ECB Governing Council Member Urges EU to Take "Urgent Action": Five Major Reforms Target Growth Bottlenecks

The European Central Bank is calling on EU member states’ leaders to take “urgent collective action” to boost the economy, and has proposed five key measures for consideration ahead of the upcoming summit.

According to a leaked letter, the ECB recommends establishing a Savings and Investment Union, launching a digital euro, deepening the single market, developing policies to promote innovation, and streamlining legislative procedures.

The letter also explains the necessity of each proposal and lists actionable steps. Sources familiar with the matter say the document originated from discussions at this week’s ECB Governing Council meeting, where officials expressed dissatisfaction with the slow pace of reforms.

They aim to provide EU leaders with a clear “action list” to supplement the comprehensive report previously submitted by former Italian Prime Minister Enrico Letta and Mario Draghi, hoping that some of the suggestions can be effectively implemented.

The key areas the ECB hopes to advance:

1. Savings and Investment Union, seen as “crucial for financing innovation and supporting green and digital transformation.”

2. Digital euro and tokenized central bank money, which can help enhance strategic autonomy, improve financial system resilience, and promote payment innovation.

3. A deeper EU single market, where coordinated rules “will create more opportunities for European businesses to scale within the EU.”

4. Innovation and open strategic autonomy, coordinating R&D to boost productivity, while protecting strategic autonomy and supply chain security through targeted policies.

5. Simplified legislation and strengthened institutional framework, reducing barriers to entrepreneurship to foster innovation and growth; a robust institutional framework is the foundation of “resilience and prosperity.”

On Thursday (February 5), ECB President Christine Lagarde stated she will send a letter to national leaders before the February 12 meeting, outlining “measures we believe can significantly promote growth, increase productivity, and truly unlock Europe’s talent potential.”

EU leaders hope to discuss plans at this meeting to accelerate European economic growth and enhance unity and independence.

Lagarde has repeatedly urged action, noting in a speech last November that Europe must advance integration in a stronger and smarter way, especially since the export-oriented business model is no longer suitable for the current era.

In the letter, the ECB states that Europe has enormous potential but faces demographic shifts, weak growth prospects, significant structural investment needs, and an increasingly fragmented global environment.

The ECB says: “Through coordinated and decisive collective action, Europe can unleash higher growth potential, strengthen resilience, and reinforce policy autonomy and prosperity. This requires improving productivity, mobilizing investments, and enhancing risk resilience.”

It also adds that the euro system, composed of the ECB and national central banks, is “ready at any time to contribute expertise.”

The document further notes that one of the ECB’s goals is to provide tokenized central bank money from the outset to support an integrated European digital asset wholesale market, and urges the “rapid completion” of legislation for the digital euro.

In promoting the expansion of stock markets and the completion of the banking union, the ECB calls for the creation of a “common, highly liquid euro-denominated benchmark safe asset across Europe.” This will increase the supply of high-quality collateral while maintaining incentives for prudent fiscal policies in member states.

The ECB’s recommendations for strengthening Europe’s economic foundation build upon the reforms proposed by Letta in 2024 with “More than a Market,” and Draghi’s subsequent strategy “The Future of European Competitiveness.”

Although many of the areas mentioned in the letter are not within the ECB’s direct jurisdiction, Lagarde emphasized that the central bank’s opinions are worth noting.

She stated: “We are not overstepping our authority. Whether it is the Savings and Investment Union, digital euro and tokenized wholesale central bank money, deepening the single market, promoting innovation and protecting open strategic autonomy, or simplifying legislation and strengthening institutional frameworks — in these five areas, we have clear positions.”

(Article source: Caixin)