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MONETARY POLICY AND THE PRODUCTIVE ECONOMY IN THE EUROZONE
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expansion instruments is only justified insofar as
it has a clear public interest purpose –public in-
terest that, in this case, and according to the
Treaty of the European Union, is defined as price
stability through the boosting or contraction of
bank credit.
Logically, the public assistance or subsidies
are always handed over on condition that they
are allocated to the general or public interest
purpose for which the assistance has been es-
tablished. However, the major problem –and
the major question mark– of our current mon-
etary policy lies in the fact that the assistance
delivered to the banking system via the afore-
mentioned instruments is delivered –save for a
few exceptions– without any type of condition-
ality, without even requiring that they actually
be allocated to the purpose for which monetary
policy as a whole has been shaped.
As a result, it is certainly striking that the
banking system is entirely free to allocate the aid
received through loans and discount interest
rates to the uses and purposes that it sees fit,
whether they have any relation with the goals of
monetary policy or not –something truly unthink-
able in any subsidy or public aid programme. The
banks that receive resources from the Eurosystem
are free to allocate those resources to the ends
that they deem appropriate according to their
own interests, even using them to refinance
themselves, with no requirement to provide any
explanation whatsoever on the matter.
In practice, this situation has meant that a
substantial part of the potential impact of the
assistance and subsidies channelled into the
banking sector through monetary expansion
has been lost, for having been allocated to dif-
ferent purposes to those supposedly intended
to have an influence on the Eurozone money
supply.
Interest rate policy and quantitative easing
are put into effect by delivering resources to the
Chart 6.
Eurozone: monetary base and private credits 2007-2015
Source:
ECB.
220
200
180
160
140
120
100
100
2007
2009
2011
2013
2015
108
110
105
105
120
134
144
205
Monetary base
M3