Introduction
On 24 April 2013, the Financial Times published a short article written by Yves Mersch, a member of the European Central Bank’s (ECB) Executive Board. The title of the article, “Europe’s ills cannot be healed by monetary innovation alone”, can be interpreted either as a cry for help, or as a veiled threat coming from the ECB itself. How so? One needs to look at the context first: the institutional framework of the European Union’s (EU) economic governance was under duress on several fronts at the time. The two pillars on which Economic and Monetary Union (EMU) as created with the 1992 Maastricht Treaty was based, the monetary pillar, controlled by the ECB, and the fiscal pillar, with numerical fiscal rules to ensure national budgetary discipline, were proving both unsuccessful and insufficient for crisis management. In 2012 alone, the year before the article was written, Greece agreed to a second rescue package for €130bn; Spain formally requested financial assistance for up to €100bn to rescue its banking sector and implemented a €65bn austerity package; finally, Cyprus, too, asked for assistance, due to its large exposure to the neighbouring Greek economy. It was becoming increasingly clear that countering the crisis effectively required a concerted effort. It was also understandable to think that the two pillars alone were not enough to sustain the EU’s economic architecture.
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