Pablo Hernández de Cos: Moving the economic governance framework of the EU - towards more efficient fiscal rules in a more complete monetary union

Speech by Mr Pablo Hernández de Cos, Governor of the Bank of Spain, at the Warwick Economics Summit 2023, University of Warwick, Coventry, 10 February 2023. 

The views expressed in this speech are those of the speaker and not the view of the BIS.

Thank you to the Coordination Team for inviting me to speak at this 2023 edition of the Warwick Economics Summit. I would like to congratulate the University of Warwick's Department of Economics on encouraging its students to run this initiative, which has benefited from the words of highly distinguished participants since 2002. I am honoured to join this group of speakers that have shared with you their views on various matters that are key not only to our present but also to our future. Allow me to add that I am particularly glad to be able to do so this year in person after the recent pandemic years.

In my remarks today I will address what I consider to be the key role that the fiscal governance framework of the European Union (EU) plays, or ought to play, and the ongoing review for its reform. I will also touch upon the European Commission's recent orientations for the reform of the fiscal rules that were published last November. Please note that my words today are merely one more voice in the ongoing debate involving academics and other policymakers on the reform of the EU's fiscal governance framework.

Introduction

The current economic context is one in which economic activity, even if more resilient that initially expected, is losing steam. A series of factors – first and foremost, in the case of the euro area, the Russian invasion of Ukraine - are responsible for these adverse economic dynamics and for the surge in inflation to levels that we had not seen for decades. Accordingly, central banks, including the ECB, have responded swiftly to the inflationary pressures, tightening financing conditions for both private economic agents and the government.