The European Central Bank (ECB) cannot make Europe's economy grow. It can only create the conditions that support growth. This is the most important message from ECB president Jean Claude Trichet in an interview published in yesterday's Irish Times.
Having delivered low inflation and historically low interest rates, the ECB can claim to be doing its job well. Although too polite to say so directly, Mr Trichet implies that the same cannot be said of all EU governments. And in answer to those who would lay the blame for Europe's weak growth at the door of the ECB, Mr Trichet cites the Irish performance as a result of the successful introduction of economic reforms here.
His point is not just a compliment to this State, but a timely defence of his own organisation. Having undermined the Stability Pact this spring, French and German governments attempted to pressure the ECB into lowering interest rates. That pressure was resisted. Mr Trichet has pointed out that historically low rates can hardly be used as a scapegoat for Europe's sluggish growth.
However, larger countries in the euro zone still suffer from the problems of high unemployment, low investment and poor consumer confidence. A lack of reform in countries like Germany and France is one difficulty. The slowness of European leaders to reform cross-border trade in product and service markets is another.
Europe's political situation is not helping. Germany is struggling to form a government. In France the forces of protectionism and economic nationalism remain powerful. And an important component in the Italian government, the Northern League, is increasingly questioning Italy's position in the euro. In this environment the ECB remains an important and independent pillar of the European project. It cannot intervene directly in national policy. Rather, it is up to national governments to interpret what it says.
In this context, there is more to Mr Trichet's message to Ireland than unqualified praise. He has noted that property price overheating, although not worrying at a European level, requires attention in countries "which are very dynamic and have a lot of real growth".
Finance Minister Brian Cowen was quick to claim endorsement from what Mr Trichet said. But the ECB president's comments refer to Ireland's historical performance over the period of several governments of different composition. Rather than resting on its laurels, the present Government should use his arguments to persuade backbenchers of the need to reduce the cost of living and to raise public-sector efficiency. The ECB has also rightly signalled its concern about property values.
The Irish Central Bank will produce a report next month on the financial stability of our economy. When it does, the Government will have the opportunity to demonstrate its self-proclaimed economic competence through a vigilant policy response in the spirit recommended by Mr Trichet.