European Central Bank Executive Board member Benoit Coeure said Europe must rebalance its social contract because the economic crisis “disproportionately affected the more vulnerable social groups.”
Workers who could “lose their employability” if they remain jobless for too long may threaten economic growth in the 17-nation euro region, Coeure said in a speech today at Harvard University’s Kennedy School of Government in Cambridge, Massachusetts. He did not discuss monetary policy.
“There are signs of a growing mismatch between worker attributes and job requirements across a number of euro-area countries,” Coeure, 43, said today at the Kennedy School’s “Europe 2.0” conference. “Future growth depends on human capital being cultivated and expanded.” The area’s unemployment rate climbed to a record 11.9 percent in January as the bloc remained mired in recession.
Coeure also said the debt crisis is fueling “nationalist temptations that do not help to achieve a consensus on cooperative solutions or to allow a return to stability and growth.” Such challenges may ultimately threaten peace in the region, he said, according to the text of his speech.
“Solidarity within member states and at the European level can restore investors’ confidence in the capacity of the EU and the euro area to resolve their problems,” Coeure said. “If this is achieved, the collective response to the crisis will have protected the sustainability of national social contracts while reinforcing the effectiveness and legitimacy of the European contract.”
Governments must solve the sovereign-debt crisis, he said. “A central bank can help mitigate the impact of the crisis but the steps it takes cannot be a permanent substitute for resolute action by governments,” he said. “The central bank can buy time for political bodies to act, but it cannot buy enough time for them not to act.”
In response to an audience question, Couere said the European Commission or the European Council should be responsible for resolving cross-border bank failures, not the ECB.
“In some cases there is a need to tap taxpayers’ money and this is the case with resolution,” Coeure said. “This is why we need a single resolution authority, and this single resolution should not be with the ECB.”
“I have this very firm conviction that a central bank should not engage in distributive policies,” he said. “We do not have any kind of mandates to do that. So when designing the future institutions we have to make sure that anything that is a distributive purpose remains within the political sphere.”
European Union Financial Services Commissioner Michel Barnier, in a Feb. 26 Bloomberg Television interview, renewed his call for the EU to leverage national resources as it determines how to restructure or shut down failing banks. The Brussels-based commission will announce proposals later this year for a European Resolution Authority, which Barnier says should make use of national funds rather than a central pot of money.
“We need to make proposals that will be accepted and we know the reservations of countries such as Germany,” Barnier said in the interview.