In the euro zone, access to financing remains unevenly distributed

As part of the response to the health crisis on March 19, 2020, European Central Bank President Christine Lagarde announced exceptional measures to address the crisis. The objectives: to maintain the supply of credit by avoiding distortions in costs and to ensure the stability of long-term interest rates. More recently, in her speech on November 17, 2023 in Frankfurt, she asserted that only greater European financial integration would enable us to meet the challenges of deglobalization, demographics and decarbonization, warning against the "financial fragmentation" of the European economy.

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Dialogues économiques is a digital journal published by the Aix-Marseille School of Economics (AMU, CNRS, EHESS, Centrale Méditerranée). As a bridge between academic research and society, Dialogues économiques provides all citizens with the keys to economic reasoning. Articles are published every two weeks.

Monetary union: a common monetary policy and perfectly integrated markets

A monetary union, such as that of the euro since 1999, is defined as an economically integrated zone: no barriers to the mobility of goods, services, capital and workers between the countries that make it up, and a coordinated trade policy vis-à-vis the rest of the world. It is characterized by a monetary policy, a central bank and a currency common to all members. Perfect regional financial integration should homogenize investment opportunities, resulting in increased cross-border financial links, better risk-sharing and symmetrical exposure to common frictions and shocks across all countries in the union.

In particular, differences persist in access to financial services between countries, raising the risk of "financial fragmentation". Several indicators can be used to measure this fragmentation, the best known being the "spread". This is the difference between the borrowing interest rates of eurozone countries and those of Germany, the benchmark country, for the same term and under similar conditions.

What room for manoeuvre does Frankfurt have to reduce this fragmentation of financial markets and the banking sector, in order to increase the positive impact of monetary policy on household and business credit? A team of researchers investigated the impact of European monetary policies on banking and financial fragmentation in the eurozone, in a study entitled "One size may not fit all: Financial fragmentation and European monetary policies", published in 2023 in Review of International Economics.