##540 billion in loans. moreover, in late july, the european council agreed on a recovery plan to secure a more even and sustained recovery across eu economies ( comprising a frontloaded multiannual financial framework for the years 2021 – 27, reinforced by a €750 billion recovery fund raised through common borrowing ). although these measures have yet to be implemented, they have had a crucial impact on the markets. in line with the eu ’ s institutional framework, national governments have done most of the initial heavy lifting. euro area governments have so far adopted measures worth about 4. 5 % of gdp 1 / 4 bis central bankers'speeches and loan guarantees equivalent to another 20 % of gdp. ad hoc fiscal reinsurance i see the historic nature of the eu response not in the sheer size of eu spending – which is indeed unprecedented – but rather in the organisation of governance in europe. for the first time in its history, the eu is taking on common debt to help finance a recovery. some might see this as establishing a precedent enabling the eu to issue debt in potential future crises. but this does not mean that outside of crisis times and the 2021 – 27 multiannual financial framework, common debt issuance should become the norm. the debt issuance under the recovery fund is legally designed to be temporary. while demonstrating european solidarity, it is an ad hoc fiscal reinsurance supporting national governments in their crisis response. it signals that fiscal policy remains largely national and subject to control by national parliaments, reflecting that budgetary policy is their key prerogative, in other words, their “ konigsrecht ”. new space carved out for eu policies my second observation is that the crisis response has carved out potential new space for eu policies, an effect that is, of course, not unique to this crisis. the response to the coronavirus ( covid - 19 ) crisis has underlined the importance of a common approach to common problems. take the “ next generation eu ” recovery fund which provides financing to fulfil the eu ’ s priorities, notably the green and digital transitions, thereby helping to avoid economic divergence and to increase resilience and potential growth. the recovery fund is disbursed to national governments on condition that it is used for making commonly agreed investments and reforms. this arrangement could lay the groundwork for common eu policies in areas of collective interest which are underpinned by direct eu spending. against this background, i would welcome a serious discussion about eu public goods

academic researchers, or other observers, may provide. here i agree with friedrich hayek and " confess that i prefer true but imperfect knowledge, even if it leaves much undetermined and unpredictable, to pretence of exact knowledge that is likely to be false. " one thing is clear, howeverthe sounder the theoretical foundation for monetary policy, the easier the life of a central bank governor. 4. macroeconomic policy challenges for sa the theme of the conference is " macroeconomic policy challenges ”. i do not want to pre - empt the forthcoming discussions, but i thought it would be appropriate to mention some of the macroeconomic challenges that i see facing south africa. the fundamental macroeconomic challenge in south africa is the alleviation of poverty. the best way to alleviate poverty on sustained basis is to generate employment which in turn requires economic growth. although the economy is growing at its highest rate since the advent of democracy, it is generally accepted that to make sustained and significant inroads into the employment and poverty situation, a higher growth trend is required. this is recognised by the accelerated and shared growth initiative ( asgisa ) strategy of government. some of the questions that need to be considered are the challenges and the risks the strategy faces. we face some monetary policy challenges as well. in recent months the risks to the inflation outlook have increased. factors leading to this deterioration include high growth in consumer spending, rising levels of credit extension to the private sector and developments in the international oil prices. although oil prices have moderated recently, upside risks remain, and a challenge we face in the bank is to keep inflation within the inflation target range in the face of significant exogenous shocks as posed by the oil price movements. research on the first and second - round inflationary effect of oil price increases is therefore important for making good monetary policy decisions. high levels of domestic expenditure have contributed to the widening deficit on the current account of the balance of payments. while the deficit is currently more than adequately financed by capital inflows, investor fears relating to the sustainability of the deficit increase the risks of exchange rate adjustments which could threaten the longer - term attainment of the inflation target. the policy challenge is to maintain low inflation within the context of a growing economy and a sustainable external balance. there are also challenges facing our financial markets. south africa is a small open economy by international standards. this in itself presents some challenges for the pursuit of domestic price stability. our foreign exchange market is very