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Franco-German relationship could help the ECB, says Belgian central banker

Guido Bergmann | Bundesregierung via Getty Images

The close relationship between Germany and France along with the clearer political landscape across Europe could help the European Central Bank by bringing more stability to the euro zone, Jan Smets, Governor of the National Bank of Belgium, told CNBC on Tuesday.

The 19-member bloc has improved over the last three years, the Governor said, not only due to a growing economy but also because fragmentation seems to have dissipated after key elections across the euro area.

"I consider the euro zone to be a factor of stability," Smets told CNCB, citing political stability and the Franco-German union as the basis for that.

"This Franco-German relationship which is really important…may contribute to more confidence and more stability and eventually deepening of monetary union," he said.

Voters in Austria, the Netherlands and perhaps more importantly in France have recently said no to anti-EU movements after these threatened to shake mainstream politics. Though Italian and German voters are also due to head to the polls in a couple of months, there's a new euro impetus.

Chancellor Angela Merkel of Germany, who appears on course to hold on to power, has vowed alongside the pro-European President Emmanuel Macron of France that further integration is the way forward.

Earlier on Tuesday, President Mario Draghi of the ECB noted that political stability in the euro area is a positive factor when the bank assesses the future of monetary policy.

"Another considerable change from three years ago is the clarification of the political outlook in the euro area. For years, the euro area has lived under a cloud of uncertainty about whether the necessary reforms would be implemented at both the domestic and Union levels…Today, things have changed. Political winds are becoming tailwinds. There is newfound confidence in the reform process, and newfound support for European cohesion, which could help unleash pent-up demand and investment," Draghi told an audience at the ECB Forum in Sintra.

There Draghi reinforced that despite the economic improvements, the current monetary stimulus needs to remain in place and the bank will have to be prudent in assessing when to end such stimulus.

"I share his confidence that eventually we will get to our objective," Smets told CNBC.

"When we are convinced enough to see inflation going up safely, durably and in a self-sustained way we will revert monetary accommodation. That's the question we will have to answer in the next months," he added.

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