Industry and monetary policy

The Consultative Commission on Industrial Change (CCMI), in collaboration with the ECO section, has recently launched a project dedicated to the impact of monetary policy on European industry and, very specifically, on the role of the European Investment Bank in this field.

The main purpose of this study is to analyse the legal, technical and economic feasibility of using different mechanisms of cooperation between the Eurosystem and the European Investment Bank as a potential way of improving the efficiency of expansionary monetary policies in the eurozone.

The objective is not to take sides or to make a specific proposal for action to any of the European institutions. Such proposals or positions should, where appropriate, be the preserve of the institutions in the context of any new initiatives that might arise from the study's findings or developments leading from it.

On 22 January 2015, the European Central Bank announced a new phase of monetary expansion, basically justified by the fall in inflation rates in the eurozone to below the target set by the ECB itself, namely lower but close to 2% annually. Our aim is not to analyse or assess the overall effectiveness or efficiency of such monetary expansion operations, but only to examine the feasibility of specific adjustments being introduced to improve their efficiency.

In response to bank credit contraction since the outbreak of the financial crisis, earlier monetary expansion programmes have provided liquidity for European banks; this is an important objective in itself, but there are significant doubts as to how much of this stimulus has reached industry and the real economy.

It is important now to ensure that the new direct or indirect support to the banking sector – through direct financing or acquisition of debt currently held by banks – not only helps the banking sector, but also maximises benefits for industry and productive investment.

In other words, we believe it is important to ensure that this monetary expansion as far as possible is allocated to financing Europe's productive economy.

The basic purpose of this study is to examine the extent to which this objective of financing the productive economy can be realised through collaboration in the implementation of monetary expansion policies between the Eurosystem and entities specialised in lending to the productive sector, which at EU level means above all the European Investment Bank (EIB). This would obviously not encroach on the competence of the European Central Bank with regard to money supply definition.