Excerpts from the Account of the monetary policy meeting of the Governing Council of the European Central Bank held in Vienna on Wednesday and Thursday, 1-2 June 2016:
Members also exchanged views on the possible impact on the euro area of the upcoming June UK referendum on its membership of the European Union. There was general agreement that this was an important source of uncertainty as regards the economic outlook, and in the event that the United Kingdom voted to leave, i.e. a “Brexit”, there could be significant, although difficult to anticipate, negative spillovers to the euro area via a number of channels, including trade and the financial markets. At the same time, it was noted that there might also be an upside risk to the euro area outlook if the United Kingdom voted to remain part of the European Union.
Altogether, the Governing Council considered that the risks to the euro area growth outlook remained tilted to the downside. Some important downward risks were still looming, relating, in particular, to developments in the global economy, the outcome of the forthcoming UK referendum and other geopolitical risks. At the same time, there was broad agreement that the balance of risks to the euro area growth outlook had improved on the back of monetary policy measures taken and the stimulus still in the pipeline.
Members again emphasised strongly the need for other policy areas to contribute much more decisively, both at the national and the European levels, in order to reap the full benefits from the ECB’s monetary policy measures. Structural policies were considered essential, given the continued high structural unemployment and low potential growth in the euro area. In particular, members judged that actions to raise productivity and improve the business environment, including the provision of an adequate public infrastructure, were vital to increase investment and boost job creation. Although specific reform needs differed across countries, the swift and effective implementation of structural reforms, in line with the country-specific recommendations recently published by the European Commission, would lead to higher sustainable economic growth in the euro area and make the euro area more resilient to global shocks. It was emphasised that, with the economic situation improving and demand increasing, it was an opportune time to strengthen investment in the public and private sectors.