 Welcome. I'm Patrick Hohnhund and I'd like to welcome everybody to this webinar, the latest in the series of webinars organized by the Institute of International and European Affairs here in Dublin, an IEA webinar. Today we have a very interesting speaker, Luiste Gindost, Vice President of the European Central Bank. Let me just say a few housekeeping remarks at the beginning. First of all, the event is on the record. So in case you hope you're going to be hiding behind Chatham House or Europe House rules, you're not today. This is on the record, both the introductory remarks and the Q&A. Q&A is very important and I think you all have an opportunity to just tell you how to do the Q&A, because there are various ways in these webinar series. In this case, in Zoom, we're using the Q&A function. Don't use any other function. Then either find it on the top of your screen or the bottom of your screen. But when you're asking a question, better to say who you are and where you come from. I'll collect these questions and process them and pass them along to Luiste in the course of the discussion later on. So Luiste Gindost is Vice President of the European Central Bank. He was appointed with that position on the 1st of June 2018. It's an eight-year term. Of course that makes him a member of the Executive Board, the Six-Person Executive Board of the ECB. A member of the Governing Council and the General Council. Before that, he was the Minister of Economy, Industry and Competitiveness in Spain. It was 2016 to 2018. Minister of Economy and Competitiveness without industry, I don't know why, 2011 to 2016. Before that, he had a lengthy career, public and private sector, Secretary of State for Economic Affairs, member of the Economic and Financial Committee of the European Union, so on and so forth. So he got a wide experience, both public and private sectors, both government and central banking. And he's going to talk to us today about, well, obviously, monetary policy, European central banks' reaction to the pandemic crisis. We were hoping he would come to Dublin a couple of months ago, and that was before the crisis. And now we're in the crisis, and he's here, but only virtually. It's not his first time in Dublin. He spent some time here many, many years ago as a student. He's told me before, and we were calling Dublin in the old days just a few minutes ago. But let me pass over now to Luís de Guindos, Vice President of the European Central Bank. Thank you very much, Patrick. Good afternoon, everyone. For me, it's a real pleasure to share my views today, doing this webinar. And as Patrick has said before, I would have liked very much to go to Dublin. My second favorite town in the world. So I have a lot of very good memories about Dublin, and I am totally hopeful that I will be able to visit Dublin in person and to share my views and to have a debate with you in such a beautiful town. Having said that, I'm going to make some initial remarks. I know that the most important part of this kind of webinars is the debate, the Q&A that we are going to have afterwards. So I will try to be short and to go to three main points, three main issues that I want to deal with in these initial remarks. The first one is the outlook, the outlook of the economy. Last week, the staff of the ECB presented the projections and the updated projections that I think are the basis of the second part that I want to comment. It's our monetary policy decisions. These projections are the basis of our actions, of our policy decisions. And finally, I will make some references to the financial stability situation in the Euro area. I think that is something that is quite relevant and responsible for financial stability. And I think that I will make some comments on the situation of the European banks and the impact that the pandemic is having in the European banks. Starting with the outlook. Well, our baseline scenario is that in this year in 2020 we will see a very deep and profound and sharp decline in GDP in the area of 8.7%. This will be followed by a recovery in 21 and 22 of 5.2 and 3.3. I think that there is a lot of uncertainty. This is the only thing that is totally certain that the uncertainty is very, very, very high, very elevated. And I think that that makes the job of forecasters much more difficult. But perhaps there is another element that I would like to stress and to highlight from the very beginning is the important drop of GDP that we are going to have in the first half of the year. According to the recently revealed figures of the first quarter of this year for the Euro area, the decline has been 3.6%. And our projection, quarter on quarter, is that in the second quarter of this year we will have a decline in the area of 13%. So as you can see, it's a very important drop in a very important decline. And in the second half of the year we expect that the recovery will start and that the recovery will resume. We are projecting in the third quarter of the year a recovery that will be of 8.3 in Q3 and 3.2 in Q4. With respect to inflation that, you know, as you know, is our main target is the main objective of, you know, in the ECB according to our mandate. Well, the projection for 2020 is going to be that inflation is going to be 0.3. This is going to be driven mainly because of the blanch in oil prices. And we expect that the recovery of the inflation rate until 2021, that the inflation rate will reach 1.3%. We will have two opposed forces there. On the one hand, we will have weaker demand. And on the other hand, we will have, you know, an upset in upper pressure related to supply constraints that, you know, partially will compensate the quicker demand and the impact on prices. But what is more important to highlight is that, you know, our projection, our forecast of inflation in the medium term is 1.3% that is clearly below our target of close but below 2%. We have two alternative scenarios. A mild one that, you know, the probability, its probability is very, very low at we have a severe scenario as well. But the reason why we are going to maintain the three scenarios is because it's an indication of the level of uncertainty that I indicated before. Here, what we have started to see is that, you know, after reaching the trap of the decline around mid-April, we have started to see that the economy is recovering. That there is, you know, an uptick in the evolution of the economy that is in parallel to the reopening of the economy. And I think that, you know, perhaps, you know, the most delicate moment of time in the short term outlook will be what happens once the majority of the containment measures have been lifted. I think that in that moment of time that, you know, in my view will be around the autumn, we will have to see whether, you know, the economy on its own can continue with the catching up process and how rapid the recovery is. Let me now turn to the monetary policy decisions. Well, the two main elements in order to decide decisions that we have taken are first, you know, the anchoring of inflation expectations. This is something that we cannot allow. And we have seen that, you know, recently inflation expectations have dropped, have declined quite a lot. And the second has been the tightening of financial conditions that could be price even to a risk of fragmentation in financial markets in the Euro area. We have taken three kinds of decisions. First, you know, provision of liquidity to banks in very good conditions and with very attractive prices. As well, we have, you know, flexibilize our collateral framework in order to facilitate the access of our counterparties to our monetary policy operations. Second, our purchase program we created, we incorporated our pandemic program, the PPP, that is temporary, it's an emergency program. It started with an envelope of 750 billion that was extended and increased by 600 billion euro additional last week. So in total it's going to be 1,350 billion euro. It's going to be used with flexibility that I think that is an important characteristic, both in terms of the assets, in terms of the jurisdictions, in terms of the timing. And it's on top of our regular PPP program that, you know, on an annual basis, it's envelope is 360 billion euro. And the third kind on the third group of measures are potential measures. We have to do with measures taken by the SSM, by the signals and providers mechanism to relieve capital requirements, liquidity requirements to facilitate, you know, the reduction of, you know, the provision of banks according to the evolution of number from the loans. We had also some modifications of the accounting rules. And I think that another important measure was the suspension of the payment. Now let me turn to the financial stability considerations. The initial reaction of the financial markets, when the pandemic started to escalate and the lockdown started to be imposed in different countries, said, you know, a very difficult situation, said a lot of turmoil in financial markets, as you know, perfectly. We saw important declines in prices and a lot of volatility. But in the last few weeks, we have seen that markets have recovered an important part of the losses that we had, you know, in the second half of March and the beginning of April. And I think that this has to do with two main elements. The first one is the reopening of the economy. And the second one is the policy response, policy response coming from fiscal authorities and monetary authorities. It's important to bear in mind in order to understand the impact that the pandemic is having in financial markets, in financial markets stability, that pre-corona we had vulnerabilities in the financial markets. For instance, high valuation in some markets of the price of assets were extremely elevated. We had also, you know, quite a high level of debt, the leverage both in the private and public sector was elevated as well. We had some issues in the asset management industry in terms of leverage, in terms of risky and illiquid assets in the portfolio of asset managers. And finally, perhaps, you know, the most relevant characteristic in terms of, you know, potential vulnerabilities of the financial landscape in the euro area was the low profitability of the European banks. As you know perfectly, but the pandemic implies an unprecedented macro shock that has aggravated and amplified many of these previous imbalances. And I think that now, you know, we are confronting, we are going to face two main financial stability risks. The first one is the sustainability of public finances in the medium term. I think that in the short term, in the short term, fiscal policy has a very important role to play. It has been, you know, the first line of defense. But once the pandemic is over and the downturn is over, well, we'll have a legacy. And the legacy will be a higher public deterioration that we will have to address in order to be back to the perception and to the situation of sustainability of public finances. And the second main risk for financial stability has to do with the profitability of the European banks. Before Corona, the profitability of the European banks was very, very, very low. And this was requested, this was reflected in the valuation of the European banks. The prices, the price to book was in the area and was in the area 0.4 that is extremely low in comparison with other banks in other parts of the world. Now, you know, even the valuations are even lower. We have seen, you know, a decline in the prices of the share of banks of 30% with respect to the level that they had pre-Corona. And this is a clear indication that we have a problem with, you know, the valuation and the profitability of the European banks. Our calculation is that the return on equity now of the European banks on average is in the area of 3%. And the problem is not the average, the problem is as well that there is dispersion around that. This is, you know, something that in my view now is perhaps, you know, the most important risk that we have to confront in terms of financial stability. And this is going to be an issue that is going to be around for a while and that it will be very important to address in the near term. Let me conclude with some remarks. Well, we are going through an unprecedented shock. This is something that is quite obvious. The only certain issue is that the decline in GDP in the first half of the year has been very deep, very sharp. We believe that, you know, the main question mark over the next months is going through the evolution of the economy in the second half of the year. We believe that risk continue to be tilted to the downside. And we also believe that well, you know, one important element will be, you know, the evolution of the pandemic. I think that, you know, if there is a second wave of infections in autumn, well, you know, the impact will be additionally detrimental to the evolution of the economy and to financial stability. You have seen today that the OECD has produced its figures and they distinguish, you know, between two scenarios. The first one is with one shock and the second one is with, you know, a second with two shocks. I think that policy response is going to be key, as I have said before. This is a force that has opposed, you know, the macro shock implement or produced by the pandemic. Monetary policy in the Euro area, sure that has reduced tensions in markets. And we have reduced as well, you know, volatility and the possibility of fermentation in different markets, mainly in the sovereign market. That is the first element of consideration. And, you know, it's the first line of defense when we have to act. I think that national fiscal policies have been as well very relevant. But not all the countries have a similar fiscal space and the capacity to respond is, you know, we have important disparities there. So this could produce an early situation that, you know, we have an unlivable burden filled that, you know, could give rise to disparities in terms of the response. And at the end of the day, the potential fragmentation of the secret market that could be, you know, something very negative for everybody. And just to finalize, I would like to emphasize the importance of having a common European fiscal response to avoid, to burden the public finances of countries with high debt, something that's relevant. But it's not only that. It's as well, you know, because I think that now a pan-European fiscal response, as the one that has been put forward by the French and the German governments and the recent proposal set by the commission, is important because it sends, you know, a very clear signal of the political commitment to deal, political commitment from the European Council to deal with, you know, the consequences of the pandemic and to start the process of recovery of our, of our of our economies. And there is something that is quite, quite important. Monetary policy cannot be the only game in town. We have to act collectively at the European level. And I think that as I have said before, that would be, you know, a very important and relevant component for our monetary policy stance. And I would stop there, Patrick, because otherwise I'm going to consume more time of what I promised at the beginning. Thank you very much, Luis. That was covering the ground very effectively and starting our discussion. And, you know, listening to you there, I was thinking, oh, wouldn't it be nice to be back and have all those difficult challenges to deal with. But then I thought maybe I'll leave it to younger men and women. Well, the questions will go in many different directions. Let me, let me start with one area which already was in place before the pandemic crisis, but it still gets so much discussion in the in the in the media in the, if you read the comments in the financial below financial times articles, people are complaining constantly about negative interest rates, and then interest rates policy interest rates of ECB. Some of the policy interest rates have been negative now for six years. And you mentioned the problem of bank profitability and banks complain that they're unprofitable because of negative interest rates. You think that has some validity. You think that to the extent that it has validity, the tiered interest rate structure that ECB introduced last year has removed that problem. What do you think in general, Bank of England and the Federal Reserve have said no to negative interest rates. Why is it right for the ECB when it's wrong for those other banks. Well, first of all, what I have to say is that the policy of negative interest rates, I think that, you know, it has been important in order to foster the evolution of the European economy over the last five, six years since the policy was implemented. I think that is behind the recovery that we had until 2018. And, you know, this is something that, you know, is quite, quite obvious. No negative interest rates have played a role in terms of fostering an investment consumption. And I think that has been positive. You mentioned, currently, Patrick, as usual, you know, the potential impact on the profitability of banks. Our calculations is that the main factors behind the low profitability of the European banks are structural. We have to do with lack of consolidation with excess capacity. We have to do with cost to income ratio that is very, very, very high. And that, you know, in net terms, the negative interest rates didn't have an impact on the profitability. And even that taking into consideration the recovery that the negative interest rates produced, it could be, you know, even net positive for the banks. You can see that over, for instance, the last three, four years and before the crisis, before the pandemic crisis, well, the levels of provisioning of the European banks started to be reduced thanks to the recovery. And that, you know, the flow of non-performing loans was clearly in decline. So we believe that the low profitability of the European banks has to do with structural actions. I think that is very important that we give a close look to, you know, the cost structure of the European banks, the question of excess capacity. I think that as well, you know, the potential competition coming from fintech and fintech. And I think that consolidation should be something that, you know, it was important before corona. And I think that post-corona will be even more relevant in terms of, you know, trying to reduce the cost structure of the European banks. Well, I have a question here from Peter McLoone, who's a board member of the Institute here. You already mentioned the uncertainty about economic forecasting, but just how bad is this situation of forecasting right now? How reliable is economic forecasting given the uncertainty about the pandemic itself and the uncertainty about how the economies will recover, whether there need to be structural changes in the hospitality sector, transportation and so forth. And then, of course, the Brexit, which is very relevant for Ireland, comes in as an additional factor, but also I think relevant potentially for the European economy and the Euro area economy as a whole. So just how uncertain are you? Is it a dramatic change in uncertainty? Is it any point in making forecasts at this stage? Well, I think that, as I have said before, uncertainty is huge. I think that forecasting the situation is strongly difficult. There is a joke in Spain that forecasting is especially difficult when you refer to the future with respect to the past. Well, for sure that everybody can have the right projections. But the only thing that we know for sure so far is that in the first half of the year between March and the end of this quarter, the second quarter, the impact has been huge. In the first quarter, the decline in GDP was 3.6%, and our projection for the second quarter of this year is that the decline in the drop in GDP is going to be in the area of 13%. It's something that quarter on quarter I have never seen in my life. So this is the only thing that we know that the impact has been huge and enormous in the first half of the year. So what's happening in the second half of the year between March and the end of this quarter? What's happening in the second half of the year between March and the end of this quarter? So what's happening in the second half of the year between March and the end of this quarter? What's happening in the second half of the year between March and the end of this quarter? As I have said before, the lift of the containment measures, and perhaps the main question mark that we have is what's going to happen once the containment measures have been totally raised? What's going to happen with the economy, regardless of the possibility of a second wave? That is something that is an exogenous work. I think that the policy response is going to be very relevant. We are making a huge effort in terms of fiscal and vital expansion. We believe that we will be able to come back to return to the pre-corona GDP levels in two years, but there are a lot of question marks, a lot of uncertainty about the recovery path. I think that the recovery path is going to be key. It's going to be key not only in terms of the economic performance. It's going to be key, for instance, for the banks. If the recovery is rapid, for sure, that the impact of the pandemic will be much more limited. If the recovery is much more timid, then you can have an additional detrimental impact. Despite the fact that banks are much more resilient than they were 10 years ago. But the impact on profitability, for instance, that is the main variable that we are looking at carefully now, could be much, much, much bigger. So the uncertainty is huge. Very difficult times to make projections about the economy and the financial variables. The only thing that we know for sure is that the impact in the first half has been enormous. We have started now a certain level of recovery. The question is how this is going to evolve after we have the containment measures. I have a few questions here about corporate profitability and the situation with small firms, medium firms, even large firms. This shutdown, whatever happens in the future, this shutdown is causing a huge liquidity drain on many, many firms. And I'm wondering if you think enough has been done to cope with this situation. One of the questioners here is Brendan Ryan, who recalls being with you in the EFC many years ago. And he wonders whether governments have done enough to deal with the loan problems that firms are experiencing. Some firms cannot access liquidity. Some firms can, but are indebting themselves to a level that may make it very difficult for them to move forward, even if they have viable business plans after the pandemic. And is this, there have been a certain number of measures governments have put in guarantee programs. Sometimes it's an 80% guarantee. Sometimes it's an 85% guarantee. That's not enough for very cautious banks. They say, I still don't want to lose my 15% or my 20%. On the other hand, governments might end up writing off a lot of this debt on these payout on these guarantees to an extent that is hard for them to afford. Where do you think that stands? And should the ECB be doing more? Well, we have done what we can do. That is to deliver a lot of liquidity in very good conditions to the banks. You know, if you look at our TLTRO operations, you can see that we have improved the conditions that we have created a new instrument. That is what we call PELTRO. And, well, I suppose that while the take up of these instruments will be very high and that banks will make, you know, full employment of these instruments. But this is a necessary condition. I think that with the level of uncertainty that we referred to before. I think that, you know, it could be perhaps, you know, a comfort with a big market failure in the sense that banks with this huge level of uncertainty, they become much more prudent than usual. So I think that, you know, the position of liquidity is a necessary condition. But there is a sufficient condition as well. And this has to do with the action of the governments. I think that government guarantee schemes are going to be very, very, very, very important. I think that the combination of the liquidity that we are giving to the banks and after, you know, the guarantee schemes that have been approved and laid out by governments are very, very relevant in order to guarantee, you know, the provision of finance to the medium companies, the small companies, and the large corporations. I think that liquidity is going to be key. It's another feature of a certainty that we are living. And I think that liquidity is going to be, and lending is going to be key, mainly because, well, the drop and the decline in revenues of corporates has been quite substantial. And so in order to go through this period of high information that we had, I think that, you know, liquidity is going to be a very relevant element. There are other actions by governments, for instance, temporary unemployment schemes is something that, you know, is going to be as well an important policy action in order to reduce the costs of the corporates. Also, you know, kind of moratoria in terms of payment of taxes, social charges, et cetera, et cetera, et cetera. But all in all, if you allow me to say it in the main element in my view, in order to have a rapid recovery, is that we try to maximize the number of enterprises and corporates that survive, you know, this period of lockdown. And if, you know, an important percentage, a very high percentage, a very elevated percentage of corporates are able to survive and totally show that the recovery phase that is going to be very important key in order to determine, you know, the future impact of the pandemic. I think that it will be much, much, much higher than if we are able to make that an important part of the entrepreneurial, you know, tissue survives, survives after the pandemic. So to keep under control the costs of corporates and simultaneously to the provision of liquidity in my view are the two elements that we have to use in order to facilitate an important recovery over the next months of our European economy. Yeah. Now, you know, we've been talking about all the bad things. But one question here, Kevin Cannon reminds me that in all of this bad news story, the stock market seemed to be pricing much less of a crisis than you might otherwise suppose. Do you have an explanation for that or an interpretation? Does the ECB, does the governing council look at the stock market as a relevant factor? Or what do you have to say about the stock market? Well, I think that the stock market is a very good indicator. It's something that we could look at closely, mainly when we are looking at, you know, mainly, you know, the valuations of, you know, financial stocks. And I think that, you know, it's an important indicator as well. And as well, you know, the positive evolution of the stock market is something that, you know, we take into consideration when we analyze, you know, the financial conditions of our markets. Equity is an important part of, you know, the finance of, you know, the private sector. So I think that, well, first of all, what I have to say is that, you know, perhaps, you know, the decline when the pandemic started to escalate and the lockdown measures were imposed was, you know, very, very, very sharp. So now as the situation is different and we are, you know, governments are lifting the containment measures, we have started to see our recovery. Sometimes equity markets, as you know, perfectly overshadowed. You know, I would not dare to say what's happening now, you know, because I am not an expert on the stock markets. But I think that perhaps, you know, is the perception that the reopening of the economy is advancing quite well. That, you know, after a period of three months of lockdown, more or less, well, you know, an important part of corporates will be able to survive. And that we will be back to normality. And that perhaps, you know, the recovery will be more rapid than our models indicate now. So, well, it's something that we have taken into consideration. We are looking at some people are saying that there is a divide between the stock market, you know, the real economy. But at the end of the day, I think that, you know, that divide, you know, the gap should be breached. And I hope that, you know, the stock market at least partially is right with respect to the, to the forecast that they are and they are doing. They're apart from the companies, the stock market, of course, they're the sovereigns and that's linked very much to the overall policy goal of the ECB to get inflation back up to the intended objective level. And early on in this pandemic event, we had a lot of volatility in government debt markets, spreads moved out peripheral countries are some in some countries, whatever you might call them. And now that's been brought somewhat under control, I think by the initiators of the of the ECB and its pandemic purchase program, emergency purchase program. There is another approach that the Japanese Bank of Japan adopted a few years ago when they were trying to get the inflation rate up, which they haven't entirely succeeded in doing. And that was to say, okay, we're just going to be prepared to buy any Japanese government bonds as in order to keep the long term you the 10 year yield and no higher than 0% that was their particular objective. But that idea of an open ended commitment to holding to a particular rate, even spread, spread a yield, even if it was a different yield for different countries. Would that be a tool that the ECB could safely use? Is it something that you've considered? Is it desirable? Americans did it in the Second World War. And they had the abandon that policy in 1951, when it was becoming a little bit exit is not as easy as entry to that policy. But still, it's something that many people have suggested. What do you think? Well, you know, perfectly, Patrick, because we have been part of the of the of the game in the past and we're a member of the of the governing council that there is something that is different from the US and from Japan, from the UK in the case of the of the year is that we have 19 sovereign bonds. And well, that's, you know, an additional, I would not say that this is an additional complication, but this is an additional element that we have to bear in mind when we implement our monetary, our monetary policy. What I can tell you is that well, our, our, our policy has clearly signaled that we cannot allow, you know, an additional fragmentation of sovereign markets that if we see, you know, widening you know, spreads, then the monetary policy transmission mechanism of that, you know, we, we try to have in place could be dramatically, you know, affected and negatively affected. And so that, you know, in order to, to, to send, you know, our, our monetary policy decisions and impulses of monetary policy to all the jurisdictions of the euro area, we cannot allow, you know, an additional fragmentation of sovereign markets. That's, you know, the approach that we have, we have, we have used. You know, the, the main idea behind and the main target behind our pandemic program is to deal with, you know, a very difficult situation to try to get rid of the tail risks of the, of the, of the euro area. And I think that we have been successful. We have seen that over the last few weeks, there is an important narrowing of, of, of spreads. So, you know, that's the way that we have in order to guarantee that our monetary policy decisions are transmitted to all the jurisdictions of the euro area. You know, you know, I often think that some of the people who don't really so much like the purchasing programs, particularly for sovereign that they don't like to see the huge volumes that are being bought in those. If you grab, I don't have it in front of me here to show you, but the graph of the, the amount of bonds on the ECB's balance sheet going up and up and up. When, when Japan announced their, this policy of freezing the, or putting a ceiling on the yield of long term, long term bonds that they call yield curve control. After that, they didn't have to buy as many because the market just said, oh, I see there's no point in trying this because these years are going to be, they didn't have to buy very much. So actually the critics of this approach might, might be wrong if they, if they think it's going to, if they think it's a threat to expanding the balance sheet. I promised myself I wouldn't, wouldn't allow any questions before 10 past three on the German constitutional court, but not 10 past three. One question, which, which has been sitting here for all that time from Blair Horan. And he has a long memory. He says Carl Otto Perl, Carl Otto Perl was, was the president of the Bundesbank in the 1980s and until 1990, I think, and he told the ecofin on the 8th of September 1990. I'm told I didn't verify this. That in the event of a conflict between price stability and other economic objectives, the ECB has no choice but to give priority to its primary objective. There can be no compromise on that. That's the quotation from Carl Otto Perl. And Blair asks the question has the German constitutional court undermined that commitment. And I think what he has in mind is that, as, as we know, the German constitutional court said that in looking at unconventional policies, ECB needs to make sure because of the treaty that these policies are effective and proportion. And that means looking at side effects. That means that if you're looking at side effects, does that not mean that the side effects are now elevated to being the same equivalent importance to price stability. Well, I expect you to have a staunch protection and defense now of the German constitutional court position or a comment on it. Well, first of all, I am not going to comment on, you know, the ruling of the German constitutional court is not my role, but I can say is that we are the ECB is a European institution is a true European institution. It's under the jurisdictional umbrella of the European Court of Justice. We are under the political control of the European Parliament and as well, you know, even the court of auditors continuously is looking at our operational efficiency. So we are a European institution, and we have to respond to, you know, European European foreign European institutions as well. I think that whatever we have, we take, you know, a decision of monetary policy. Well, it's very important to bring in that we are continuously analyzing, looking at reviewing pros, cons, costs, benefits. We do not put our monetary policy in a sort of ivory tower at all. We analyze, you know, all other elements and when we take a decision, we believe that this is the best in order to meet our primary target, as we have said, that is price stability and the definition of price stability that we have. You know, it's part of, you know, let's say, a more, you know, complete analysis of the potential implications. I'm for sure that we have referred to side effects in the past. The theory, for instance, you know, is a measure that was taken because we were, we were aware of the potential impact that our policies could have, you know, on maximum. So we will continue implementing monetary policies that, you know, are directed and targeted at meeting our primary target. This is something that, you know, we will discuss as well as part of the study review that we are going to start that has been postponed because of the pandemic. But continuously, I can assure you that in my experience in the government council, all the decisions that we have taken have been based on, you know, a very, let's say, broad-based analysis and research. And that, well, that we have evaluated the pros and the cons. And if we decide to take a measure, it's because we believe that, you know, the benefits of the measure clearly are superior to, you know, the costs of the side effects of this measure. So inflation, of course, the main objective of the ECB, it has undershot its, you know, but close to 2% goal for many years now, despite all the effort. One possibility is that in the years ahead, as you get back on target, it might be sensible and correct in terms of the overall policy to overshoot the target for a few years in order to get an average, an upward-looking average that's below or close to 2% over, say, a 10-year period, rather than just saying, well, buy-gones are buy-gones. Sorry, we didn't deliver 2% inflation up to now, but we're going to do it. What do you think about that? Is there a case for an overshoot so that you have, over the average, you get to the 2%? Well, this is going to be a very important part of our study review. This is something that, you know, we will, we have not been able to, even to reach, you know, because I think that this, you know, the definition of price stability is perhaps, you know, the first part of our study review. Unfortunately, because of the pandemic, we were not able to be there. I know perfectly that the staff and Philippe Lane have started to analyze different alternatives. You know, I have an open mind, an open mind that approach would stick to this, you know, definition of inflation. I think that it will be part of our discussions, but I do not want to judge what's going to be, you know, my position. You know, the possibility of overshooting and undershooting to reach an average has pros and cons, but I am, I think that it could be to speculate. And, you know, I want to waste until I have, you know, all the analysis and all the research from the staff and, you know, the different proposals that Philippe is going to put forward before taking a personal position on that. It's a funny business inflation right now because nobody knows what inflation is this month and next month and last month because we weren't able to buy anything. Well, we were able to buy some things, but there were many things that we couldn't buy and therefore the prices were either zero or infinity depending on how you look at it. So, in this, this period is very strange period, probably in some ways prices have gone up quite sharply. In, in, in other ways, it prices probably would be depressed because of the downturn of economic activity. What, what risk do you attach to a kind of swish effect that, yes, inflation will be weak in the recovery because the economic activity is low, but then so much liquidity would have been pumped out into the markets. The governments would have been, would still be spending a huge deficit. You think there might be a swish, an upward swish of inflation, say two, three, four years ahead. Well, this is something that we have. I think that you're totally right. You know, this is a risk that we'll have to look at and to monitor very, very, very closely. You know, our projection is that, you know, before in my initial remarks about our inflation forecast. Well, we believe that in 2020, inflation is going to be very low on average point three for the euro area. And that we'll see, you know, recovery over time over the next two years to a level that this went to 1.3. That is clearly below the, the forecast that we had pre-corona with downgraded our inflation, our inflation forecasts. I think that it has to do with the emotional for the price of oil and, you know, energy, energy prices are going to play a very important, a very important role. But I think that there is something that we have to look at as well is, well, we are living in, you know, very strange times as you have said, Patrick. And I suppose that, you know, the structure of consumption of the basket of goods consumed by the European households during times of the pandemic has changed quite a lot. Well, I suppose that during the lockdown, people didn't go so often to the pump. And so that the reduction in oil prices didn't have, you know, the impact that theoretically has according to the weight, the weight in, the weight in some of the inflation index. So, simultaneously on the other side, for sure that if you look at the evolution of the prices of food, immediately you realize that they have been, you know, raising more than usual during the times of the pandemic. So I think that we have to be careful. I think that, well, as we have said before, well, inflation perceptions from households and inflation official indexes, perhaps, you know, there is, there is, there is a gap. And I hope that, you know, once the economy normalizes, I think that they will converge again. But, you know, the cooperation and pure economic sources. The first one is that the pandemic is going to produce a weekend enough demand for goods and services. And secondly, that, you know, we are going to have, you know, an upper pressure. Because perhaps, you know, we will have some supply constraints. So we have to balance both in order to try to reach and to reach, you know, a concrete forecast. But again, you know, these are times of huge uncertainty, we will have to look at, you know, the evolution of prices over the next months. I think that is going to be very important how inflation evolves once the economy is reopened. And I am totally sure that we will avoid, you know, the risk of having, you know, an important increase in inflation over the next months. And that's not part of our projection. That's not part of our baseline. Let me turn to another question. We have a government formation process happening in the election was way back in February. And at the moment there's a discussion among three parties, one of which is the Green Parties. There's more of the three parties, but it's a very closely looking at a variety of government policies on climate change. Now, the ECB is not governed by what the Irish Green Party or any Green Party or any political party says, but still it's of considerable interest here. And what's been noticed is that ECB buys bonds of this company and that company and actually more or less any company with an investment grade, including companies that might be regarded as rather carbon-heavy, carbon-intensive companies in order to maintain general public support and indeed consistent with the secondary mandate of the ECB, which is to support the economic policies in the Euro area, European Union. Would it not be good to have a negative list and stop buying the bonds of, you know, some category of carbon-rich companies? Well, as you have said, climate change is going to be one of the main objectives of the new commission. They are going to put forward, well, they have put forward and they have proposed a plan. Now perhaps, you know, this plan has been overlooked because of the situation, the concrete situation that we have suffered during the times of the pandemic. But I think that climate change is going to be a continuous objective in all the policies, all the economic policies implemented by the European authorities. And if you want my opinion, I think that, you know, we have, it's not only because climate change is, you know, and to try to minimize the impact of climate change is good in itself. I think that, you know, the Europeans would have a competitive advantage, a competitive edge in that regard and for sure that is going to be part of the recovery plan. And that will be decided by the different authorities and that investments, you know, to minimize the impact of climate change will be one of the priorities of the European Commission when they make an assessment of the different, you know, plans that different governments present in order to obtain resources from, you know, the recovery funds that are going to be approved by the European Council and put forward by the European Commission. With respect to the role of the ECB, but I have to say here is that, you know, we are analyzing but in detail, you know, the impact of transition towards economy is going to have an impact on the balance sheet of many financial institutions, and we are looking at very carefully. Secondly, we are applying now, you know, the green criteria to, you know, the investments of our non-monetary policy portfolios now is something that we are doing now. And, you know, with respect to, you know, what's going to happen with monetary policy, well, I think that climate change considerations should be part of, let's say, you know, the analysis and of the future resolvency of the different assets that we buy. We have to pay, you know, when you know perfectly that we pay a lot of attention to the risk management situation of our balance sheet because our balance sheet is getting bigger and bigger and we have a lot of different corporates in our balance sheet. And I think that, you know, the issue of climate change is something that, you know, we should take into consideration. But embedded in the solvency rating of, you know, the different and the different assets. We are dealing with the rate in agencies. We are asking to have, you know, much more in consideration the potential impact of climate change in the solvency of the different corporates. And I hope that, you know, this criteria will become increasingly more relevant in the rating delivered by the different agencies and that we will, you know, include that consideration in our risk management assessment. And one type of bond that you don't buy is bank bonds. And some people wonder why you don't buy bank bonds. I think I know, but what's your answer to that? Well, it's a question of, you know, avoiding, you know, a sort of, let's say, it could be, you know, it could be, you know, an internal conflict. We are supervising banks. On the other hand, you're buying, you know, securities issued by banks of the risk potential. Let's say conflict of interest that I suppose that everybody can understand. When we come out of all this, the economic structure may have changed. And one of the things that may have changed is a consolidation of power in larger companies. We may have less competition, smaller companies may go to the wall, their assets and their business absorbed into larger companies. Do you worry about this for Europe? Or do you think it's quite important for Europe to have large, powerful companies to compete in the wider global market? Well, I would say it's something that is quite obvious, but I would like to have this very competitive European companies. I think that I always put an example when you look at, you know, the market valuations of traditional large European utilities, or even the European banks, and you compare with, for instance, you know, the tech companies, the valuations of the tech companies in the US, you realize, you know, the big gap that we have there compared, you know, the market value of Facebook or Amazon or Google with, you know, the larger European traditional utilities. And you realize that, you know, there is a big gap. I think that, you know, it's not as much the question of having, you know, say national champions or European champions. I think that Europe has to invest much more in knowledge, in research. I think that we need tech companies, tech, really real, you know, European tech companies. And, well, and that we have to create, you know, the environment and the atmosphere in order to have, you know, companies with such high valuations. That's the main problem. With respect to competition policy, I think that if you allow me, Patrick, I would like to say that now, you know, all the state-based framework, the regulation framework has been removed. And I think that for the correct reasons. But I think that this is something that we have to, you know, to resume the competition policy roles have to be in place again, once, you know, the pandemic is over. And because, well, I think that's very important to have a well-playing field in terms of competition, avoid fragmentation of the single market. And in order to do that, I think that the state date regulation is key. And while we have been through very difficult and strange times at once the pandemic is over, hopefully we'll be over. I think that we should restart, I assume, you know, with implementation of the state-based rules. Luis, thank you very much. You have answered so many questions. I didn't even acknowledge that so many people asked different questions. Adano, Brian Ray Light and Owen Farty, Kenan Rossi, Robert Short and I sort of mixed those into my posed questions for you. And I think you did a remarkable job feeling them all in different questions. I was asked to ask another question, but then a Reuters report that the ECB is set up a task force to look at the idea of a European bad bank. But the ECB declined to comment on this matter, either working on a bad bank scheme. So I know that the answer would be the two declined to comment on this question. So I wouldn't bother to ask you. No, no, no, I am totally quite transparent. I am a little bit surprised when I see this kind of information. But we haven't had any sort of serious discussion about this instrument. Well, when I was finance minister in Spain, well, and in Ireland as well, you incorporated bad banks as matchmaking companies. And it was a powerful instrument in order to clean up the balance sheet of the banks, both in the case of Ireland and in the case of Spain with the selling banks. But we didn't have any sort of discussion of that kind of the European level in the ECB. All right. Thank you very much, Luis. Thank you very much, my pleasure. We'll have you back again, I hope in the future. Thanks to the audience and thanks to all the questioners. I hope you've got good connections, everybody. I know that sometimes it can be a bit patchy in these webinars and we're using multiple locations and great success and success in this event. Thank you again. Thank you very much, Patrick.