In the first speech as ECB President, Christine Lagarde urged Eurozone states to meet the common challenges with a “common response” of a “new European policy mix”. Monetary policy is the first element and ECB will “continue to support the economy and respond to future risks in line with our price stability mandate” and “continuously monitor the side effects”.

Another key element is fiscal policy which is “not just about the aggregate stance of public spending, but also its composition.”. Investment is a “particularly important part” of the responses. She added that public investment in the Eurozone remains “some way below its pre-crisis levels” and the share of “productive expenditure” also dropped. Both national policies and European programs like Invest EU has a “role to play.”

Also, “empowering our internal market also means completing our Economic and Monetary Union.” Completing EMU is about finding the right trade-off: enough protection against moral hazard to discourage under-saving, but enough mutual insurance to prevent over-saving.

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Lagarde’s full speech here.

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