50 / 145
THE STATE OF THE EUROPEAN UNION
50
Need for a new approach
Structural inefficiency of monetary policy
In order to understand what is happening to
European monetary policy it is important to take
into account that the fundamental instruments of
monetary expansion are nothing other than sub-
sidies. It is aid handed over massively and system-
atically to the banking system, be it the shape of
granting loans or via especially low interest rates
when providing them. There is no reason why the
fact that these instruments are aid or subsidies
should be negative in itself. Public aid makes
sense when it has a proportionate or significant
favourable impact on the general interest.
Similarly, this massive and systematic assis-
tance for the banking sector through monetary
Chart 4. A)
United States money supply (M4) and private credit.
B)
China money supply (M2) and private credit
A)
B)
Chart 5.
Eurozone: monetary base and M3 2007-2015
Source:
ECB.
220
200
180
160
140
120
100
100
2007
2009
2011
2013
2015
106
108
114
125
120
134
144
205
Monetary base
M3