Euro20plus Town Hall Christine Lagarde 24.11.2023

This transcript is a conversation between Christine Lagarde, President of the European Central Bank, and a group of 200 young people from many different countries. Lagarde talks about the evolution of money and how it is becoming more digital, and how small changes in our daily lives can make a difference. She also talks about the battle against inflation and how the European Central Bank has deployed a lot of ammunition to fight it. Finally, she answers a question about the most difficult and challenging part of having a common currency, saying that it is important to observe the components of our lives, like salaries, profits, fiscal, and geopolitical developments, to decide how long to stay in the battle and what decisions to make.

And it's my very great pleasure to introduce our very first guest for today, Christine Lagarde. She's the most powerful woman in Europe, one of the most powerful woman in the world. We all know that her remarks can move markets and her decisions define the future of finance. She has had a remarkable career, first in international law and then in public service. In the late 90s, she became the first woman ever as global chair in the international law firm Baker McKenzie.
First woman to ever serve as as Minister of Economics and Finance in France. She was the first managed female Managing Director of IMF and now she is at half time of her term as first female President of the European Central Bank. That's probably all things that you already knew. So I thought I'd add a few fun facts. Interesting facts that I found out during my preparation for today.
The first one was that apparently Madame Lagarde still uses the breathing techniques in stressful situations that she learnt as a teenager when she was part of friend of the French national synchronised swimming team. So I think now it's meeting other politicians and. Potent members of the finance world that that she uses them for. She also loves gardening and grows her own grapefruits, although probably not in Frankfurt Gardens. Difficult.
She originally started to study law because she wanted to fight the death penalty and then the death penalty got abolished before she even graduated. And you can find her signature on every Euro bill that has been printed over last years. I looked into my purse this morning and I got. An original Lagarde. If you have your wallet with you, you can also check if it's still an old draggy or one of the new ones of Madame Lagarde.
I'm very curious to see what you will find out from and about her over this town hall. Please give a very warm welcome to the President of the European Central Bank. Hello. Nice to meet you. It's so nice to have you with us.
Before we open up for questions, I have to ask like what's the process like to get your signature on a Euro bill? Is it something you have to do first day of office? Do we have several tries or is it like a one shot?
What is it like every night I sign all the notes?
That's a lot of work, I will ask you.
No. What happens is that you have this beautiful screen with one single banknote and you apply your signature using a special electronic pen, I suppose, and you sign your signature standing, which is not that easy. So it has to be authentic and genuine. And then it is used as such to be reproduced on all the banknotes that are printed in different countries in the euro area, because banknotes are not printed in one single place just to avoid concentration of risk.
And now, if you pay cash, do you still Sometimes.
But when? When you know when you're invited to a party and you you really want to go to bed, or you have so many other things to do that you don't want to discuss and people insist please stay, I generally say no, I can't. I have to sign all the banknotes tonight. And it works.
And do you, when you pay in cash, still sometimes check if it's one of your bills? And if so, like if you see that signature, what does it mean to you?
Well it's to imagine that many European around Europe's have have my signature in their pocket is is is humbling and I and it you know what it I I often think about it as a reminder of the collective duty that we have together with Mr. Nagel for Germany other central bank governors in the euro area. So together we have the responsibility to look after the euro, to make sure that it's a currency that holds its rank in the concert of currencies around the world and to have your signature on the bank note and to to know that people have this expectation of you is is important. So sometimes symbols matter.
I read an slightly older interview with you where you said that you have been an outsider for all of your life and that got me thinking. I was wondering, is it because you are a woman and what used to be a men's world? Or is it because of?
What do you mean used to be?
Well, I I would hope that they that it. That there's something moving? Or is it more that because of these powerful positions that you're often lonely at the top? Like what is it that made you an outsider?
I think the loneliness at the top applies to everybody and and I think it's it's for everybody to try to reach out and and to have to build teams because I don't think that things can be achieved just alone and and by yourself. No, the point you made is right because the first part of my professional life for 20 years was in the legal world and being first of all a young baby associate and then a young partner and then chair of the international firm Baker McKenzie was a lonely, not a lonely adventure. But I I wasn't outsider very much because when I joined the partnership there were 7% women partners. So 7% is definitely a minority and and you you feel very much like an outsider. And then when I moved when I was first finance minister in the Eurogroup or in the Ecofin, I was the only female finance minister, then it changed, you're right.
So there has been improvements and when I look at the the ECOFIN table with the finance ministers there, there are probably, depending on the season and the year and the change of government, you have probably 5-6 female finance ministers. So there's a major improvement. But compared with the Group of 27, it's still about 20%, which is quite low. And if you look at some photos, with all the respect and the friendship and the affection that I have for my colleagues on the Governing Council, there are many, many, many more men than women.
Well, we have a much better quota here. Almost half of the audience is female. And it's 200 young people from many different countries that have now two days to get to know each other. You must be a master at networking. So what would be your top advice to make networking successful but also fun?
The first thing I would say is if you think you are shy, isolated and a bit by yourself, forget about that. Look around the room and spot other people who probably feel isolated, lonely and shy, and then go to them and you don't have to ask for a cell phone right away. That we have a party for later, yeah, but start, you know, chatting about anything in particular and don't assume that you are alone in that situation. In any group of people, everyone feels a little bit awkward. A little bit strange when you don't know everybody around, so reach out yourself because others feel exactly the same way as you.
So that's what I would say.
OK, so nobody should feel awkward about any question now. And we're going to, right. So that's right in Who wants to post the first one, please hands up that's Thank you. Because then I don't have to throw it to and maybe stand up, say your name, and then pose your question.
Good morning.
Good morning.
Do you think, sorry, do you think that the SAP has already won the battle against the inflation we so see? I have the same issue as you with my throat, highly recommended by a vote whenever you have to give a public speech or where your throat is not helping, you drink a lot of water. So if you see me drink all the time, it's that my throat is in the same situation as yours. The battle is not over and we're certainly not declaring victory. But if you look at the progress that has been made and if you look back to the highest reading of inflation that we had a year ago in October in the euro area, not specifically in Germany, but in the euro area, it was 10.6.
We're now down to 2.9 and I'm talking here about what we call headline inflation, which includes all the items that people purchase, you know, for their for their day-to-day life. So I think this is progress. We have started that fight against inflation. That's my colleague and friend Mr. Nagle calls a nasty beast.
So we started the battle. We have deployed a lot of ammunition because we have increased interest rates by 450 basis points. By the way, don't be intimidated by basis points. It sounds terribly, terribly scientific. You take out a zero and you put a comma and it's 4.5%.
So we have already done a lot and I think that at the point where we are given the amount that we of ammunition that we have used, we can observe very attentively the components of our lives like salaries, like profits, like fiscal, like geopolitical developments and certainly the way in which our ammunition are impacting economic life to decide how long we have to stay there and what decisions we need to make up or down. But we will win this battle, I can assure you.
OK, who else has a question?
Jacob and Aaron, So what happens? You throw the little Yeah, they.
They are going to distribute. Oh, I see.
So you don't we need throw to the end of the room? No.
Yeah, that's what. Thank God. So hands go up and there, Yeah. Hello, I'm Leila. Hello.
My question would be what is in your opinion, the most difficult and challenging part of having a common currency?
I think that what we call our monetary union, which is the architecture around our euro, which is your currency, my currency, our currency, I think that's the most accomplished union that we have in Europe. But there are missing pieces around which are halfway done or not completed at all. One which is 2 third of the way done is banking union but not yet completed. So we need that needs to be finished. One that I very strongly believe in if we want to continue to innovate in Europe, if we want to be competitive, is capital market union where someone who has a great idea starts his company.
Her company can actually raise funding through the various steps of the development of his or her enterprise and raise money here without having to go to the United States or without having to go to London or Hong Kong. We don't have that. We have scattered great markets, but too small and too fragmented and different. So that's the 2nd and the third one is fiscal union for the moment when we sit around the table, we are 20. Well, there are 20 governors plus the executive board members.
But we reach one single decision, not always unanimously, always with strong majority, but it's one decision and we apply it throughout the euro area. In Europe, whether it's euro area or the whole of Europe, there are 27 or 20 different finance ministers who decide their respective fiscal policies at home in their member states. That dichotomy between our monetary union and the fiscal fragmentation, which is not helped by the current vacuum about the rules, is an issue that needs to be addressed as well. So that, that's my assessment of the priorities and and the difficulties ahead. Now in terms of running this, let's face it, I mean, you will see it when you network, when you meet better, when you understand each other.
We each have specificities, we each have different cultures, we each have different languages. But we are all part of this incredible region of Europe which keeps us together, which has common culture, common roots and certainly a common destiny because it was decided decades ago that we were not going to be at each other's throat anymore. And going to war after each other and that is to be cherished and to be valued and to be complemented in the areas that I have just mentioned to you. Now I know it's not, you know, it doesn't seem terribly exciting and glamorous and all of that, but it it has to be a solid foundation overall. And from there on, you can build much more glamorous project that can be integrated.
You know, if we were to decide to have a much more ambitious space policy or if we wanted to develop a Pharmaceutical industry that would be firmly rooted in Europe and encouraged in this country. You need for space, you need combination of public and private money. You need a single fiscal determination to invest in there. If you want a very lively, strong Pharmaceutical industry, you want a capital markets union. Why should we let very creative innovators who have helped us fight COVID?
Why should we let them experiment and develop and build elsewhere? We can do it here.
OK, find another question. Where's the Micro?
I am maybe back in the back and maybe a guy after that, Bonjour and Lagarde and Sami from University of Liege. And in the university we had a debate with the director of the BNB about the bricks and how they influenced the world today. And now I would like to know how you perceive them? Do you perceive them as competitors, a threat or as partners? And what would happen if?
I know it's difficult, but if they managed to build the central bank like we have it here in the USCB and maybe also have a common currency, will it be a danger? For Europe, well, thank you very much for taking us beyond our borders. And for all of you, BRICS is Brazil, Russia, India, China, South Africa. Think for a second about what these countries really have in common in terms of demographics, in terms of geopolitical alliance, in terms of history and background, and ask yourself whether they have enough in common to actually volunteer their currency to something that would be jointly organised, care for and used in the future. I think that's my way of addressing your question.
A common currency cannot be just something nice to have that you decide on the flight. It's far more important and and it's an expression of your sovereignty and you really have to have something bigger than that, something that brings countries together. So I'm you know of course there, there are discussions and there there are common interest. But I don't think that there is that that sort of strong foundation of collective sovereignty that would deliver this single currency that they could, that they could envisage. You know, they they, they did set up an international bank, some I would say probably about 8 to 10 years ago.
I don't think that it has generated much by way of even projects. There isn't there is an Asian investment bank. There are some development banks that are very active and very efficient. But in terms of having actually a central bank that that manages monetary policy in all these countries and looks after the currency, I'm not so sure.
There was another one with a question right next to you. Maybe we could get the mic there.
Hello. I'm Joshua. Thank you for being here. I have to say, I'm a little bit nervous speaking before 200 people. You know what?
Remember, they are all as nervous as you. Oh, I hope so. But they envy you as well. I hope so. Right.
I work on public transport in the port city of Hamburg and have a question. We're now moving away from cash payment. We're going way more to cashless payment through the Internet, through prepaid cards. And thinking about that, what is your personal opinion about paying in this digital age with the euro? Is it going more digital?
Do you think cash will always be a point in the payment system? What is your opinion? Thank you. You know, I I grew up in a port myself. So on Sundays my father, who loved vessels and ship and ships and and shipping lines and all the way he would take us to for a walk on the platforms, on the embankments.
And guess what? In those days it shows our whole name. But forget about that. In those days there was no container. There was a few cranes, of course, but all the goods and the the shipping that was sent from all over the world to the port of Lav was coming in bulk.
And the dockers in those days would sort of hang around and if ever there was a whole chunk of bananas that would fall would fall off the net. That would be nice to have. When I think of your Port Hamburg, which I visited last year, there's none of that anymore. Everything travels by containers. It's highly automatic.
Well, it's highly mechanically organised, electronically driven, and I think dockers never pick up a bunch of bananas on the bank. With money it's the same. There is an evolution that is underway. If you look at you know, if you think about how you pay many things, it doesn't involve coins or banknotes. You will use your phone, you will use electronically supported devices, and you will use a payment infrastructure that helps you move your money around when you want to buy something.
So we have to prepare for that future, and we have to, you know, be sovereign in that respect as well. Which is why we should continue to develop and eventually launch, if it is the decision of the governing Council, a digital euro, which will be a digital version of cash. So that we can be the master of our destiny, both in terms of the media on which our currency travels, but also the infrastructure payment. So that we are not at the mercy of anyone who suddenly says, oh, you're not going to use my infrastructure anymore. I'm not sending you any gas, remember.
Does that mean that bank notes will go away? No, no. Because there are people and maybe some of you in the room who are quite happy to have a bank note in their pocket and there is no reason why it should go away. But I I don't want to lead an institution where eventually in a few years time people will turn around and say what have you been doing? We are now under attack by other currencies that are invading our space and we are at the mercy of somebody else, including possibly tech companies that we'll actually manage all that, thank you very much.
I don't want to do that. Neither neither does Joachim Nagle nor any of the members of the governing council. We just have to stand ready and to make sure that we are resilient. As we have said, how many, by the way, how many? How many of you use, you know, on a daily basis, Banknotes and coins.
Hands up. So you see it's about a good third half. So you should not be deprived of your preference for cash or coins, bank notes or coins. But all the others who have not raised their hands, they probably either don't pay ever for anything which is not, or they use other devices. So we have to to be prepared for that.
We have by the way several workshops on that topic, even later on with Neil and Julian from the Bundesbank. They are experts and the workshop is called 1 or 1000 Silence Merkel Kaiten and also tomorrow with Mr. Biles about the digital hero. So now the next question that was the first hand. You were quick, you get the mic with the glasses I run there.
Thank you very much for taking the time to answering our questions. My name is Kaston and I wanted to ask about the concretization of the EC BS secondary mandate. Yeah, exactly. How do you see the process going, particularly with regards to the climate crisis and trade-offs with the labour policy? And building on that, what would be the expectations for fiscal policy?
You must have prepared your question. It's not of the cuff. So I don't know how many of you in the room know the distinction between primary and secondary objectives, but I'll try to explain very quickly. Obviously, you know, the European Central Bank was given a mandate by the Europeans and that is embedded in the treaty. Those are the the rules by which we have to abide and that we have to comply with.
And in those rules, we were given a primary objective and that objective is price stability. So that that's our mantra. That's if you, if you hear any of us say we're here to procure or restore or maintain price stability, we're just doing our job. So we have a single mandate, if you will, as opposed to other central banks which have sometimes a dual mandate. But the Treaty went a bit further and mentioned that, and those two words are critically important for those of you who have legal background.
It says without prejudice to the first objective, price stability, the European Central Bank will also support the economic policies and other policies determined by the European Union. So what this without prejudice means is that if there is a choice between the two objectives and they contradict, we have to respect and follow and comply with the first objective. But provided that the first objective is complied with and respected, if there is a way to deliver on this primary objective which is also in compliance with the 2nd objective, that is perfectly fine and legitimate. As a result of that, and with always our mind on the primary objective of price stability, we have to be informed, mindful and respectful of the economic policies that are decided by the European Union, by the appropriate institutions, meaning Parliament, Commission, Council. And it's pretty obvious that the fight against climate change, the protection of the environment and its biodiversity are objectives that bring together the member States and under which they have agreed to comply with the Paris Agreement that was signed at COP 21.
So for us, what it means is that wherever we can and to the extent that it does not prejudice price stability, we have to think about how we can also deliver on those other objectives. And in that respect, we've decided in our strategy review that was completed in 2021 to include climate change in various dimensions. The first dimension which is probably the most visible at the moment is in the area of supervision, where under the supervision mandate that we have, which is conducted by the SSM, which is part of the ECB but separate in a way stress testing expectations by the bank that they will seek disclosures of their clients to appreciate what climate change policies and strategy they have is checked and verified. And we have the supervision arm of the ECB does that on an on a sort of escalation basis. So last year it was stress test and recommendation, this year it is identification of the shortfalls.
And next year it will be associated with more. And I think the the fit and proper test that is applied by the SSM whenever a new president or a new board member from a large systemic bank is appointed is also a time when this commitment to fight climate change and to respect the rules of the Paris agreement can be assessed the 2nd dimension. So that is that is supervision. The other two dimensions, and I'll be maybe a bit quicker so that they can be other questions are 1 risk management and 2 including the climate change consequences into our macroeconomic assessment. I'll give you an example.
When you have repeated flood, repeated droughts, massive fires, it does have an impact on harvest, on farming activity, on transportation and that has necessary economic consequences that we have to factor in. It's not very easy, but the our model experts are really working hard in trying to insert into the hypothesis events that haven't necessarily happened are in the process of happening but certainly will be a threat for the future. And in terms of risk management, we apply what we call a tilting mechanism to assess the value of bonds for instance that we take as collaterals in order to extend credit to banks. So in those three dimension, we try to integrate this aspect of the secondary objective without prejudice to the first objective.
OK. Now I think we could go back and to front there in the Reds. Yeah, you. Hey, we'll see that we get the the mic to you. Good morning, Miss Lagarde.
Good morning for.
All the answers and I'm interested in the topic of interest rates again well before. The Corona crisis, before the war in Ukraine, we had an era of really low interest rates in Europe. And we also saw, for example, in Switzerland, I guess, negative interest rates And well, if you go beyond Europe, also in Japan. And do you think there is a chance that after we have successfully fought inflation that we will go back to this era? As some economists argue that one of the reasons for this development is demographic change, yes.
And we can see that what's happening in Europe in terms of demographics. And my my question is what is your view on this issue?
Thank you. Thank you very much. I don't think you have to go to Japan or to Switzerland to remember that there were negative rates. There were negative rates in Europe as well. I remember some three years ago, one of the rates, the most often used, the DFR, was at -50 basis point, which is -0.5 and we have moved away from that promptly in order to fight inflation.
The question you ask, I don't have the answer. The jury is out. There are many economists who believe that what they call R Star, which is this interest rate, which is at the level where there is good equilibrium throughout the economy. Many believe that R Star has gone up from where it was and that as a result, particularly if our productivity can be improved and we can be more competitive, the interest rate will be higher than where they were during that negative rate. But I'm not going to, you know, pass judgement on that.
I think that they, they have very good elements to argue for that equilibrium rate to be higher than where it was, which would as a result bring our interest rates higher than where they were. But future will tell.
OK. Then I just, I make our microphone people walk. Maybe we go to the very back the the last line.
Hi, I'm Max, my question. Hi Max. Where are you? I can't see you. OK, yeah.
My question is, in your strategy review 2021, you wrote that there's little value in using the quantitative theory of money because the correlation between the money supply and inflation is not big. And do you think that was the mistakes that because the inflation is so high now, the money supply grew so large during the Corona pandemic. I think the money supply grew large way before the pandemic. I think quantitative easing was a time when money supply increased significantly and during the pandemic, when we decided to do the Pandemic emergency Programme as well as the targeted Long Term Refinancing Operation. It was intended to just keep the economy afloat and make sure that we didn't have a collapse of European economies.
I think that the observation of the size of the monetary mass in its various dimensions is something that was less relevant for a period of time. I don't think that we ever ignored it. If you look at the work that we do and if you look at the monetary policy statements, there was always a reference to that and we always look at how much it grows, in which conditions, at which rhythm. So this is part of the of the work that we do and the observations that we make. But you know this is, this is something that will be continued, but it's integrated in the overall analysis that we conduct and we do not as was the case in the past, some you know 40 years ago less than that actually 20 years ago.
We do not single handedly look at that instrument to determine our monetary policy by way of interest rates or otherwise. So it's one of the components that we look into and we do that on a on a consolidated basis with the rest of the analysis.
OK, I have. I'm looking where the mics are. So maybe we get one question here. Maybe they're in the corner.
I'm Max as well. Oh, hello, Max. He's jumping any other Max in the room? Yes, Yes, I have one question regarding the inflation rate. We always treat 2% as God-given or something like that.
But why is it not zero and why is deflation so bad, especially in regard of climate change? I would say if we have, if the value of money is getting higher with the time, we would spend the money only for the things that we that we really need and buy less junk. So I would say a small deflation could also help help in the fight against against the climate change or is it or what do you think about that? I think the 2% is a is a really interesting question actually because if you ask anybody in the supermarket or anywhere if you buy a car for instance, if, if you do that or if you buy anything, why would a price increase of 2% every year be actually good, Why not keep it at 0. And I think the reasons why it was decided that 2% was actually the right number.
I think what there were several, but one that I I know of for sure is that we were not particularly confident and confident and certain about our statistic apparel at the time And we thought that those, those who decided at the time, but I'll I'll endorse the responsibility, but we decided that 2% was probably enough wiggle room to account for those errors and and inaccurate statistics when you you know check prices, That's number one. Number two, it was also considered that having that 2% wiggle room is actually helpful in order to negotiate salaries and to have these discussions with unions when it comes to increasing their their wages. I think the number 31 was I guess given by Alan Greenspan when he was chair of the Fed and where he recommended that 2% it had been set in New Zealand because that's where the inflation targeting was first set. And I think New Zealand had 2% as well, but it was validated by by the Fed and Greenspan arguably said 2% nobody will notice and it gives that wiggle room for wage negotiations for statistical errors and to accommodate for some growth. So those are those are I was told and and I read the reasons why 2% was selected.
Now your other question is from is far deeper. Why is deflation bad? Because it's essentially it, it acts it, it is counter growth productive if you will because if you think that prices are moving down, will continue to move down, then of course you don't buy, you wait until they move down and they move down further and they move down again and eventually consumption drops. Now that's a goal that is pursued by some, I don't know how with that goal you resolve many other issues because then you stop having growth. And I know that a thesis that some have of having de croissants de growth, but how you accommodate that with more people on the planet, which is not great for climate change, I contend that.
And how do you do that with investing in the right technologies? How do you contend that with innovating where we should innovate in order to deal with the issues that we have? I'm not sure that I have the answers to that.
OK. Maybe where's Aaron? Aaron is with the mic there. I'm wondering if we have another woman with a question not in your area. Aaron, what are you at there?
Or wasn't that? Yes, Sorry, it's hard. I don't want to call out people by their appearance, but also don't have the names. Hi, my name is Teresa. And yeah, the last three months, four months, six months, I don't know.
I studied very hard the digital euro. So it's my special topic and I'm really interested how the position of the classic banks such as corporate and yeah, saving banks will develop, then the digital euro will be introduced. So I think my personal opinion is that it would be a good opportunity to, yeah, have new. Services, innovative services for the customers. But most banks are really, yeah, have much anxiety and to know know how to react to this topic.
So I want to ask you, what do you think? Is there are there threats or more opportunities for the banks?
Fantastic question by the way. I think you're doing the right thing by focusing on on these issues and I'm sure you'll find a job easily. So is it more of an opportunity or more of a threat? I'm definitely in the camp of those who say that it's an opportunity including for banks in in the work that we have done so far within the euro system, banks are some of the financial intermediaries who will be distributing the digital euro. We at the ECB are not going to open a bank account for the 360 million Europeans.
It's not our business. We don't know how to do that. We don't manage relationships, but banks do that. So they really have to embrace that project and see how they can deliver on the promise that we make which is that the digital euro properly supported, will be user friendly, will be cheaper, will be faster, will work online and offline. And if they if they embrace the project, they can develop much further the relationships that they have with their customers.
They can offer additional products, customers might use them, might not use them, but they should not regard that as a threat. Now the, you know it's it's work in progress. As you know, there is a piece of legislation that is pending at the moment at the European Parliament, which has been tabled by the Commission and I am sure because if you're working on that, it's it's something that will be of interest to you. There will be a lot of lobbying efforts to make it as innocuous, unhelpful and popular as possible by some not not by, you know, everyone. But what I know for instance is that consumers association in the in the the reaching out that we have conducted so far are very supportive and they want to see it come out as the promise that I have just mentioned.
OK. Now let's go back to Jakob with the mic, maybe just pass it right there. Yeah, just Copenhagen on the mic or was it sorry, it's wondering you go first and then comes. OK. Thank you very much.
OK. Hi. So my name is Frederica. First of all, thank you very much that you're here today. I guess you've faced many challenges in your career like sovereign debt crisis, the Corona pandemic.
May I ask what was the biggest one or the most challenging one and why?
Thank you for asking and now I have to ask myself, you know, I guess and that's that's very much part of how I I I think we can work Better Together. I I, I think that we can resolve the most difficult issues if we work as a team. As I said, I do not believe that you know single handedly a superhero can fix problems. It has to be done by teams, and I think I've always felt comfortable since I've been president of the ECB that we can work out issues because we work as a team. When I felt most uncomfortable, because I I feared that the team would break up, is when the sovereign debt crisis in Europe led to country is being on the verge of leaving the euro area.
And I think that was a moment when the team players who were the member state leaders were not forming A-Team anymore. You had divisions, you had different views, you had vested interests, you had political imperatives. There was a mix of the domestic frontier and the European dimension. And I think it was thanks to the, the vision of two or three leaders that we all collectively escaped what would have been then, in my view, the breakup of the euro area. At that point, I was really, really concerned and worried.
Yeah. Thank you. Thanks. So, yeah, I'm Vitas and thank you for giving me some time to ask to think about which question I'm actually going to ask. So, oh, you didn't have a question then.
I have several questions, but I had to decide which which of the three. So I would be most interested in how do you see the issue of Geo economic fragmentation and sort of having read the C BS reports on that, I'll be mostly interested what bigger role does it play internally and how much uncertainty in your thinking is associated with that? Oh, that's that's a a really important question. So what you what we all tend to call geopolitical fragmentation is this new landscape where certain countries regard other countries with which they have done a lot of trading in the past as not only competitors but possibly more than that. And a world where the sort of binary relationship is breaking down into multiple relationships, which leads to fragmentation.
And that was clearly and obviously the case after the unjustifiable attack of Russia against Ukraine. It it it had developed over the course of time. I tend to think that the war in Syria was one of the triggers which led in many countries to question whether the economic order was going to continue and stand. But I think it has been accelerated since not 2014 when Russia invaded Crimea, which it could have, but more recently February 2022. And that has political consequences, society consequences.
And I'm not going to, you know, comment on those because I have to stay at my place. But it has economic consequences of of real magnitude. And it it does question the validity of some business and economic models that were set up. I say business and economic models because there were quite a lot of corporates around the world. Which had organised their supply chain in such a way that they were really going for the cheapest, the most efficient and rapid fragmentation of their supply chain.
Because they relied on a world that was essentially ruled by WTO rules and the acceptance of the general principles of free movement of goods and services with limited tariffs. Now that was completely turned on its head, and it has implications for supply chains, for bottlenecks, for reorganising your industry, for resetting at both corporate level and at country level, the relationship and the supply chain around the world. What will be the consequences in terms of prices, for instance, in terms of costs? We are beginning to see it, but I think we will see more of it if this geopolitical fragmentation continue to be the rule of the game.
OK.
And maybe we go back to the centre or you can by the way it it it pains me to see that because I tell you as as part of my curriculum in public service, I was Minister of Trade for two for a little over two years. And I could see the benefit of trade. And I could see how, you know, when I was taking French companies abroad to sell their products or to source products and to better organise themselves, it was phenomenally beneficial to have to have trade with the rules of the game, respected by all players. Thank you. Hello, I'm Vincent.
What's your opinion about crypto currencies? Thank you. You know what we have seen in the last nine months or so with Terra, with Luna, with FTX, with now Binance, I think proves the point that cryptos are a highly speculative asset that people may want to invest if they're prepared to lose it all, but can also be used as a very evil device to pay for an account for transactions that are otherwise criminally sanctioned and not acceptable. So I have, as you can tell, a very low opinion of cryptos. I also, I'm also concerned about the the level of bias and sometimes expression of hatred that is associated with the crypto community.
People are free to, you know, invest the money where they want. People are free to speculate as much as they want. People should not be free to participate in criminally sanctioned trade and businesses, and they should not be insulting those who actually argue this. Now I know I'm looking at my communication director. He knows that in the next three hours I will be bombarded with horrible and nasty X slash tweets and and other things.
But I still believe what I just said about crypto.
Have you had that?
And by the way, for those of you, by the way, I encourage you to really dig into the reasons why Binance has settled a claim with the Federal Supervision Agencies for $3 billion. It's a settlement. And why BT has actually resigned from his position. It's quite telling.
I was about to ask like, have you had that talk with your son yet? I read somewhere that one of your sons invested also in crypto.
Yes I did. Yes I did. How did that go? He ignored me royally, which is his privilege, and he lost almost all the money that he had invested. It wasn't a lot, but he lost it all.
He lost about 60% of it, so when I then had another talk with him about it, he reluctantly accepted that I was right.
We have another question. Your head was up very quickly and maybe Alan, you could go there. Yeah.
Hi. I'm Freddie. And now I'm not quite sure anymore whether my question is really a good question, but it doesn't matter. There's no bad question. I've listened to the ECB podcast and you made it sound like you've only met nice people.
But I thought you must have met some people who are very, let's say self confident and have strong opinions. And you might feel like they might be rightly self confident, but you have a different opinion and you exchange arguments with them and at some point you feel like they are being stubborn and that arguments won't help. And right now I feel like you already had that talk with your son and it didn't go well. But I would say considering your position, most of the time it seems like your strategy worked and maybe you cannot show us all your cards. But what do you do when you have exchanged arguments and you are convinced that you are right but the other one is being stubborn and doesn't do what you think is right?
Thanks. That's a really good question. Actually, I I think as because we we care about democracy and because I think that part of democracy is having a constant dialogue and not necessarily being in agreement with each other. I would say that when I face those situations, I try to to expose my case, to argue my case, to identify what the assets of the arguments are. But more importantly, what I always do is I try to listen to the other side and once we have exchanged long enough and I can tell that I'm not convincing the person, then you know, I rest my case.
There's no point, you know, spending time that you know is going to be wasted because the other side simply will not agree. But the beauty of democracy is that when you operate an institution, there are rules, and at some point the rule of the majority wins. But it's your responsibility, in my view, if you're part of that institution and if you're part of democracy and you respect the principles, to listen to the other side's argument to expose your position. And then the rules will decide where where it goes. But by the way, at the end of that, unless it's a, it's a, you know, life or death issue.
But at the end of that exchange of views and possibly argument, you respect the person, whether you shake hand, whether you decide to, you know, talk about something else and have a cup of coffee or a glass of beer. But that has to take place.
Aaron, I have another question here in the 5th row, Lady in a Black Sweater.
Sorry, glass of wine is OK as well.
Hi, I'm Malaria. Over the last couple of days there's been a lot of very polarized discussion about the German debt break. Don't know if you've noticed it's. Well, very Polaris. Polaris.
And how far do you think that affects, like the European collective discussion about collective European debts, especially when facing crises like climate change or securitization right now? And in how far does this very fiscal discussion affect your monetary work?
Well, I will preface what I say with the fact that I don't want to interfere with a court decision and I don't want to really comment on a court decision in any member state. And yeah, that decision did not escape my attention though. Two things. One, I very much believe that charity begins at home. OK.
Second, it's an issue for us at the at the ECB because we have to, we have to forecast, we have to anticipate what fiscal space countries will have, what policies they will deploy and what is the likely economic result. Because it's important for us to understand what growth there will be, if any, and what inflation is likely to result from the economic circumstances. I mean, it's difficult enough when you don't have yet the rules of the game agreed at the European level. That's the fiscal governance that is being discussed at the moment. And I very much hope that the member states will find a solution before the end of the year so that we know, we know the framework in which they decide their policies.
But not to understand yet where Germany's budget will be next year is, is, is not helping us to do our projections. So I hope that solutions will be found. Germany's the largest. I'm a member of Europe, the largest euro area country. So I hope, I hope, I hope we will see a solution shortly.
I have one more question here. Someone with a beard very engagingly trying to get this mic.
Thanks tremendously. My name is David. My question pertains to that exact question. And giving the lack of fiscal capacity and the lack of fiscal union, do you see room for a bigger fiscal role for the ECB as a fiscal stabilizer? And what do you think of the prohibition of monetary financing?
Is it still a taboo or is it a dysfunctional taboo as a lot of politicians as well as academia, Anglo American academia advocates. Thanks very much. Thank you for your question. One is the central bank is in charge of monetary policy and should not have a fiscal role. Fiscal is for finance ministers.
Fiscal is one day maybe for a finance minister or a ring of finance ministers who will decide collectively A fiscal policy for the euro area. That would be one of the three items where I think that work needs to be completed or pursued. And we have said that in legal opinions in relation to fiscal governance by saying that some fiscal capacity might be in order, particularly when collective projects such as European defence, such as the fight against climate change and various other areas are in our joint interest. But this is not for us, European Central Bank nor any of the central banks in my view, to decide. It's it's for governments.
It's not our responsibility. And on the other one, yeah, monetary financing is not something that that we do and this is verboten, so.
Important German word and we have a question here in the 2nd row. Alan, maybe you could. Thank you so much. My name is also Valeria. So I started my professional career working in crypto and now I transition to detailed Euro and digitalisation of monies, right, either public or private.
My question, and it's a question that I it comes a lot from many of my ex colleagues to me now working on the topic of the evil Euro. It's about privacy and surveillance. What would you say to those that state we are not trusting in the digital euro because it's a tool of surveillance in European Society, but it's also referring to what China has been doing, what their currency? I always answer the trust is the base of any relationship and you need to trust your institutions. If not, you're not part of our.
Democracy. What is your answer?
I think your answer is terrific. Trust is at at the heart of everything that we build together, that we do together. In addition to that, I think that we in Europe, sometimes we're blamed for it, by the way, but we in Europe have built enough of rules and laws. I'm thinking about the Data Protection Act, for instance, exactly, which are intended precisely to protect the privacy, to protect the data, and to make sure that there is no abuse of such data. If I look around the world, you know be it China, be it the United States, be it other countries around the world, I think that we rank first in the world in terms of protection of data, regulated use of data to which you give consent or not and you can as a result protect your data and protection of our privacy.
So you know, when I mean you do that as well, you press accept, accept because it's faster and if you press reject or only accept some then the service will be slower and so on and so forth. What does that mean? It means that you data delivered by the use that you make of certain applications or other devices is going to be collected somewhere and is going to be monetised somehow. This is not something that the central Bank of any member of the European Union would do if the law, if and when the law is passed concerning the digital euro, and there are barriers and mechanisms that protect our data and our privacy.
Thank you so much. Thank you. OK, our time is always up. I would give one last question right there in the middle where you could go give the green mic to the girl in the jacket. Hi, I'm Angelina.
Hi, I'm a sustainability consultant and I have a very short question. My question is in what way can the economy be affected if no one takes care of climate change?
Well, I said eight years ago in Davos that if we don't do everything we can, we will be toasted, roasted and grilled. That is still my view. When you look at temperature, when you look at the catastrophic weather developments that have taken place, that's the future towards which we are going, which is why it is the prime responsibility of government, of Parliament to actually take the necessary action to prevent our planet from heading in that direction. And everybody else, you and all of us included, have to see within the parameters of our mandate and our requirements, how we can help. But the prime responsibility is with governments and with parliaments and I would caution you all against developments that we are seeing of.
Well, isn't that a bit too much? Shouldn't we be a little bit tired of all these regulations? Is it so important to have green policies? It's it's happening in front of us. It's not a long term risk over there.
It's in development and it's coming at us. But let's not forget where the responsibility lies and who can move the needle? Governments, parliaments have the prime responsibility to do that.
Can I maybe add a last question just to that, because many people here in the room don't have quite that responsibility yet. They are not in these top positions that we were talking about very early in our session. So what would be your advice to people here in the room, to us who want to make a difference but don't have the power yet? How can we?
You know, we can all make a difference in in, you know, in very small ways, but small ways multiplied by so many of us actually move the needle. I know it's going to be trivial and I'll be, I'll be chastised if I start going through the list. But the way in which you brush your teeth, the way in which you take a shower, the way in which you turn off your computer, the way in which you turn the light off when you finished working, the way in which you select your transportation means all of that makes a difference. And I think it's just it's a cultural shift that that that we need to to have.
OK. Well then, thank you so much for taking the time, Madam Lagarde, for sharing these insights and the ways you make decisions with us. Thank you. So brightest repertoire and frang It's been the journalist tricks for venetab. I'm Rahmat's wife Frank, and I know parking on the Android of the.
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