In a speech to the Asia Europe Economic Forum in Beijing, which was entitled Lessons from East Asia for the euro area, Benoit Coeure said the European bloc was at a crossroads.
“In one direction lies the Japanese experience, and in the other direction that of emerging East Asia,” he said. “Europe has emerged from the danger zone. It’s time for us to get our act together, to reform and to grow.”
The ECB’s plans to assess 128 top Eurozone banks before taking over supervision of banks in a year’s time aim to increase transparency, identify “the necessary corrective actions”, and build confidence in the sector, Coeure said.
“With such steps, and provided that sources of capital are clearly identified, including public backstops when private sources have been exhausted, I firmly believe we can put the banking system on a sounder footing,” he added.
Turning to the broader Eurozone economy, Coeure said countries should prioritise public spending towards investment that boosts productivity, and ensure labour and goods market are flexible to promote investment in new business models.
“Europe needs to avoid protectionist temptations and calls for re-nationalisation,” he added.
“Europe should remain open to the world. Further progress on bilateral or regional free trade agreements and cooperation in implementing the new financial regulatory standards are the best signal in this respect,” he said.