speech europe as a common shield : protecting the euro area economy from global shocks keynote speech by fabio panetta, member of the executive board of the ecb, at the european parliament ’ s innovation day “ the eu in the world created by the ukraine war ” brussels, 1 july 2022 i am very pleased to be taking part in this event, even though i unfortunately cannot do so in person. i would like to thank european parliament secretary - general klaus welle for his kind invitation. as an eu institution, the ecb is accountable to the citizens of europe via the european parliament. and our two institutions have quickly learnt one of the key lessons of the covid - 19 crisis : physical distance need not imply intellectual distance. thanks to technology, since the outbreak of the pandemic i have participated in several virtual hearings of the committee on economic and monetary affairs to discuss the ecb ’ s work on a digital euro. the digital euro is a key innovation for serving the interests of europeans in a digital world. it would provide easy, costless and safe access to central bank money for daily digital payments, just as cash does for physical transactions today. co - legislators can ensure that the european union supports modernisation and progress in a way that is fully aligned with european values and interests. for the digital euro, they will legislate on key aspects such as the protection of privacy and legal tender status. but the digital euro is just one example. promoting socially desirable innovation does not only apply to technology. it also applies to institutions. we need to continuously modernise the “ technology ” that underpins the functioning of our union, from its governance to its economic architecture. this is crucial if we are to enhance our resilience to global shocks and safeguard european sovereignty. ultimately, this is about protecting our society and guaranteeing that it can continue to enjoy peace, freedom and prosperity in spite of the geo - economic disruptions that we are facing with russia ’ s aggression against ukraine, the commodity and energy price shock and the threats to international cooperation and multilateralism. if we are to overcome these formidable challenges, we must be united. the lesson of history is that when our actions are inspired by selfishness, and we waste our human, economic and political capital on fuelling internal disputes instead of solving them, we are defeating europe. we are dividing it, weakening its ability to face shocks and shape global outcomes. unity, not fragmentation, makes us strong. two years ago, at

, in india, financial inclusion has become a national policy with the prime minister and, hence, the government taking the lead and the rbi being the most important institution involved in the policy. issues recent developments in regard to the emphasis on financial inclusion and the responsibilities assigned to or assumed by central banks raise several issues and these have been well documented. i will flag them here to facilitate deliberations in the meeting. first, how far are the central banks going to the other extreme, from a “ one target - one instrument ” to a “ multi target – multi instrument ” approach to central banking? how much would this result in a dilution of the focus of central banks? what should be the relative emphasis between the various objectives? second, under the new dispensation, there is a widening of central bank mandates. how much would this widening result in a dilution of the independence of central banks? third, in view of recent developments relating to the responsibility for and response to global financial crisis, the independence of central banks and, more importantly, the credibility of central banks is under stress. at the same time, the central banks, by and large, are already in uncharted waters in handling the exit from the global financial crisis. how far would the acceptance of financial inclusion as a major responsibility at this juncture threaten the effectiveness of central banks ’ core function, namely, monetary policy. fourth, there is evidence that very high expectations have been created for a positive outcome for the programme of financial inclusion. it is being described as a win - win game. national targets that appear to be quite ambitious have been adopted. to what extent would the central banks face reputational risks in the event of the expectations not being met? fifth, there is increasing recognition that there are limits to what monetary policy can achieve, and there is acute awareness of complexities of regulation of financial sector. in such an environment, how far could a central bank deliver some of the laudable objectives of financial inclusion, such as poverty alleviation, reduction of inequality and environmental improvements? sixth, do central banks have the expertise to be closely involved in a wider programme of financial inclusion since the demand factors are difficult to assess, even assuming that the central bank can ensure the supply of financial services? seventh, what are the lessons that could be learnt from experience in regard to programmes for financial inclusion, including those from the us housing bubble, credit facilities to government employees in south africa, and microfinance in india