De Nederlandsche Bank published opening remarks by Olaf Sleijpen at its Annual Research Conference arguing that, because monetary and fiscal policy inevitably interact, the case for better coordination grows as economic and political challenges intensify, while each policymaker remains independent within its mandate. He pointed to mixed outcomes from past shocks: during the European sovereign debt crisis, monetary and fiscal policy often moved in opposite directions, while pandemic-era policies were more aligned; misalignment returned during the recent high-inflation episode when fiscal support persisted for too long as monetary policy tightened. In the Economic and Monetary Union, he warned that large fiscal disparities can weaken the effectiveness of monetary policy across member states and create spillovers, and that more frequent supply shocks and greater political uncertainty could threaten financial stability and hinder transmission despite existing tools to counter fragmentation. The remarks also highlighted mounting longer-term fiscal pressures from climate action, the digital transition, ageing and defence spending, and raised questions about how such plans interact with price stability, including whether deeper European capital markets or joint financing of public goods could ease pressure on national budgets.
De Nederlandsche Bank 2025-11-11
De Nederlandsche Bank urges closer monetary and fiscal policy coordination to protect euro area policy transmission
Olaf Sleijpen of De Nederlandsche Bank stressed the need for better coordination between monetary and fiscal policy amid economic and political challenges, while maintaining independence. He warned that fiscal disparities in the Economic and Monetary Union could weaken monetary policy and financial stability. Sleijpen also highlighted long-term fiscal pressures from climate action, digital transition, ageing, and defence spending, questioning their impact on price stability and the potential role of deeper European capital markets.