(Bloomberg) -- European Central Bank Executive Board member Benoit Coeure said a lack of governments’ efforts to take the steps needed to boost their economies may force more monetary stimulus, even if that brings risks.
“If there is not much taking place on the structural-reform front, if there’s not much taking place on the fiscal-policy front for what can be done, then the ECB will do more,” Coeure said during a panel discussion in Geneva, highlighting side effects related to more action. “There are no free lunches.”
Coeure is one of the first ECB decision makers to report back from vacation, with chief economist Peter Praet scheduled to speak in China next week. Their comments may foreshadow some of the arguments Governing Council members will present at their next meeting on Sept. 8.
With policy options limited after years of unprecedented stimulus, officials are stepping up their call on governments. ECB President Mario Draghi said before the summer break that the implementation of reforms must be accelerated to substantially to lower structural unemployment and raise potential output growth, arguing that monetary policy would be more effective as a result.
Coeure said that the ECB has so far managed to curb the risks related to expansionary policy, but “the more we do, the more side effects will materialize.” In his choice of words, the Frenchman is echoing Bundesbank President Jens Weidmann, one of the most outspoken critics of the ECB’s loose policy, who has frequently warned of undesired consequences of non-standard instruments.
Economists surveyed by Bloomberg last month predicted fresh measures before the end of the year, with an extension of quantitative easing beyond its current end date of March 2017 and another deposit-rate cut the most frequently cited options.
Since then, the economy has continued its gradual recovery. A survey of purchasing managers showed Tuesday that private-sector activity grew at the fastest pace in seven months in August.