Luis de Guindos: Growth and competitiveness in the euro area

Panel contribution by Mr Luis de Guindos, Vice-President of the European Central Bank, at The European House-Ambrosetti Forum, Cernobbio, 7 September 2019.

The views expressed in this speech are those of the speaker and not the view of the BIS.

• Growth, investment and competitiveness are topics of utmost relevance for monetary policy. Investment trends and productivity growth are key determinants of the potential growth rate of the economy. Measurement challenges aside, the resulting output gap - the deviation of actual economic activity from its potential - is a key driver of inflation over the short and medium term.
• Today I will focus on the factors behind weak investment and productivity, on the remaining barriers to competition and on the importance of deepening Economic and Monetary Union (EMU) and completing the capital markets union (CMU) to enhance the attractiveness of the euro area.

Let me start by looking at why investment has been so weak in Europe in recent years, despite historically low levels of financing costs.

• Anaemic business investment dynamics have been observed in many advanced economies, but especially in the euro area, Italy being a case in point.