Economic recovery has arrived in the 19 countries that share the euro, but it is up to governments to ensure it endures, European Central Bank executive board member Benoit Coeure said Thursday.
“The eurozone recovery is clearly there. Growth is coming back, all business and household confidence indicators are pointing upwards. And the good news is that this recovery is rooted in domestic demand and in consumer spending in particular,” Coeure told AFP in an interview.
For the time being, however, the recovery is still “insufficient and somewhat unequally spread from country to country,” he cautioned.
“Our concern is that the current upturn is merely a cyclical one, that it’s merely a flash in the pan.”
To help get the economy back on its feet, the ECB launched a massive one-trillion-euro bond purchase programme, known as quantitative easing or QE, at the beginning of March, under which it aims to buy 60 billion euros ($64 billion) of bonds per month until September 2016, or more than 1.0 trillion euros in total.
Coupled with the weaker euro and falling energy prices, the ECB scheme “is injecting a lot of fuel” into the economy, Coeure said.
But these factors “are only transitory,” he added, urging governments to turn up the pace of economic reform.
“It’s extremely important to ‘convert the try’, so that growth can become long term,” the central banker said, using a term from the game of rugby.
“This can be achieved via labour market reforms and by more generally creating a business environment that is more conducive to investment,” he argued.
“The real test will be a pick-up in investment in Europe this year,” he added.
To achieve this, “favourable financing conditions are needed. That’s what were doing, that’s the role of the ECB. But people must also have plans and the desire to do business. That’s the task of the governments.”
Coeure insisted there was no question of the ECB rolling back its QE programme for the time being.
“That’s a discussion we might have later down the line,” he conceded.
At this stage, however, “we haven’t encountered any technical problem in the implementation of the programme. It’s going very smoothly in all eurozone countries and market reaction has been exactly as we hoped,” he said.
QE “will have an accelerating effect on recovery, we’re certain,” Coeure said, adding that fears of a scarcity of bonds for the ECB to buy had proven unfounded.
“We don’t see any difficulty in buying all of the assets that we had planned to buy as part of this programme,” he insisted.
Asked about Greece’s future in the euro area, Coeure said “there is still a lot of work to do,” even if a possible “Grexit” — or Greek exit from the single currency — was “not a working hypothesis” for the central bank.
“A very large majority of the Greek population wants to remain in the eurozone. It’s up to the Greek government to take the necessary action to make that possible, which is to say, reach agreement with the euro area,” Coeure said.
The Greek government under Prime Minister Alexis Tsipras is obliged to draw up a list of economic reforms in return for a final 7.2-billion-euro tranche of aid under its bailout programme. Athens needs the money to be able to meet its debt repayments. But talks with creditors, the EU, the ECB and the International Monetary Fund, are proving sticky.
“Discussions have been difficult and slow,” Coeure said.
“They weren’t made any simpler by the way in which they were organised. That made them very laborious,” he continued.
“There remains sizeable disagreement between the Greek authorities and the three institutions — the Commission, the ECB and the IMF — on a number of issues that are key to the Greek economy, such as labour market reforms, privatisations, pension reforms… or the reform of the product and services market,” Coeure said.
“The process is on track and were having good discussions. But there is an element of concern that the talks are proceeding slowly and that Greece has less and less time to find a solution,” he said.