, a quick implementation of this european recovery fund is an economic must. this innovation, while still a one - off, could also imply lessons for the economic and monetary union, which from the start has lacked a permanent fiscal capacity at supranational level for macroeconomic stabilisation in deep crises. either we succeed in designing – at end – credible and coordinated countercyclical rules for national fiscal policies, or we should think about some 4 / 5 bis central bankers'speeches central fiscal capacity, reversible in its use, controllable in its size, but effective through the cycle. this should be one area of discussion in the “ european momentum ” which the crisis has initiated. thank you for your attention. 1 article 3. 3 of the treaty on the european union. 2 article 127. 5 of the treaty on the functioning of the european union. 3 the monetary policy strategy review : some preliminary considerations, speech by christine lagarde, president of the ecb, at the “ ecb and its watchers xxi ” conference, 30 september 2020 4 www. banque - france. fr / sites / default / files / medias / documents / 2020. 05. 25 _ sep _ en _ cl. pdf see blanchard & summers ( 2020 ), automatic stabilizers in a low - rate environment, aea papers and proceedings, vol 110, may. 5 / 5 bis central bankers'speeches

francois villeroy de galhau : central banks ’ response to the “ tragedy on the horizon ” speech by mr francois villeroy de galhau, governor of the bank of france, at the suerf – online conference, 14 october 2020. * * * ladies and gentlemen, i am very happy to join you today for this discussion that, although virtual, will be very real in terms of the strength of the ideas put forward. i am grateful to michala marcussen for offering me the opportunity to give this speech on such a dense topic : central banks ’ response to the “ tragedy on the horizon ”. faced with an unpredictable shock, the past eight months have driven the global economy into uncharted territory. however, one danger is certainly looming larger at the moment : our lasting addiction to public debt. let me be clear : in the face of the unprecedented covid - shock, a massive and one - off recourse to public debt financing was both inevitable and desirable. however, we have entered this crisis with public debt levels, which were already very high in most countries, with few notable exceptions. the continuous rise of public debt, along with climate change, represent two of the main long - run challenges that we face today. in his famous 2015 speech, mark carney spoke of climate change as the “ tragedy of the horizon ”. with this, he meant that this tragedy is inevitable if we do not act, but it is in the long term, possibly leading to a “ status quo bias ”. public debt is of a somewhat different nature : we do not know if nor when the tragedy – a major confidence shock, for instance – may happen. but we know for sure that rising public debt is a growing risk hanging over us, and still more over our children and grandchildren. let us therefore call it a “ tragedy on the horizon ” : a moving horizon – indeed nobody knows precisely where geographically the horizon lies –, but it will not be any less threatening. so what would our best response to this possible tragedy on the horizon be? and what can we do to avoid it? let me elaborate somewhat on a simple triptych ( i ) monetary policy ( ii ) fiscal policy and ( iii ) their renewed interactions. i. monetary policy and the ecb mandate in order to address this unprecedented covid crisis, the ecb acted boldly and rapidly, using all the tools at our disposal and inventing new ones such as the pepp. by doing