Following his colleagues, the ECB president Christine Lagarde and the bank's former President Mario Draghi (who recently left his post), ECB's policymaker Francois Villeroy de Galhau called countries with room for maneuver in fiscal matters like Germany to employ fiscal policy tools to help the Eurozone to face a slowing down economy affected by the current global instability.
“Countries with fiscal space should use it quickly, even more so when they suffer an asymmetric shock-like Germany,” he said during a speech in the Europlace international forum in Tokyo.
He also told countries with high public debt to deal with their public finances in a way that would facilitate Economic Growth. It's not clear if he was referring to cutting public spending.
“Those with high public debt should make their public finances more growth-friendly,” he added.
It's not the first time an ECB member calls for coordinated fiscal policy action in the Eurozone and given that it seems that monetary policy's ability to stimulate the economy is currently very limited. In any case, his requests are controversial since complying with them may open the doors to a unified Eurozone fiscal stance and budget and countries like Germany oppose turning the European Union into a "liability union" that would loan money to countries that have been unsuccessful in carrying the reforms that they consider necessary to guarantee financial stability.
The "politicisation" of monetary policy is also a factor that concerns the representatives of those countries, hence the opposition to redefining the role of the ECB from a mere guarantor of price stability to economic growth and stimulus aide.
Villeroy also made a reference to the necessity of regulating the European Non-bank financial institutions, which currently are holding a more prominent role in the financial system, thus compromising global financial stability.
“We made significant progress in the last 10 years about the regulation of banks and insurers, There was a significant strengthening of their resilience," he said, “We didn’t have the same regulation for non-banks, and this is one weak part of the financial global system,” he added.
The Eurozone non-banking system grew in the first half of this year, and the fact it doesn't face the same regulatory framework as the traditional banking system aids systemic risk and compromises the financial stability in the Eurozone. In a recent report, the European Central Bank called to develop macro-prudential measures.
By 11:05 GMT the Euro went up by 0.12 percent against the US dollar, at 1.1011. Conversely, it grew against the Swiss Franc and the Japanese Yen by 0.09 percent and 0.04 percent respectively.