francois villeroy de galhau : new ideas for europe speech by mr francois villeroy de galhau, governor of the bank of france, munich, 15 february 2018. * * * mr. prime minister, ministers, dr. theo waigel, ladies and gentlemen, it is an honour for me to speak here this evening, following on from my compatriot from the saarland, the finance minister, peter altmaier. i am 100 % french, but with family roots in germany that go back two centuries... and dr. altmaier even represents my town of saarlouis in the bundestag. however, all honour today goes to munich and to bavaria, and i would like to thank dr. theo waigel for so kindly inviting me. dr. waigel, you played a key role in the construction of our european currency. i would like to repeat the words that you used before the bundestag in april 1998 in anticipation of the transition to the third phase of our economic and monetary union : “ after two devastating and painful world wars, the european project is opening up opportunities to our children and grandchildren that our mothers and fathers, our ancestors, would never have dared dream of ". 1 twenty years later, we can state that monetary union is a success : 74 % of euro area citizens support the euro, and this figure is as high as 81 % in germany. the economic union on the other hand, has not yet fulfilled its potential. and that is a concern for two reasons. first, because even though the current economic cycle is in a very robust phase today, it will come to an end at some point. if we have not armed ourselves with stronger economic instruments by that time, there is a risk that monetary policy will be overburdened. this is a well - founded german worry that as a central banker i share entirely ; but it is for that very reason that i say to our german friends that they must aspire to an enhanced economic union. second, because the absence of a genuine economic union is holding the euro area back, at a time when we must stimulate growth to catch up our past lag, particularly vis - avis the united states, and address the radical technological transformation. the theme of this evening is “ new ideas for europe ". but to have new ideas, we must begin by putting the old cliches that are paralysing the debate behind us. that is what

, it would be both dangerous and illusory to want to change the rules – rather, let ’ s respect them. but at the same time, we should consider the quality of public spending : in order to boost potential growth, in the long term, expenditure on investment and on our future are vital, including on education and training and, of course, new technologies. this is true of national budgets, but we could amplify the effect through a euro area investment budget. this budget could be used to finance, for the benefit of all countries, certain “ common goods ” such as digital technology, energy transition, security, and external border protection. finally, my third idea begins with a question : how to deal with stabilisation? in other words, how to deal with the shocks that can have a brutal effect on certain national economies? private risk 2 / 3 bis central bankers'speeches sharing through the capital markets union and the financing union that i mentioned earlier, is part of the answer. in the united states for example, the stock market is capable of absorbing around 40 % of a state - specific shock. but that is not enough and it is absolutely vital that we go further still. otherwise monetary policy may bear too much of the burden during a future recession, which would be dangerous – monetary policy should not be the only game in town. in the euro area, we therefore need better economic policy coordination. countries will continue to be responsible for their economic policies, but we can aim for a better collective economic strategy with more reforms in countries where they are needed and with more fiscal or wage support in countries with room for manoeuvre. this collective strategy could be supplemented by enhancing the european stability mechanism to transform it into a european monetary fund ; this would require that the scope of its actions be expanded to include a genuine crisis prevention role and that its governance be amended. otherwise, it would be a simple change of window dressing. * * to conclude, i would like to mention another reason why 2018 must be europe ’ s year : our international environment, with the prospect of brexit and the presidency of mr. trump in the united states. confronted with the challenges of globalisation, europe ’ s twofold message is essential. first, our common social model – die soziale marktwirtschaft – combines a high level of public service, relatively low levels of inequality and a strong intensity of social dialogue ; it is the ideal response to the debate on inequality