François Villeroy de Galhau: Twenty years later- and twenty years ahead

Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the Warwick Economics Summit, virtual, 4 February 2022.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Ladies and Gentlemen,

I am delighted to be with you today, though I would have preferred to actually come to Warwick and your world-renowned University. And I am deeply honoured to offer today, with this speech, the very first of the Persaud Lectures, launched this year by Professor Avinash Persaud – none other than the son of Professor the Honourable Bishdonat Persaud. I borrowed my title from the famous French writer Alexandre Dumas: Twenty Years Later was his sequel to the Three Musketeers. January 1st marked 20 years since the introduction of the euro as cash. And if central banking isn't quite as much fun as the tales of d'Artagnan and his friends, our young currency has had a few adventures and it is worth drawing some lessons from them. I will then turn to the next twenty years and the two main transformations facing Europe.

Before I plunge into this longer view, allow me to say a few words about the European Central Bank's latest monetary policy decision as set out by ECB President Christine Lagarde. Yesterday, in the face of increasing uncertainty on inflation, our key word was « more than ever » optionality. We take it seriously: we retain our full optionality on the decisions we will make from March and in the following quarters, informed then by the latest data, forecasts and geopolitical developments. And as we clearly stick to our sequencing – starting with first tapering and second lift off – we will also retain our full optionality about the pace of this sequence, and timing of moving from one stage to the other. Hence, while the direction of the journey is clear, one shouldn't rush to conclusions about its calendar: it will remain gradual, state dependent, and open in each of its steps.

I. The outstanding success of the euro

So – back to the tale of the euro. You students are perhaps too young to remember the politics of the 1990s, but it's worth reminding ourselves of how far we have come. When we recall that the European Union had only 12 members when the Maastricht Treaty was signed in 1992, we realize how much the world has changed. Today the EU counts 27 members and 19 countries have adopted the euro. The addition of Croatia and Bulgaria will soon bring the latter number up to 21.