christine lagarde : remarks on the occasion of receiving the grand prix de l ’ economie 2019 from les echos speech by ms christine lagarde, president of the european central bank, at the " grand prix de l ’ economie des echos pour l ’ annee 2019 ", paris, 5 february 2020. * * * it ’ s a great honour to be awarded this prize, and to receive it in the presence of so many leading figures from the french business community. the environment facing european business today is characterised by both uncertainty in the short term and a changing landscape in the longer term. the short - term uncertainties are mainly related to global risks – trade, geopolitical and now the outbreak of the coronavirus and its potential effect on global growth. over the last two years, the euro area economy has been quite resilient to global shocks, with our accommodative monetary policy supporting employment and consumption. and, though gdp growth in the last quarter was weak, it was broadly in line with our expectations. but while the threat of a trade war between the united states and china appears to have receded, the coronavirus adds a new layer of uncertainty. so we ’ re continuing to monitor closely how these risks develop and how they feed into our central scenario for the economy. in the face of these uncertainties, the ecb ’ s forward guidance on interest rates and asset purchases acts as an effective automatic stabiliser. the longer - term picture is different. ambitious proposals are gathering momentum within europe today and look set to profoundly reshape the environment for business. in particular, two big ambitions are pervading many aspects of policymaking in ways that create change, but also opportunity : the goal to build real “ european autonomy ” ; and the aim to urgently fight the consequences of climate change. i know that, as business leaders, you naturally seek the new opportunities that emerge for your companies in such times. so i ’ d like today to talk about how i see these ambitions evolving, and where they intersect with the tasks and priorities of the ecb. european autonomy we all have a sense of the world around us moving more quickly. the post - war global order is fracturing, tensions between great powers are rising and technological change is transforming the way we produce, distribute and consume. this environment clearly exposes europe to new types of risk, as demonstrated today, for example, by the turn towards protectionist policies and

in the expected path from “ a ” to “ b ”. the “ be ” path ( the yellow line ) illustrates a transition path of inflation that is even lower than originally envisaged. by providing additional monetary policy accommodation, the central bank can aim towards the upper region of the “ bcde ” zone, so that the adjustment is closer to the “ bcd ” path. chart 6 shows a stylised sketch of the choice facing the ecb in terms of the monetary stance. before the onset of the pandemic, inflation was expected to rise gradually towards the inflation aim, represented by the “ ad ” path ( the blue line ). the initial negative impact of the pandemic shock – in the absence of additional monetary policy accommodation – is captured by the downward shift in the expected path ( the drop from “ a ” to “ b ” ). one option would be to simply accept that convergence to the inflation aim will take more time and that inflation will be even lower than originally envisaged during the transition path, as illustrated by the “ be ” path ( the yellow line ). however, this option is costly in terms of the implied higher path for real interest rates and the slower economic recovery that results. it is also risky, since a longer phase of even lower inflation might become entrenched and contribute to a downward drift in inflation expectations, which would make it even more difficult to deliver the inflation aim over the medium term. a substantial weight should be attached to these risks in the context of the euro area, in view of the already - low pre - pandemic inflation rate and the long interval of below - target inflation. it follows that, for the ecb to deliver on its mandate, the more effective and safer option is to aim towards the upper region of the “ bcde ” zone by providing additional monetary stimulus, so that the adjustment is closer to the “ bcd ” path. this is the line of reasoning behind the design of the pepp, with a temporary phase of additional asset purchases intended to restore momentum to inflation dynamics. accordingly, the monetary policy challenge consists of two stages. the first stage is to counteract the negative shock to the expected inflation path caused by the pandemic : through an intense temporary phase of additional monetary accommodation, the pepp ( in combination with the other monetary policy instruments ) is designed to accomplish this first - stage task. once the negative shock has been sufficiently offset, the second stage is to ensure that