Once again, the European Central Bank followed the script anticipated by analysts at its last meeting of the year, expanding exceptional measures with the dual objective of ensuring financial stability and keeping financing costs low throughout 2021. As its President, Christine Lagarde, repeated several times, the goal is to preserve favorable financing conditions.
The parallels with the Bank of Japan’s monetary policy before the financial crisis are increasingly evident—a policy that was framed in 2012 within what became known as ‘Abenomics’: an economic policy supported by monetary expansion, fiscal expansion, and structural reforms. The main failure that economists acknowledge is that ultimately the global economic recovery scenario following the crisis was not leveraged for the economic transformation that would have led to increased potential growth and boosted inflation. Favorable financing conditions and fiscal stimulus were not sufficient. History gives us the opportunity to learn from these mistakes.
The expansionary unconventional monetary policy measures of the world’s major central banks have reduced market risk perception by cushioning tensions that would otherwise have arisen from the pandemic and preventing them from materializing in the markets and feeding back into the economic crisis. Although it is impossible to speak with certainty about future recovery if we do not overcome the virus, this does not mean that the strategy to be followed by economic policymakers should be one of ‘wait and see.’ The monetary policy transmission mechanism developed by banks and expansionary fiscal policy are helping to mitigate the impact of the crisis on households and businesses. But it is essential that a reform strategy be put on the table that allows us to generate sustainable medium-term growth. And that, when the time comes, the reforms are carried out.
José Luis Martínez Campuzano, spokesperson for the Spanish Banking Association
