ECB Executive Board Member Benoit Coeure the recent developments in trade war “doesn’t have the potential to derail the recovery” of the Eurozone. Just after ECB announced to end the asset purchase program in December, the risks of US-China trade war has turned from rhetorics into reality. And the US is threatening tariffs on European Union autos. But Coeure said that the June monetary policy decision “already takes the risks into account” and there is “no reason to change policy expectations” right now. He added the the impact of trade tensions on business confidence is so far “limited” and “the backdrop is very strong resilient growth in the Eurozone”.
Coeure also delivered a speech titled “Asserting Europe’s Leadership” and shared his view on the current global development. He noted that over the past seven decades, American leadership in the world was of the “legitimate” type, that “builds on trust and common identities”. That’s called “hegemonia” in ancient Greece. Such leadership was “largely unchallenged because it was built on shared fundamental values … of human rights, freedom, democracy, equality and the rule of law.”
However, Coeure pointed out that “putting one’s country first marks a departure from the sort of prudent and vigilant policy that leadership by a legitimate hegemon would entail.” And, “he transactional nature of such an approach arguably belongs much more to arkhe – hard power – where policies and doctrines are imposed on others, without their consent and regardless of the consequences. International agreements are repealed, the international rule of law is questioned and other nations are challenged.”
He also said that solutions offered to solve the problems of globalization are too often “simplistic and short-sighted”. For example, “raising tariffs and withdrawing within national borders will deprive people of the economic benefits of trade and integration.” And he pointed to ECB staff estimates that if US raises tariffs of all goods by 10% while others retaliate the same, US GDP could drop up to -2.5% in the first year alone.
Coeure said EU’s response, as seen with ancient Greeks, were alliances against arkhe. That is, “Europe united” against “America first”. In particular, he stressed the importance of “completing the euro area’s architecture” as it’s necessary for Europe to attain other objectives on fostering cooperation on security and defence, speak with one voice on international affairs and to complete the Single Market.
Full speech here.