaining economic growth and stimulating job creation, Wim Duisenberg, who was the first president of the European Central Bank (ECB), said on Monday in his first speech since stepping down almost one year ago.

Duisenberg had been observing a tradition among Dutch officials, whereby they keep “silent” for one year after withdrawing from public office.

The former ECB head said the voting system in the Board of Governors was sufficiently robust in terms of the decision-making process to cope with the expansion of the Eurozone to include 27 member states.

Attending the “Euro after five years” conference organised by the European Commission, Duisenberg explained how the institutional independence of a central bank is a crucial prerequisite for a successful application of monetary policy focused on maintaining price stability.

“The central bank needs to be shielded from short-term concerns and politicising influences. The temptation of politicians to resort to monetary measures that yield temporary results at the expense of long-term economic prospects is always there,” Duisenberg explained.

At the same time, Philippe Maystadt, chairman of the European Investment Bank (EIB), warned that monetary policies couldn’t be used as a substitute for structural reform.
razvan.voican@zf.ro