cutting, wage moderation ; long run : reforms to strengthen productivity growth. but every imbalance has two sides : surplus countries ( germany, netherlands, austria ) should strengthen domestic demand ( 2 ways ) : structural reforms to enhance investment ( ecb / bundesbank view ) ; income and tax policy to strengthen consumption ( ft view ) ; bis central bankers ’ speeches – otherwise, deflationary drag – could not be compensated by loosening monetary policy ( pushing on a rope ). crisis lesson : structural reforms go beyond proper functioning of markets. eliminate conditions that favor bubbles : imbalances, inequality and overindebtedness ; reflected in the new eu 2020 strategy : smart, sustainable and inclusive growth ; economic governance reform in the eu to address high degree of economic inter - dependence while preserving national responsibilities. van rompuy task force – 5 proposals ( accepted by european council ) : 1. 2. greater fiscal discipline : reinforce compliance of eu ’ s fiscal rules in euro area countries ; preemptive part of stability and growth pact ; focus on debt sustainability. broadening economic surveillance : new mechanism for macroeconomic surveillance ( annual assessment ) ; alert on risks of macroeconomic imbalances and vulnerabilities ; excessive imbalance procedure with sanctions ( including excessive surpluses? ) ; indicators to be specified. 3. deeper and broader coordination : european semester 4. robust framework for crisis management : 5. european stability mechanism ( esm ) to succeed rescue umbrella from 2013 on. part of a credible crisis resolution framework ; details in discussion by european council. stronger national institutions : new public institutions to provide independent analysis, assessments and forecasts on domestic fiscal policy matters. d. monetary policy : – internal and external stability : – price stability = primary objective ; = ( necessary but insufficient ) condition for stable exchange rate and balanced current account. inflation vs. deflation deflation no immediate concern in the euro area ; hicp in january 2011 : 2. 3 % ( energy, food and taxes ) ; hicp in february 2011 ( flash ) : 2. 4 % eurosystem forecast ( march ) for 2011 : between 2. 0 % and 2. 6 % ; bis central bankers ’ speeches – inflation expectations firmly anchored : below, but close to 2 % over the medium term ; risk : commodity prices ( wheat, oil, etc. ) ; but expansive monetary policy not inflationary – can easily be reversed! crisis lesson : monetary policy ’ s role ( jackson hole consensus ) : preserving

– foremost price stability, but also financial stability and other economic objectives. consequently, the ecb governing council has taken important climate - related decisions, i. e. decisions on monetary policy this summer, on the eurosystem ’ s non - monetary policy portfolios last winter and on the ecb ’ s supervisory duties much earlier. we do what we can – of course, within the limits of our mandate – not only because we must, but also because we want to contribute. one way how we could contribute most effectively is by fulfilling our role as an economic think tank, highlighting challenges and providing impartial advice on questions such as, what instruments to cut emissions are preferable : direct carbon taxation or emission trading or emission standards and other command and control regulation? nicholas stern helps us to answer this question with his famous sentence “ climate change is a result of the greatest market failure the world has seen. ” so, the answer would simply be to make the polluters pay. carbon pricing is technologically neutral and cost - efficient. however, there is also some room for command - andcontrol and financial regulation to tackle other market failures such as asymmetric information. there are two options to tag a price on “ bad ” technology or behavior : imposing a tax or establishing a cap - and - trade regime. in theory, the two options should deliver the same results, because quantities and prices determine each other, regardless of where you start from. and despite the beauty of an emission trading system resembling an ideal market, economists tend to prefer a tax. a tax is simple, provides easily accessible information and creates forward guidance for all economic agents. however, vested interests tend to hijack the debate and exploit the confusion about the variety of policy options. i fear a bazar might emerge, a bazar that may lead to inefficient measures and even have a taste of planned economy. however, i have to accept that we live in a real world where solutions are often second best. i am sure even friedrich hayek would have agreed that taking any climate action is preferable to doing nothing. after the keynote, we would like key players and stakeholders to get to talk to each other. therefore, we have invited high - level representatives from government, european and global institutions, business, finance, central banks, and rating agencies. we want to know from you what policy fields, policy mix and policy actors are best suited to reach the global net - zero goal.