christian noyer : the euro area is getting stronger speech by mr christian noyer, governor of the bank of france and chairman of the board of directors of the bank for international settlements, at the paris europlace international financial forum, “ post - crisis growth and investment opportunities in europe ”, new york, 22 april 2013. * * * mr chairman, ladies and gentlemen, i am very pleased to have this opportunity to speak to you here in new york. i ’ d like to offer you some views about the euro area from both a short - and long - term perspective. i ’ ll start with cyprus. this was certainly a traumatic episode. obviously, the decision process was not optimal. and the adjustment effort requested from the country, while absolutely necessary, was totally unexpected by the population. as a result, many observers have interpreted the cyprus crisis as a sign of fragility and uncertainty about the euro. in fact, it ’ s quite the opposite. imagine if the situation in cyprus had occurred nine months ago. most likely it would have resulted in a new wave of turbulence in euro sovereign markets, with interest rate increases and strong capital flows out of the periphery. this was not the case. there was no contagion, and no spill - over effects from cyprus to other euro area countries. during the first quarter of 2013, when the cyprus crisis developed, long - term interest rates in greece, portugal and ireland actually declined by around 270, 120 and 130 bps, respectively. in the case of spain, yields decreased by 70 bps, while in italy, they decreased by 30 bps. this is the first time in three years that a major crisis in one euro area country has not affected others. this sends an important message. the euro area is more robust today than it was a year ago. while challenges remain, the actions taken have increased our resilience to internal and external shocks. before i move on to other areas of progress, i would like to say a few more words on cyprus. first, the financial support provided by the euro area countries and the imf was very substantial, up to eur 10, 000 for every cypriot citizen. this should put to rest the claims that the country was unfairly treated and discriminated against. second, the commitment to protect insured depositors has been maintained in the euro area and, in fact, is strengthened as a result of recent events. last but not least : cyprus is a unique case

aim to ensure that the monetary policy transmission mechanism is working. let us now turn to fiscal policy. in all advanced countries, and primarily in the us, the fiscal stance is being hotly debated. as we all know since musgrave has introduced his famous distinction, fiscal policy has three dimensions : stabilization, allocation and distribution. in a post crisis environment, governments are struggling to find the right mix. today, what constitutes a “ growth - friendly ” fiscal policy? discussion has sometimes focused on the stabilization aspect, and more specifically, on one important, but limited feature : the so - called “ fiscal multipliers ” which are set out to measure the impact of a change in the fiscal balance on gdp. this narrow standpoint focuses on the negative impacts of fiscal consolidation, especially when the output gap is significantly negative, as is now the case. however, we need to take a broader perspective and take into account the effects of fiscal policy on consumer and investment confidence as well as on the efficient allocation of resources. where could the gains come from? to answer this question, it is important to consider the interactions between the fiscal stance and debt markets. surely, a growthfriendly strategy is one that minimizes the risks of major financial disruptions in the future, that does not impede the smooth functioning of financial intermediation and that does not block the transmission of monetary policy. in several countries of the euro area, sovereign spreads are still at penalizing levels. in so - called “ core ” countries, including france, the situation is different with historically low interest rates. while, in some cases, this reflects the consolidation achieved in fiscal accounts, there are also other temporary factors at work. low interest rates are the product of low growth expectations in the short run ; and they also result from exceptionally accommodative global monetary and liquidity conditions. this environment offers a unique window of opportunity to consolidate and bring public debt to a more appropriate level. ultimately, growth in the euro area will depend on the ability to undertake the necessary structural reforms and enhance competitiveness. the euro area, like all advanced economies is facing a double challenge. first, it must absorb the consequences of the crisis, resorb financial imbalances, eliminate excessive indebtedness and restore the normal functioning of capital markets. and second, it must adjust to the deep changes taking place in the world economy. looking past current difficulties, it is clear that the euro area is well equipped to confront