On Friday, José Manuel González-Páramo, a member of the Executive Board of the European Central Bank (ECB), delivered a speech in Madrid regarding the monetary and fiscal reaction of the euro area to the financial crisis.

He began by summarizing some of the monetary actions taken by the ECB during the crisis, noting that “the ECB’s main refinancing rate was cut by a cumulative 325 basis points between October 2008 and May 2009 bringing it to its current level of. just 1%.” In addition to standard rate cutting, the ECB implemented a number of “enhanced credit support” measures, including asset purchases.

With respect to fiscal policy, Mr. González-Páramo’s remarks centered on the “extent to which the euro area fiscal response to the crisis [was] shaped by the EMU [economic and monetary union] architecture.” He conceded that, “One could argue that the answer is ‘not much,’” suggesting that individual countries arguably ignored agreed-upon limits to government deficits (a not-too-veiled reference to excessive budget deficits in a number of euro-zone countries, including most prominently Greece). However, he ultimately concluded that “the European fiscal rules were not brushed aside” and that countries had largely acted within the EMU framework.

At the end of his remarks, Mr. González-Páramo advocated the normalization of European monetary and fiscal policies. He warned that “the ‘fiscal adjustment’ that will be necessary in the coming years is likely to prove even more challenging for governments than the phasing out of non-standard measures for the Eurosystem,” and that “the key issue for fiscal policy at this juncture is not ‘whether’ but ‘how much’ and ‘how soon’ to start fiscal consolidation.”