It is broadly accepted that the success of monetary policy comes from the CBs ability to manage effectively market expectations. But without being credible, a central bank cannot properly manage expectations. Mario Draghi, the ECB president, reiterated in April 2016 how important is for a CB to be credible: “any time the credibility of a central bank is perceived as being put into question, the result is a delay in the achievement of its objectives, and therefore the need of more policy expansion.” In other words, in order to achieve effectively its monetary policy objectives, a CB must be fully credible.

The financial cycle has ended up in a very deep financial crisis. Very low interest rates, ultra-low, even negative, policy rates epitomize this crisis; they have raised concerns about the global economy and  have triggered heated debates among economists, decision-makers. Central banks, especially those which set the tone in financial markets are under scrutiny taking the center-stage of debates. Top ECB officials cite structural conditions in the European and the world economy as an explanation for the very low interest rates. In essence, these conditions refer to the balance between investment and saving[1]. The IMF also got involved in the debate by saying that ultra-low rates (even negative) are not unjustified in the current context[2]. The BIS, instead, warns repeatedly about side-effects of non-standard measures.

All eyes in Europe are riveted on the migrants/refugees’ crisis, which has come as another major shock following the financial crisis and the euroarea troubles of recent years. The migrants/refugees’ crisis and the euroaria troubles have revealed the fragility of the Union, which, for many, is likely to be a shock in itself. More than worrying is the pretty low response capacity of the Union to such shocks. Can the Union pull itself together, can it reengineer itself? Below is a reading of the Union’s turmoil and avenues for policy action are outlined
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