François Villeroy de Galhau: In a highly uncertain world, refocusing Europe's goals and means of actions

Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the Centre for Economic Policy Research (CEPR) Spring Symposium, Paris, 2 June 2022. 

Central bank speech  | 
03 June 2022

Ladies and Gentlemen,

It is a great pleasure to give this keynote speech today at Sciences Po. We have all been eagerly looking forward to the CEPR's installation in Paris, celebrated by this CEPR Symposium which turned from a winter into a spring event. And we also celebrated the happy reunion of CEPR and ESSIM with a cocktail two days ago – I hope you had a wonderful time in the Golden Gallery.  My keynote speech today precedes a panel about "Europe refocused" – a very topical subject that is dear to me, to Jean Pisani-Ferry and to the panellists.

Europe does indeed need refocusing, after staging several turnarounds in recent years. First, its priorities have switched from structural reforms to emergency crisis management – the Covid pandemic for more than two years, and at present the war in Ukraine. Second, its focus on the Stability Pact has been tempered by investment needs, which are now catered for in the Next Generation EU. Finally, Europe is moving away from an omnipresent monetary policy, which has helped it deal with financial crises and stabilise the euro area while fighting deflation risk and enhancing growth; monetary policy is now focused again on how to rein in inflation.

Add geopolitical pressure from outside and the weight of diverse domestic agendas inside, and the risk is that Europe becomes mired in confusion, contradiction and, in the end, inaction. Does a compatibility path exist for Europe? Let me try to elaborate on a possible positive answer, on the basis of two conditions. The first condition is to clarify our goals, i.e. the three "great transformations" ahead of us (I). The second condition regards our means of action: our success will also depend on our ability to add up three different components (II).