is efficient in combining clarity about the sequencing – full reinvestments will last for an extended period after a first rate - hike – and flexibility about the timing of each step. consequently, financial markets tend to adapt their calendar expectations – and hence financial conditions – to the perceived outlook : our chained guidance already provides some stabilisation function, without prejudice to our future decisions. beside flexibility in the calendar, let me stress another capacity of our monetary policy : pragmatism in its intensity, thanks to the powerful “ trio ” of instruments at our disposal : the reinvestments of assets, interest rates and liquidity. concerning this third instrument ( provision of liquidity ), everybody is aware of the forthcoming expiry of the tltro - 2 programme, starting in june 2020. the governing council will decide about this in due time, with two prerequisites. as mario draghi stressed, “ there should be a good case for monetary policy ” 7 for the euro area as a whole : our policy cannot be designed according to the specific needs of some banks or jurisdictions. and secondly, we should look at the whole spectrum of possible tools, including various forms of ltro, to decide about the recalibration of conditions and maturities. regarding interest rates, i have often stressed in the past the usefulness but also the obvious limits of negative interest rates. let me quote what i said as early as 2017 : “ they are difficult to accept by households and smes, and so impossible in practice to pass through to them ” 8. and thus they are believed by many, if maintained for too long, to weigh negatively on the profitability of financial intermediation with possible adverse consequences for the smooth transmission of monetary policy. hence, if we had to use negative rates for a longer period than expected, we should study pragmatically how to contain their possible adverse effects on the bank transmission of our monetary policy. 3. relentless efforts towards a stronger europe let me come back to the european spirit i pleaded for. today, it is also an economic requirement : faced with the slowdown and the uncertainties, monetary policy cannot be the only game in town. this is a german worry i fully share with many others. but then, we need to push relentlessly for a strengthening of our economic union. the commitment of mario centeno, as chairman of the eurogroup, is essential. the advances made by the european council in december 2018 are a step

bellagio event in paris – 11 january 2024 international monetary spillovers : financial and intellectual linkages speech by francois villeroy de galhau, governor of the banque de france press contact : page 2 sur 6 it is a great pleasure to welcome the bellagio group in paris. the 80th anniversary of the d - day landings this year is an important reminder that american and european histories are so closely inter - twined. today this relation materialises through tight economic and financial linkages, the subject of my talk this afternoon. 1. financial interlinkages and global monetary policy spillovers in a globalized world, economies are linked through trade and financial flows. while these linkages help when domestic demand falters or domestic savings are scarce, they can also transmit adverse developments across borders. this is the essence of international risk sharing, which if taken to the limit would imply a common global cycle. due to global value chains, spillovers and comovements in goods production have indeed risen over recent decades. however, there is less commonality in the production of services. the rising share of services in overall production has offset the increased integration of goods, so that the co - movement of economic activity between countries has not increased. 1 the disruptions caused by covid and russia ’ s unjustified invasion of ukraine have shown the fragility of extended supply chains. noticeably, there had already been some retrenchment in globalization indicators following the great financial crisis, as shown in figure 1 ( slide 2 ). however, fewer spillovers do not necessarily imply less volatility. in autarky, countries depend entirely on their own industries and there is less ability to adjust to domestic shocks. on the financial side, the globalized economy features similar patterns. on the one hand, increased openness implies rising exposure to the global financial cycle 2. on the other hand, improved policy credibility and better monetary policy frameworks have allowed more countries to have freely floating exchange rates and independent monetary policy to meet domestic objectives. bonadio, b., huo, z., levchenko, a. a., & pandalai - nayar, n. ( 2023 ). globalization, structural change and international comovement, nber working paper # 31358 rey, h., ( 2013 ), dilemma not trilemma : the global cycle and monetary policy independence, proceedings - economic policy symposium jackson hole. page 3 sur 6 however, monetary policy