frank elderson : the european central bank's monetary policy strategy - delivering our mandate in all circumstances keynote speech by mr frank elderson, member of the executive board of the european central bank and vice - chair of the supervisory board of the ecb, at the european parliament conference on " greening monetary policy in times of soaring inflation ", brussels, 28 september 2022. * * * many thanks for giving me the opportunity to deliver the introductory remarks at this conference on greening monetary policy at a time when inflation is far too high. although i am delivering these remarks remotely, it is always a privilege to speak directly to you, the elected representatives of europe's citizens, the very same citizens – served by eu institutions, including the european central bank – who are united in their commitment to foster peace and stability in their part of the world, even when that very world is subject to significant transformation and upheaval. the pandemic and the war have shaken the environment in which the eu must address the vital challenges that it faces, including the ongoing climate and environmental crises. since russia's unprovoked invasion of ukraine, the global economic outlook has become much less favourable. having said that, the invasion has not shaken the eu's resolve to address the challenges faced. in actual fact, the war and the ensuing energy crisis have only served to increase eu authorities'determination to reduce the bloc's dependence on fossil energy sources. even if in the very near - term the energy crisis may cause an increase in non - gas fossil fuel being used, the likelihood of a timely and orderly transition towards a low - carbon economy consistent with the eu's commitment to the paris agreement has increased. that being said, another record - breaking summer has confirmed that physical risks of climate change and environmental degradation are materialising ever more frequently, which will add to the risk of increased macroeconomic volatility until the transition has been completed. when the boat we all share is rocked to such an extent by external forces, we need to be able to count on internal anchors of stability. the ecb provides one of those crucial internal anchors by pursuing its mandate of maintaining price stability in the euro area as laid down in the treaty on the functioning of the european union. in line with that mandate, our primary concern is, as always, our primary objective : price stability. inflation is currently far too high. the shocks that are hitting the euro area economy have not only led to a turning

were not foreseen before 1999 – and that also need to be addressed through common solutions. hence, the banking union we are aiming for today goes beyond purely banking supervision : in my view it must comprise five elements. first, a single rulebook for banks. second, a single framework for banking supervision. third, a single mechanism for resolving banks, funded by levies on the sector itself. fourth, a common backstop in case temporary fiscal support is needed. fifth, a common system for deposit protection. harold james, making the european monetary union, pp. 313 – 315. padoa - schioppa, t., “ emu and banking supervision ” lecture in the london school of economics, on 24 feb 1999. bis central bankers ’ speeches how would banking union have helped during the crisis? to illustrate why these elements are so important, it is helpful to think through how a genuine banking union in europe could have helped both prevent and mitigate the crisis. preventing the crisis turning first to prevention, one of the key causes of the crisis was the unacknowledged buildup of large private financial imbalances in the period from 1999 to 2008. they were unacknowledged because the governance framework that existed in europe was focused exclusively on fiscal policies via the stability and growth pact. this reflected the prevailing belief at the time that the private sector was composed of fully rational agents and was essentially stable and self - correcting – hence only the public sector could create instability. this was of course a fiction : the private sector was where some of the largest imbalances were concentrated. between 1999 and 2007, the ratio of public sector debt to gdp in emu declined on average by around 6 percentage points – while the ratio of private sector debt to gdp increased by almost 27 percentage points. to give just one example, in spain the ratio of private sector debt to gdp increased by around 75 per cent, while the ratio of public debt to gdp fell by around 35 per cent. the key point for this discussion was that all of these private flows were being intermediated by the banking sector, which had become much more integrated as a result of monetary union. hence the official bodies best placed to identify these growing risks, and act to prevent them, were national bank supervisors both in lending and borrowing countries. however, they lacked both the cross - border perspective and also the instruments to do so. after all, their mandates were national and did not extend to systemic risks building