christine lagarde : christine lagarde : rebuilding and sustaining growth remarks by ms christine lagarde, president of the european central bank, at the g30 international banking seminar, frankfurt am main, 18 october 2020. * * * the first phase of the coronavirus ( covid - 19 ) crisis was an extraordinary challenge for public policy, but policy responses around the world converged fairly quickly. governments everywhere acted swiftly to offset the loss of private sector income through massive fiscal interventions. central banks stabilised financial markets and financing conditions, and – within their respective mandates – worked hand - in - hand with fiscal authorities to absorb the shock. the results were remarkable and averted what would have been a catastrophic depression. but today the challenges facing economic policy are broader. the covid - 19 recession simultaneously calls on us to avoid structural damage and to encourage structural change. we need supportive policies to remain in place for as long as needed to avoid scarring of the economy and rising inequality. however, we also need to acknowledge the permanent changes that are taking place and – to extract as much benefit as we can from them – start transforming the economy now. the potential for both structural damage and structural change emanates from the unprecedented impact of the covid - 19 recession on the services sector. compare what we have seen in the first half of this year with what we saw in the six months following the lehman crash. from the third quarter of 2008 to the first quarter of 2009, services contributed – 1. 7 percentage points to the recession in the euro area and manufacturing contributed – 2. 8 percentage points. but in the first half of this year, the loss was – 9. 8 percentage points for services and only – 3. 2 percentage points for manufacturing. this has implications for the health of the labour market, the strength of the recovery and the distributional effects of the recession. first, services are the most job - rich part of the economy, accounting for almost 75 % of employment in euro area countries, putting a greater share of the workforce at risk1. second, research finds that the recovery from a services - led recession can be slower than from a durables - led recession, as the latter creates more pent - up demand through deferred purchases2. indeed, demand for consumer goods in the euro area softened in the summer months after bouncing back briefly in may and june, confirming the absence of widespread pentup demand. third, a services - led recession – especially

one driven by social distancing in high - contact sectors – tends to increase inequality. at the peak of the crisis, 40 % of income for the poorest europeans was coming from sectors that were heavily affected by covid - 19, compared with 16 % for the richest. according to one estimate, two months of lockdown followed by six months with the economy operating at 80 % capacity could increase the gini coefficient by almost 14 % in europe3. and this feeds back into the recovery, since lower income households have a higher propensity to consume. in this context, it is clear that both fiscal support and monetary policy support have to remain in place for as long as necessary and “ cliff effects ” must be avoided. otherwise, we risk hysteresis in the labour market, an unnecessary loss of viable businesses and greater inequality. and the recovery in the euro area remains uncertain, uneven and incomplete, while the new coronavirusrelated restrictions currently being introduced across europe will add to uncertainty for firms and households. 1 / 3 bis central bankers'speeches fiscal authorities are already taking action. all of the “ big four ” euro area countries have extended their short - time work schemes into next year. our analysis finds that, at the peak of the crisis, such schemes halved the share of firms under liquidity stress and reduced “ employment at risk ” by almost two - thirds4. this week governments also announced their planned fiscal measures for 2021, which suggest that member states plan to provide sizeable fiscal support to their economies next year. all the conditions are in place for monetary policy and fiscal policy to continue working together. the gdp - weighted sovereign yield curve in the euro area is in negative territory for maturities up to ten years. and our forward guidance on our asset purchase programmes and interest rates provides clarity for governments on the future path of interest rates. but precisely because the covid - 19 recession has affected services so deeply, it will also herald structural change. there is always some rotation of businesses during downturns, but the pandemic is different : it is accelerating the pre - existing spread of digitalisation in ways that look set to permanently reshape our economies and our societies. nearly 50 % of europeans say they have worked from home during the pandemic and of those only 18 % are in favour of a full return to the office5. e - commerce increased by almost one fifth in terms of volume of sales between february and august 2020 and online payments