Both its independence and ability to fulfill its mandate are guaranteed even in very adverse economic circumstances. While it should not lead to complacency and negligence, the existence of such buffers should alleviate any concerns about the potential risks that the expansion of the balance sheet may entail. Finally, huge Central Banks’ balance sheets may be seen as influencing the allocation of resources, or effecting implicit fiscal transfers, an issue of special sensitivity inside the euro area. To discuss this question, it is useful to refer to the famous Musgrave classification of public policies between three purposes: allocation, distribution and stabilization. There is no doubt that monetary policy is only and exclusively concerned with stabilization – and a very focused part of it : price stability. No monetary policy action should be taken for any other purpose. So to the extent that “unconventional” tools are implemented, there should be no ambiguity as to their close link with the Central Bank’s mandate of price stability. I believe that has been the case in all major countries and certainly so in the Eurozone. 4. How to mitigate unintended consequences? The truth is, however, that the real world does not always fit perfectly with the beauty of Musgrave’s classification. Some public policies may aim at several objectives. Others may inadvertently, have unintended side effects. All public policies with no exception, health, energy, infrastructures, unwillingly affect some citizens more than others. Those side effects should be minimized, but cannot always be totally avoided.

It is also important to note that unwanted side effects can be minimized if different public authorities operate in a well-defined and respected framework. We have such a framework in  BIS central bankers’ speeches  3  the Eurozone. It is based on fiscal discipline leading to debt reduction. If those disciplines are not respected or implemented with insufficient vigilance, then monetary policy through public sector debt securities purchases may be perceived as creating strong moral hazard, thereby weakening the necessary consensus and compromising its efficiency. When fiscal transfers take place between countries of the Eurozone, they are implemented through mutually agreed and conditional programs. There are permanent temptations to blur the distinction between those fiscal programs and the monetary and liquidity operations of the Central Bank. Those temptations should be resisted. This is the reason why the Eurosystem has been extremely rigorous in implementing its collateral rules in a transparent and neutral way. Let me conclude. Unconventional monetary policies are necessary but complex. They create more interference with markets than policies conducted in ordinary times. As a consequence, it becomes more difficult to avoid unintended spillovers of stabilization policies on the allocation and distribution of resources. This reality should not prevent Central Banks from acting decisively when there are risks for price stability. But such actions demand rigor and precision in their implementation. For Central Banks, their balance sheet has become the main tool of monetary policy for the foreseeable future. It has proven effective.