French president calls for expanded ECB mandate

The European Central Bank (ECB) mandate needs to expand to include growth and decarbonisation, French president Emmanuel Macron said on April 25.

“It is absolutely indispensable for the European economy that the objectives of the ECB are integrated with that of growth and decarbonisation,” Macron said. In his speech, Macron gave few details of how the ECB’s mandate should change. All European Union governments would have to agree to alter the ECB’s mandate, but many, including Germany’s, are very likely to oppose such a plan.

Macron also called for more fiscal initiatives between EU countries, and repeated the frequently made French demand for a European capital markets union (CMU). He suggested that other developed economies were lagging the European Union in adopting the Basel III standards on banking.

The EU expects to raise €712 billion ($761 billion) from its “Next Generation EU” programme, its first common fiscal initiative, but Macron said it should do more. The bloc should raise a further €650 billion–1 trillion in common fiscal revenue for investment, he said.

When it comes to European defence, security, decarbonisation and artificial intelligence, there is an “investment wall” between EU countries, Macron added.

The US inflation reduction act, which included a massive stimulus towards decarbonisation and furthering the green transition, has “changed the rules of the game”, he said, citing that both the US and China have invested in “strategic industries”.

“The common financial capacity of Europe has to be doubled,” Macron added. 

CMU and a culture of risk

The French president also called for the EU to pass measures creating a CMU. He said that European capital markets are “very intermediated,” given that 75% of savings flow through banks and other financial institutions.

Successive French governments have backed plans for a CMU but have met with resistance from their German counterparts. German governments of different parties have insisted that other governments should accept that not all eurozone countries’ sovereign bonds should have the same rating.

But because European capital markets aren’t unified, “savings are not going to the right sectors and right places”, Macron added. He also called for deregulating pension funds and other savings vehicles “to allow them to invest it [savings] in the right funds”.

“Our [European] savings, around €300 billion, are financing Americans. It’s an aberration,” he said.

A culture of risk has to be reintroduced to European banking, Macron said. He called for a revision of Basel regulations regarding solvency, noting “Europe can’t be the only economic space that applies them”.

He added: “I am not for a culture of irresponsibility, but if there isn’t a culture of risk, there will not be investments in innovation, research and start-ups.” 

He gave the “fiscal convergence” plan a tight, 12-month solution, but did not specify any technicalities.

The new investments must go towards green re-industrialisation, Macron said, as well as strengthening European defence, including a common army. He also called for furthering cyber security and cyber defence.

“The objectives are clear: Europe has to be richer, its citizens’ purchasing power must be defended, its economy decarbonised, its sovereignty assured, and its open economy conserved,” he said.