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I began my career as a young economist trained in a fairly traditional tradition. My doctoral thesis, for example, dealt with fiscal policy and interest-rate differentials within the European exchange-rate mechanism, and since then I have devoted myself, both intellectually and professionally, to Europe’s economic and monetary integration.
In 1995, I joined the Dutch central bank (DNB) for the first time to help prepare for the forthcoming adoption of the euro. Three years later, I helped establish the euro-area desk at the International Monetary Fund. Upon returning to the DNB in late 1999, I spent the bulk of the following decade focusing on financial regulation.
The global financial crisis of 2008-2009 transformed me from a conscientious financial regulator into a crisis manager tasked with some of the most complex bank-rescue operations of my career. I subsequently left the DNB to join the Dutch Treasury, where the emphasis shifted from crisis management itself—such as rescuing banks, asset disposals, bank recapitalizations, and similar measures—to rebuilding the institutional architecture capable of making the system more resilient to prevent such a catastrophe from recurring.
In 2011, I was appointed governor of the DNB, a position I had the privilege of holding for 14 years. During that period, I participated in more than 100 meetings of the European Central Bank (ECB) Governing Council and worked with three different presidents of the ECB. Concurrently, from December 2021 until the end of my term, I chaired the Financial Stability Board, which gave me a privileged vantage point on global monetary and financial-stability policies and allowed me to contribute to the international coordination of policies beyond the European framework.
My departure from the ECB Governing Council a little over a year ago gave me the chance to take a retrospective look at this period, to examine how policy evolved, and to see how my views withstood and were refined by events. In this framing note, I revisit this intellectual journey over the 14 years through three thematically intertwined topics in the realm of monetary policy: asset purchases and the de facto role of lender of last resort within a fragmented monetary union; fiscal policy and the question of common European borrowing; and the international role of the euro in a changing geopolitical order.
I believe the evolution of my thinking on these issues largely mirrors the evolution of the monetary union and its architecture. I remain convinced that Europe’s sui generis integration poses unique challenges to economic policy and monetary policy, places a special responsibility on central bankers, and requires that ECB policy be bounded by law, subject to conditions, and anchored in the price-stability mandate. Yet European integration also demands pragmatism to update this action framework in order to preserve its founding principles.
Asset purchases and the function of lender of last resort in a fragmented monetary union
Skepticism toward non‑conventional tools
When I took office in the summer of 2011, the ECB was facing the first tremors of what would become a genuine sovereign-debt and banking crisis. The conceptual framework I brought to Frankfurt rested on a traditional conception of the central bank’s role: price stability would be secured by the interest rate, with non‑conventional measures reserved for genuine emergency situations, such as the global financial crisis of 2008-2009. Initially, I was among the most skeptical voices within the ECB Governing Council regarding the scale of monetary easing and asset purchases.
This skepticism reflected my economic training, not ideological rigidity. It rested on real concerns about the effectiveness and side effects of non‑conventional tools. As new data appeared and the situation of our monetary union evolved, I continuously revisited these beliefs. Even though I had been rather cautious about the effectiveness of the bond-market program (SMP) under Jean-Claude Trichet’s presidency, for example, I approved Mario Draghi’s announcement of outright monetary transactions (OMT) in the summer of 2012.
Yet while recognizing the effectiveness of asset purchases in restoring the transmission of monetary policy, I was more skeptical about the capacity of our quantitative easing (QE) program to bring inflation back to its target. Here again, my view evolved. Recent data on the effects of QE have yielded important lessons for both supporters and skeptics. Asset purchases are an integral part of the monetary-policy toolkit; they shape the entire term-structure of interest rates (across time and across asset classes) to maximize the monetary-policy impact when the short-term policy rate has reached its effective lower bound.
That said, I believe QE’s effectiveness depends on both the macroeconomic context and the stance of fiscal policy. In a liquidity trap where monetary policy loses much of its potency, fiscal multipliers typically hit their maximum. If the euro area were to find itself in such a trap again, I would therefore be a proponent of euro-area‑wide coordination aiming for an appropriately calibrated aggregate fiscal stance.
The ECB as lender of last resort
The turning point in my thinking came in 2012, when fragmentation in sovereign-bond markets threatened the very integrity of the monetary union. Spreads on Italian and Spanish debt surged to levels that could not be sustained, breaking the homogeneous transmission of monetary policy that is a precondition for the effectiveness of the single policy. From 2011 onward, the eurocrisis was no longer just a sovereign-debt crisis or a banking crisis as in Ireland or Spain. As contagion spread, it became clear that markets doubted the political integrity of the monetary union and the irreversibility of the euro, and thus the single currency in the euro area. The emergence of the risk of convertibility and the breakdown in monetary-policy transmission made it obvious that our analytical framework and our toolkit needed to advance.
As a central banker within an incomplete economic and monetary union, I ultimately accepted that the uniform transmission of monetary policy could not be dissociated from some form of lender-of-last-resort role. That is why I publicly supported the OMT programme in 2012, a stance not always understood in Northern Europe. My support, however, was conditional: the OMTs had to be subject to strict budgetary and structural safeguards. I quickly recognized the reach of Mario Draghi’s remarks in London in July 2012 and, given the safeguards, I fully subscribed. The OMTs were never actually activated, but they permanently reshaped markets’ perception of the ECB’s capacity to support the system, providing a vivid illustration of how a central bank’s credibility can deter rather than intervene.
In January 2025, I described the OMTs as a “big leap forward,” because that is when the ECB committed to potentially unlimited asset purchases if necessary, thereby eliminating the threat of redenomination and functioning de facto as a lender of last resort. This revealed what I now regard as a fundamental truth about euro-area architecture: a monetary union with fragmented fiscal policies, debt markets, and national banking systems cannot operate without a central-bank safety net, however conditional it may be.
From APP to PEPP
In 2015, the ECB launched its first quantitative easing program aimed directly at making monetary policy more accommodative and nudging inflation higher. The launch of this asset-purchase program (APP) placed me in a noticeably tenser position with most of my ECB Governing Council colleagues. While I fully acknowledged the necessity of non‑conventional steps to anchor inflation expectations in the mid‑2010s deflationary environment, I consistently insisted that program implementation be rigorous, including clear criteria for its extension and subsequent normalization, because I continued to harbor reservations about its ultimate effectiveness in achieving inflation that is below but near 2%.
Over time, I came to view QE as a way to demonstrate our commitment to our objective and as an extension of conventional policy rate action across the entire yield curve and the structure of rates. By lowering term premia and risk premia across asset classes and reducing long‑term borrowing costs, asset purchases provided substantial support when the short end of the curve had reached its effective lower bound. This channel was most effective when there was still substantial room for long‑term rates to fall. As the yield curve gradually flattened, however, the marginal effectiveness of additional purchases declined, while the side effects and exit challenges accumulated. In this context, monetary policy without fiscal backing loses much of its potency.
Looking back, I think the ECB was, on balance, too slow to implement QE in 2014, and I take my share of responsibility for that. But I also think it likely pursued QE for too long and in a manner that could have been more targeted. The lesson I draw is that it is probably better to launch QE earlier and more aggressively than we did, but also to be more flexible and to end it sooner. After all, a bold initial strike is likely to maximize the policy‑signaling effect on inflation expectations, whereas slow, gradual purchases are unlikely to drive a deeper structural change in underlying inflation.
The pandemic allowed this new doctrine to be tested. The Pandemic Emergency Purchase Programme (PEPP), launched in March 2020, explicitly freed asset purchases from the capital-key constraint that governed previous asset purchases, allowing greater flexibility across asset classes and countries to prevent financial fragmentation in the face of a symmetric shock. I supported the PEPP unreservedly, aware that the health emergency had produced an unprecedented demand shock that justified an equally unprecedented fiscal and monetary response. The design of the PEPP (flexible, large-scale, and clearly temporary) also matched my preference for instruments with a flexible scope but explicitly limited duration. Over time, we were able to conduct PEPP purchases more efficiently. We focused on preserving favorable financing conditions rather than purchasing a pre-set amount of bonds. We were thus able to buy less when conditions were favorable and more when required. I view this as one of the ways we can ensure the proportionality of asset-purchase programs.
In a talk at the London School of Economics in early 2026, after stepping down, I clearly distinguished, in my retrospective of the QE experience, the asset purchases as:
- as a mechanism for stabilizing financial markets and repairing the transmission of monetary policy—the area in which I think they paid off,
- as a tool to mitigate the risk of deflation, where their announcements and implementation helped halt the decline in inflation expectations, and
- as a tool aimed at lifting inflation, a domain in which empirical evidence is rather mixed.
Our experience with QE has also taught me that while central-bank independence is essential, monetary and fiscal policies cannot always be treated in isolation. It is a false premise to believe that monetary policy can fully stabilize the economy in all circumstances, irrespective of fiscal orientation and the broader institutional context. QE, in particular, benefits from aligned fiscal policy. This has important institutional consequences and implies that while independence is essential, it should not, on that account, hinder policy coordination.
The TPI and the institutionalization of the backstop mechanism
The creation of the Transmission Protection Instrument (TPI) in July 2022, as the ECB was moving toward tightening for the first time in eleven years, completed the loop. The TPI represented the formalization of some of the lessons learned from asset purchases.
Our Economic and Monetary Union (EMU), characterized by segmented national sovereign debt markets, needed a backstop to prevent self-fulfilling fragmentation crises from undermining the transmission of monetary policy. The TPI could be activated in favor of any member state facing an unjustified widening of spreads, subject to the EU budgetary framework—a design aligned with the emphasis I had previously placed on the conditionality of central-bank interventions on sovereign markets. It enabled a vigorous tightening of interest rates to counter rapidly rising inflation, without fear of triggering turmoil in financial markets. It further strengthened the ECB’s credibility as an inflation-fighter, while the conditionality embedded in the TPI helped limit moral hazard. It is important to note that the TPI did not prevent sovereign-spread developments in the euro area from continuing to react to national budgetary and structural developments.
Taken together, the evolution of my stance on asset purchases and the lender‑of‑last‑resort function traces a coherent arc: from skeptic to pragmatist anchored in principles. I accepted each new instrument not out of enthusiasm for monetary activism, but because I recognized that letting fragmentation jeopardize the transmission of monetary policy or undermine the single currency would be incompatible with the ECB’s price-stability mandate and with its role in safeguarding the euro area’s integrity.
Common borrowing and European public goods
The initial framework: fiscal discipline and national responsibility
My initial stance on the monetary union’s budget architecture was firmly rooted in the Dutch tradition of fiscal prudence, as reflected in the Maastricht framework: independent national-budget policies subject to common rules, with no budgetary solidarity. I viewed this architecture as economically robust enough to avoid fiscal dominance and politically necessary to preserve democratic accountability with respect to the single currency. Common borrowing, in my view, risked weakening members’ incentives to maintain viable public finances and introduced moral hazard, which is why I opposed it for a long time.
successive crises, notably the euro crisis but also the COVID crisis, led me to acknowledge that Maastricht’s architecture was incomplete and in need of reform. The public response to the global financial crisis and the euro crisis had already outlined the contours of a new architecture, including a degree of risk-sharing and common borrowing through conditional lending facilities such as the European Financial Stability Facility (EFSF), the European Stabilisation Mechanism (ESM), and the European Stability Mechanism (MES), with appropriate legal and political safeguards.
But that was not enough. The post-crisis feasible policy mix was inadequate because the widely held view that national budget policies should focus on domestic stabilization while ECB policy would stabilize the euro area as a whole failed to anticipate liquidity traps, the effective lower bound on policy rates, safe-haven capital flows, or the tight margins for maneuvering with national budgets. The deflationary environment after the crisis reinforced the case both for European-level budget coordination and for a monetary backstop, as was implemented during the COVID crisis through a mix of fiscal expansion and monetary measures. It thus stands as another case where pragmatism proved necessary to protect the founding principles of the EMU and preserve the euro area’s integrity.
The pandemic, a turning point: NextGenerationEU and the new paradigm
The pandemic proved decisive in this regard. The combination of monetary and fiscal policy yielded much better outcomes in 2020 than during the sovereign-debt crisis. The crucial difference, as I argued at the time, was that the pandemic hit all member states simultaneously, making coordinated fiscal expansion politically feasible and economically sensible. Activating the general escape clause of the Stability and Growth Pact, together with the ECB’s accommodative stance, helped avert an economic collapse. More importantly, the NextGenerationEU (NGEU) plan, financed by issuing EU-level common debt, represented a structural innovation in risk-sharing, fiscal expansion, and policy coordination.
Together, PEPP, the easing of national-budget rules, and the NGEU program stabilized the economy, calmed financial markets, and prevented the widening of yield spreads. The conditionality—formulated as reform commitments tied to disbursements from the recovery fund to spur productivity growth—made the instrument politically acceptable and economically more robust.
Common defense expenditures as a tool for strategic autonomy
The Russian invasion of Ukraine and the subsequent recalibration of transatlantic defense cooperation have made Europe’s rearmament necessary. This geopolitical imperative creates new realities for European policymakers, including central bankers. The rising defense spending will strain national budgets. A greater share of common defense expenditures would achieve a triple objective: sending a political signal of deeper integration and resilience, delivering this essential public good more efficiently, and, consequently, strengthening the euro’s international appeal.
However, I remain committed to the principle of conditionality and to prudent incentives. Common debt issuance, as an option among others to finance this increased defense effort, cannot be used to bypass budgetary rules or to channel disparate and inefficient national defense spending. In the medium term, any EU debt increase should be accompanied by a reduction in national debt: the cost of servicing EU liabilities is ultimately borne by the same taxpayers as those holding national debt. Common issuance can reduce financing costs, but it cannot ignore budgetary sustainability considerations.
The link to safe assets: completing the euro architecture
I have always linked the euro-area debate on euro‑bonds to the broader question of the euro area’s institutional completeness. The absence of a truly safe euro-denominated asset that is as liquid and as firmly anchored in the system as US Treasuries was both a symptom and a cause of euro-area vulnerability to fragmentation. National bonds rated AAA or AA, such as German Bunds, while safe, were not issued in volumes large enough to anchor the euro-area financial system. Supranational securities issued under the EU banner—such as those from the European Investment Bank (EIB), the MES, or as part of the NextGenerationEU framework—could partly fill this gap, but only if their issuance were regular, predictable, and of sufficient scale to generate liquidity premia that make safe assets self-reinforcing.
This analysis places my own thinking within a broader discourse on safe assets and the design flaws of the euro area, a literature to which researchers such as Markus Brunnermeier and Ricardo Caballero have contributed. While I still believe that proposals to pool and mutualize existing national debts are politically less feasible because they blur responsibility with accountability, I now recognize that there are legitimate arguments in favor of a larger set of European public goods capable of producing a gradually expanding stock of euro-denominated safe assets.
A strategy for a global role of the euro
The ECB’s traditional agnostic stance
During most of my tenure, I shared the ECB’s traditional stance on the euro’s international role: a deliberate agnosticism. The ECB’s mandate is price stability in the euro area. The external appeal of the euro was viewed as a spillover of sound monetary policy rather than an independent monetary-policy objective. The Governing Council did not seek to promote the euro as a reserve currency or as a invoicing currency for international trade; its international role should reflect the underlying strength of the European economy and its institutions.
This position could be defended analytically. The dollar’s dominance as the world’s reserve and invoicing currency reflects decades of deep institutional development, legal predictability, and market liquidity that cannot be conjured up. In a roundtable organized in 2021 on the roles of the dollar, the euro, and the renminbi, I expressed the prevailing view that the euro’s international standing would evolve with the quality of European institutions rather than through deliberate promotional campaigns.
Arguments for a greater role
The geopolitical upheavals of 2022-2025, beginning with Russia’s invasion of Ukraine, sanctions on Russia’s central-bank reserves, and later the frictions with the United States under the Trump administration, created conditions in which this traditional agnostic posture proved intellectually insufficient. I laid out this evolution explicitly in my speech at the Peterson Institute in April 2025.
I noted that the international use of the euro had initially grown well after its 1999 introduction, surpassing the combined share of currencies that preceded it, including the German mark. Yet the 2008‑09 global financial crisis, quickly followed by the euro crisis, laid bare the euro’s design flaws and substantially weakened its international appeal. The post‑2020 context, however, presented a natural opportunity for re-evaluation.
I did not imply that replacing the dollar was realistic or desirable, given network effects and the reinforcing dynamics tied to reserve-currency status—and because dethroning a global currency generally requires a major crisis rather than a deliberate policy shift.
Nevertheless, I came to believe that a more substantial international role for the euro would be desirable and feasible. The principal driver is strategic: European payment systems and financial-market infrastructure depend heavily on foreign service providers, creating vulnerabilities that have become politically unacceptable in an era of heightened financial interdependence. In addition, the rise of private digital currencies and the prospect of a digital euro compel us to think more strategically about a sovereign infrastructure for our digital payments.
Conditions for a greater international role
External power is a reflection of internal cohesion and coherence. The euro’s international role could be strengthened by policies designed to consolidate and deepen the European economy and its financial markets. I distinguish four priorities.
First, integration and deepening of the internal European market, with the euro’s international attractiveness as a welcome spillover. Second, the creation of a safer, more sovereign payments infrastructure. The ECB’s efforts to extend the use of the TARGET Instant Payment Settlement (TIPS) and to roll out the digital euro for retail and wholesale payments are important steps in this direction. Third, the creation of a true single market for capital: as long as an American investor wishing to invest across the European Union faces potentially 27 different regulatory frameworks in corporate and insolvency law, European capital markets will remain fragmented and less attractive. Fourth, and finally, a more structural issuance of common EU bonds, which would deepen the market for euro-denominated safe assets and increase its liquidity for foreign investors.
But greater powers imply greater responsibilities. A more prominent international role will lead international actors to turn increasingly to the ECB in times of market turbulence, just as the Federal Reserve has always occupied a central place in the international monetary system. The ECB’s evolution over the past 14 years, the introduction of OMT, PEPP, TPI, and the EUREP, along with a broader toolkit for financial stability, has, in my view, prepared it to assume this broader role, even if its mandate remains formally unchanged and if the framework of swaps and the EUREP remains somewhat conservative.
A principled pragmatism
My fourteen years at the crossroads of European monetary policy and global financial regulation escape the simplistic dichotomy of “hawks” and “doves” and any hard classification. Events repeatedly tested my convictions. While remaining strongly engaged with academic and theoretical work, I like to think I have always shown openness and flexibility to adapt to events and to formulate policy responses grounded in solid theoretical and empirical foundations, without being dogmatic.
As circumstances evolved, I revised my positions on important areas of monetary and financial policy, without abandoning the principled foundations underpinning our currency union. I hope that by applying this form of “principled pragmatism,” I have helped push the European consensus forward on these questions.
I believe the trajectory of my thinking remains coherent and aims at a more perfect and safer monetary union. I have also learned from my peers, among whom are some of Europe’s best thinkers and policymakers—Mario Draghi demonstrated the value of decisive leadership at a moment when the euro area needed it most. He showed that the trust and confidence built by institutions and norms in peacetime can enable decisive action in crisis, likely saving the euro area. I also learned from Jean-Claude Trichet and, in particular, Christine Lagarde that dialogue, cohesion, and consensus are never a given, but the product of patient, thoughtful engagement and that leading by stepping back can often be the best form of leadership possible.
I continue to learn today that, even though Europe is fortunate to possess treaties and statutes protecting central-bank independence, this independence must always be preserved and cherished. Yet independence does not come without trade-offs. It requires us to remain open to reconsideration and scrutiny to avoid conformity and the comfortable refuge of our ivory towers. Independence should never prevent us from engaging in constructive dialogue and cooperation with other public authorities without compromising our mandate. I believe that in today’s world, where geopolitical threats are pervasive, the call for the central bank to support the Union’s overall economic policies is an obligation we should approach with an open mind, provided price stability is not sacrificed. Moreover, independence should not excuse us from accountability. I think significant progress has been made, but there is still much to do for European citizens to feel that the ECB truly listens to them.
Finally, in a world marked by growing and more radical uncertainty, we must be more open to external contributions in our day-to-day work. The insights of historians, economists, policymakers, other social scientists, and even physicists must play a greater role in our thinking. Increased uncertainty and a broader array of risks and shocks require us to be prepared to listen to epidemiologists, energy experts, biologists, and perhaps even philosophers. Our responsibility should be understood not merely as an attempt to control prices, but as a direct link between the present we aim for and the future we aspire to, since we set the cost of borrowing for our economy and the discount rate of our future.