 We know that this is the week of midterms, so we will finish on time, so you can go and prepare tomorrow's or Friday's midterms. So, today is an interesting experiment of open dialogue with ECP, and we'll tell you in a second how it works. But let me first introduce Benoacore. Benoacore is probably, what could I say? The heavyweight economist on the board of the European Central Bank, Benoit, is from Grenoble in France, and did the Ecole Polytechnique, and from Ecole Polytechnique, he worked in the French Treasury as, first as Chief Economic Advisor at the Treasury, and later as the person in charge of the Agence France Trésor, which is the agency that issues and manages French debt. Then he moved to the ECB in January 2012, if I remember right, and he has been responsible for the operations of the European Central Bank in an important period, because you know the ECB has done a lot on markets recently. But he has also had time to write books, so there is a book which we published, which Bocconi published a few years ago. The book is interesting, because the original is with Agnès Benacore, who is a French economist. The original title in French was l'economie de l'euro, the economics of the euro. But then in the Italian translation is l'euro de la discord. I don't know how you translate it in English, so it was a successful book. And then there is also a textbook in Economic Policy, published by Molino a couple of years later, so been also the time to do it. So today is about what Europe can do for you, for your generation. It's a dialogue, so you're going to ask questions, so you should think about them. But also many other people around Europe at least in the world are asking questions. And I let Professor Manaceli describe the complicated way in which we're going to manage this. I don't think it's going to be... So good evening, first of all, everyone. So as Francesco suggested, we thought about doing this in the form of a dialogue through which you can submit questions directly. If you have a question for Benacore, you can either raise your hand directly, or you can go to a website that is called... That it's called SLIDO, OK? S-L-I-D-O, I think you can view this here, OK? So the most requested... You can vote on other people's questions as well. So the most voted questions will pop up on the screen. So you have to log on to SLIDO.com, and then you can enter this code, hashtag L066, OK? Yes, you can see it here. And so you can simply submit your question there. You can vote on other people's questions. The top three questions will be seen on the screen, and I will sort of then submit the questions to Benacore. OK, I hope this is clear. So you can submit your questions directly, or vote on other people's questions. So log on to SLIDO.com, and simply enter the code L066, OK? OK, so now we can leave the floor to... Benoit is going to start with an introduction, maybe 20 minutes, and here are some slides, and which will give you time to think about questions. So good evening, everyone, and I would like to thank very much the university, particularly Francesco and Tomasso for the invitation, and to thank you for being here tonight. I'll try not to be too long. I would like to thank also Francesco for his kind introduction. Even though the change of title between French and Italian probably tells you more about Italy than about the authors of the book, but, OK, that's a discussion we can have. We are... Just to set the stage for that discussion, I've tried to take the theme here, the title seriously, at face value, what Europe can do for you, and I've prepared a few thoughts on how economic conditions for the youth, for the younger generations, have changed recently in Europe with the crisis, but also with structural factors that go beyond the EU and beyond the crisis, and what Europe can do about it, just to take the theme of the discussion seriously. And then we can have a discussion on anything else, including monetary policy. If you're interested in monetary policy, I'd be happy to answer, but also on the EU more broadly. And so the few slides I'm going to show you are about how the younger generations can reap the benefits of Europe better. And you will see that there are many challenges, so we start with the challenges, the dark side of it, and I will offer a few solutions. And so to start with the challenges, I think that first slide outlines the challenges quite well. That's about the living standard for different generations, so it's real GDP per capita. It's here, it's in Italy. It would probably not be substantially different in any other country, but I took Italy because we're in Italy here, and that's real GDP per capita as broken down by generations, for different generations. And so it's a stylized fact, if you want. And it's quite striking. You see that starting with the generations born at the turn of the last century, so early 20th century, which is the yellow line here, the bottom yellow line, you see that living standards have steadily increased for every generation. So yellow generation, the blue generation, the green generation, the dark blue generation, which was born between 1966 and 1980. And then you have the latest generation here, born between 1981 and 2000, so let's call it the millennials, or whatever you want to call it, but anyone born between 1980 and 2000. And you can see that the first time you have a generation which is at risk of breaking with the trend and not benefiting from the same tide in terms of steadily increasing living standards. So there is something that is broken here. And so that immediately beats the question, which is what has to do with Europe here or what would be something that you would see more globally and what can EU institutions in particular do about it. And just to give you another illustration or maybe to dig deeper into that discussion, here you have another stylized fact, which is how much household disposable income has increased between 1980 and 2010. So over a period of 30 years in different places, UK, Canada, et cetera, but again is broken down by generation. And you can see that the income growth for the younger generation, aged 25, 29 here, has been actually negative compared to the average. So disposable income has grown by less than average for the younger generation and it has grown by more than average for the older generations here, the 65, 69 and 70, 74. So that's another illustration of the inequality in the distribution of income across generations, which is not something that is so often looked at. So why does it matter? Well, it does matter because if there is a sense that the distribution of income is so unequal across generations, it creates a risk that the younger generation will lose support for Europe. Europe will lose support among the younger generations and that really creates a risk of a kind of negative doom loop. European institutions need to be supported, they need to be democratically accountable, obviously they need to be trusted, they need to be supported in order to deliver what they have to deliver. That includes the ECB but any other European institution. And if there is a perceived lack of performance, of delivery of European institutions in distributing income fairly across generations, there is a risk of a doom loop where European institutions would lose support and would be less in a position to deliver what they have to deliver. And that's the kind of doom loop that we really have to avoid today. And the point I'm going to make is that Europe has to act first. A lot of it is in your hands actually because the future is with you, is not with European institutions, run by elderly bureaucrats. But in order to fight this doom loop, Europe has to act first and to show in a visible way that we use all instruments to distribute income in a fair way across generation. And just to give you one last stylized fact which is over the latest period. So that's net income since 2009. So it's really a focus on the impact of the great financial crisis and the Eurozone crisis. And you can see how the median income has evolved for the younger people across member states. So that's for people aged 16 to 24. It's deflated by prices. So it's real median income across Europe and countries. And you can see that in nearly all EU member states, real median income has actually decreased. It has fell for the younger generation across Europe. And it's only in France and Germany that it has marginally increased and it has decreased. And obviously you can also have a sense here of the impact of the financial crisis. You see that Greece, Spain, Ireland, come last. These are countries which have been very heavily impacted by the crisis. So it also tells you that if we want to do something about it, we also have to make our macro institutions in particular the Eurozone work better to avoid that kind of crisis that has disproportionately impacted the younger people. So it's not only about micro issues, structural issues. It's also about having good macro policies to avoid seeing that kind of economic. So it's about outcomes which have disproportionately impacted the younger people. So of course it's not all bad. And so if you focus on the left hand side of that chart, you see that unemployment has went down by quite a lot since around 2013. So the turnaround is about 2013. In the aggregate in the Eurozone, around 10 million new jobs have been created since mid-2013. And I would argue that monetary policy has been a substantial part of it, not the only part of it, but a substantial part of it by lifting aggregate demand. We've also allowed net job creations to come back in all European countries. And that shows in the net job creations, that also shows in the unemployment rate. The unemployment rate at Eurozone level has fell down from 12% in 2013 to a little bit lower than 8% today. So there has been a very substantial decrease in the unemployment rate due to macro policies and also labor market reforms in some countries. But it's always balanced because on the same slide, you also see that youth unemployment remains twice as large as average unemployment. So you can see that whatever macro policies have brought in the aggregate has benefited the young people less and the youth unemployment remains twice as large as average unemployment across the board in nearly all Eurozone countries. So there remains a lot to do here. And what makes it even more worrying in a sense is that if you look at the reason why the unemployment among the young people in Europe has fell, it is not that much because of net job creation. You would expect unemployment to fall because jobs are being created, right? But in the case of the young people, it's not that much because of net job creations. It's also a lot because the labor force has strength among the youth in Europe. And that reflects a number of factors which are mostly structural factors which have nothing much to do with the EU or with Euro or with anything local here. First factor is demography, obviously. The structure of the labor force is changing and the proportion of the younger labor force is shrinking because of aging, because of demographic change. And that's true everywhere. Second factor is about new technologies. Digitization is coming, automation, robotization is coming, and an increasing fraction of the younger population has been seeking higher education so has been studying for longer instead of looking for jobs. And that also has resulted in a reduced labor force which somehow artificially reduces numbers for youth unemployment because they're just out of the labor market to train and to be educated. So that's good in a sense, but that has nothing much to do with the functioning of the labor market. It has all to do with preparing for future changes. And the last factor is about labor market institutions where there are factors which have nothing special to do with the younger people, like for instance, a declining role of trade unions across the board. That's something that we see everywhere and it does not specifically impact the unemployment among the youth, but you also have the rise of atypical forms of unemployment. So short-term employment, part-time employment which have disproportionately been used by the younger people. So flexible work, or you may want to call it precarious work, is something that is much more widespread across the young. For instance, just to give you a number, the number of young people which are part-time employed in 2000, that was 18% of the labor force, and in 2018, that was 33% of the labor force. So whenever jobs were created for the young people, these were mostly flexible jobs, precarious jobs, and a lot of them are involuntary part-time or short-term contracts. And that's another illustration here where you see something which is specific to Europe here. If you compare the eurozone which is EA on the right, OECD average, UK, Japan, USA, you see that the share of temporary workers is really something that is special to Europe and that we don't see as much in the USA or in the UK or in the OECD. So there's something going on here which has to do with new forms of labor which disproportionately impacts the younger people. But all of that is structural, so it doesn't have much to do with the euro or in that case even with macro policies. It's something that runs deeper inside the labor market. So what can we do about it? What are the implications for Europe? I would say two main implications. First, Europe, meaning European institutions have to make a much more visible contribution to sharing growth across generations, to fight the kind of unequal distribution of growth that I've illustrated with the previous slides. And second, we have to pay more attention to those that are left behind which are generally the poorest people, the precariously employed, which are often also the young people for the reasons I've just explained. And for that we have to maximize employment opportunities, but also here Europe can make a difference. So when it comes to the first point, which is how do we make a more visible, how do we share growth more equally across generations? It has a lot to do with education, obviously. And here the numbers are not that good in terms of educational spending in Europe. Spending on education has stagnated in Europe in recent years. It's around 5% of GDP and it's quite stable, even slightly declining. It is quite dispersed, quite heterogeneous across Europe. In Italy I guess it's around 4% of GDP. In Denmark it's 7% of GDP. So you can see that you can already do more at national level. And it's only 10% of total spending which is spent on education. And that's probably a neglected dimension of the discussion on public finances in Europe, which very often focuses on headline numbers for deficit, for debt, 3%, 60%, stability pact and so on, which is also important. But the composition of spending is too often neglected. Very few member states have fiscal space to spend more, but all member states have space to spend better. And that also implies increasing education spending as a share of total spending. Something that the European Commission has repeatedly told member states which is not really being followed up. And that lack that insufficient spending, that gap in spending on education also explains, it goes a long way to explain the lack of social mobility in Europe. You may have seen these OECD studies on social mobility across the OECD, where the OECD computes how long it takes to move from the lower, say the lower D side of the income distribution to the average or to the median of the income distribution based on the historical patterns of social mobility. And the average for the OECD is that it takes between four and five generations to move from the lower, from the bottom 10% to the level of mean earnings. And for Italy, by the way, it's slightly worse, not that much worse, but slightly worse around five generations. And that has a lot to do with education. And then of course, it's also about investing in technology. And here you have, on the slide here, you see the numbers for R&D spending across a number of regions. And you can see that Europe is not doing well. Europe is a dark blue line here, towards the bottom. China has catch up, interestingly, that's a yellow line. And you see that Europe is much, much below other regions, and that also has to do with the composition of public spending. So very often the discussion on public finances should be more about the composition of spending than about the headline, the headline numbers. And finally, on my last point, which is how do we, how can we pay more attention to those that are left behind by all these structural transformations that we're seeing? Here you can see that the young people in Europe are suffering in a disproportionate way from unemployment, this we've seen already, but that also correlates with the risk of poverty. So on this slide, on the slide here, you see the risk of poverty at EU 27 level. Again, according to generations, and you can see how much the risk of poverty has increased for the younger people, mostly I would say as a result of higher unemployment across the young. And so that has to do with improving on opportunities to become employed, in particular, including at the lower end of the skill scale. And here there is something that matters quite a lot, which is that the existing welfare systems have not been designed for to address that kind of situations. The design of the existing welfare systems across Europe remain tailored to traditional forms of employment. I've mentioned the rise of temporary contracts across the board, but also for the younger. And that, of course, makes it difficult for, I mean, it's structurally difficult for when you are temporarily employed to become eligible for benefits, but even the eligibility criteria are based on factors that benefit older workers, such as the duration of employment as a criterion to get eligible for benefits. That's something that benefits older workers compared to younger workers. So we also need to think harder and maybe to rethink, to revamp welfare systems to account for all these people who are now working in atypical forms of employment, more flexible, more precarious forms of employment. And that also, of course, speaks to the whole discussion on how to revamp welfare systems to account for new forms of work related to new technologies like platforms, I mean, Uber, Deliver or whatever, where being legally an independent worker and not an employed wage earner, you don't have the access to the same benefits. So we need to rethink, that's mostly at the national level, obviously, not at the EU level, but the EU can help in different ways. One way the EU can help is that the EU can help protect our tax base to make it possible to support redistribute and support those who are left behind on the labor market. And for instance, what the European Commission has started to fight corporate tax avoidance to use competition law, what Margaret Vestiger has done to use competition law to fight against tax avoidance by large multinational corporates. That's something that eventually helps support the tax base and protect the means, the financial means that we have to redistribute and to be more inclusive on the labor market. And there are also ways that the EU can spend more at EU level to support the youth. So for instance, we have a new youth, so-called youth guarantee, which has been created in 2014, which has already created quite a lot of job at EU level. So that's mostly national, but it can be coordinated. There can be benchmarking, there can be good practices. And there are some actions that will be more effective at EU level, in particular the action to fight tax evasion and to protect our tax bases. So I've just been trying to give a number of examples of what the EU can do. I've tried to answer the question that we had on the screen earlier on, which was what can Europe do for you? So these are examples of what Europe can do for you. And then all the rest is in your hands. And I stop here. Okay, so I can see here from Slido that already a number of questions have come in. So quite interesting. So I think we can start. So again, let me welcome you again in submitting your questions to Slido and to vote about other people's questions so that we can project the most liked questions. So let me go by the rules. So let me start with your questions. Actually, the one on the top now seems to be about migration flows. Okay, and so although it's hard to see a connection with the monetary policy, right? This question asks, so what are the CB views if any on the economic impact of migration flows into the European Union? If any. That's really not starting with the easiest question. I have to respect that. Yeah, yeah, yeah, no, no. You will get credit for that. I mean, obviously, the ECB is doing monetary policy, right? So we don't have a normative view on migration policy and we have no competence whatsoever when it comes to migration policy, obviously. That said, migration is also an economic fact. And so we have to, first we have to understand what's going on and we have to ponder the impact both in the short term and in the long term. So just to give you an example, we spend some time together with the Bundesbank colleagues to understand the impact of the huge labor force shock, positive labor force shock in Germany with all the migration coming into Germany. We had to understand the impact on wages. Is that going to create more competition? Is that going to be an additional dampening force on wages, on nominal wages in Germany? But for that you've got to understand the qualification level of the migrants. How far are they going to learn German? How far are they going to be trained, et cetera? So what we do is more trying to understand the consequences and also in the long term, I would say in the long term, that's something that has to be seen positively because I mentioned aging, the longer term prospects for the euros or labor forces to be shrinking, to be in decline. So provided that the right training skills, et cetera is provided, that's an unambiguously net positive in the long term. Now it all depends how it's done in the short term. In the short term, it can have an impact on monetary policy, as I said, because it can have a material impact on wage developments. Let me remind all of you that you can actually raise questions directly. So if you'd rather prefer to do it on one, so that's fine. You have the digital way and the analogic way. Yes, please. Can we give a mic? That's the old fashioned way it's part. Hi, thank you to be here today. My question would be, what are the monetary implication of aging in Europe? Well, it's a little bit the same answer in a sense. In so far as aging can be seen as a labor supply shock. It's a shock on the composition of labor supply. And I guess the answer is also the same in so far as it's really a kind of, it depends kind of answer because it depends a lot on how much training, skills, technical change can make up for the loss of labor force that comes with aging. So I think, and I don't have the answer. So you will be very disappointed, but I think it entirely depends on whether we can innovate enough to push up TFP growth so that we can compensate the impact of aging, which would be the Japanese model in a sense. Well, it might seem a little bit weird to see that Europe has a Japanese model. I don't think Japan is a model in that many dimensions, but Japan has been successful in raising, in innovating to make up for the impact of aging. And as you've seen, I mean the figures I've been trying to show you on these slides are not so positive in terms of our capacity so far in Europe to innovate, to increase productivity, to make up for the impact. But the jury is out, so I don't want to have a definitive answer here. So let me pick the question that is now on top because I guess that's a theme that comes back very often in the debate surrounding ECB policy, right, that has to do with one monetary policy in many countries. As this question asks, the national economic situation in each country varies and how is it possible to implement one monetary policy for all? Well, I mean clearly you need a number of preconditions for it to work. That is, you need, if you want to have a single monetary policy for a very diverse regions, such as Eurozone, you need elements of flexibility in markets, labor market flexibility, capital market flexibility, so that you have the right adjustment mechanisms in the economy, right? So that's, I'm really doing optimal currency areas 101, so sorry for that, but you need flexibility in the economy, you need fiscal policies that can deliver adjustment at the national level, and this we haven't seen so much. We've seen fiscal policies being quite proselytical actually in countries and fiscal buffers not being built to the extent that would allow fiscal policy to be effective and sorry to kind of move away from your question, but I think that's the core reason why we have fiscal rules and the core reason why at the ECB we've been supportive of the stability pact and fiscal rules is that we do believe in fiscal policy in the usefulness of fiscal policy. If you want fiscal policy to be useful at the national level, you need fiscal buffers. You need to be able to use fiscal policy when you need it and when your public debt is already very high before the negative shock hits the economy, then you're not in a position to use fiscal policy. It's too late. So that's why countries need to build fiscal buffers if they want to be able to use fiscal policy and it's an essential part of the functioning of a monetary union. And then you need some amount of convergence. I mean, you need countries not to differ too much. And that's why, for instance, we've been supportive of this new discussion that member states are having in Brussels on having a fiscal capacity for the eurozone which would be focused on competitiveness and convergence because we need more convergence and if there is some Europe and money to be put on projects that can foster convergence across eurozone members that's something that will benefit monetary policy as well. So these are the preconditions. And then finally, monetary policy is single. The instruments are the same for all countries, obviously. We don't do differentiated monetary policy but the impact of the instruments can differ across countries. So if you take some of the instruments that we've created in the crisis, take the long-term refinancing operations, ELTROS or the targeted long-term refinancing operations, TELTROS as we call them. These are instruments which are the same for everyone. Any bank can access under the veil of ignorance if you want to put it like that. But exposed, of course, access is different across countries. So these are instruments which are equal and accessible everywhere but which have been accessed in different ways in different countries and depending on the needs of different economies. And that's something that we've learned in the crisis. That some instruments of monetary policy can be single ex ante but have different impacts exposed and that has been very useful. Before we go to, I see interesting questions on Italy coming up. But before we get there, I have a question related to the discussion on aging. So Japan and the euro area are in the world, the areas of aging population, fast and everywhere. But if you look at monetary policy, the inflation target is about 2% and has remained 2% independent of the fact that the agency has become a more serious problem. But at the same time, for many reasons, of course, not only aging, both areas find it difficult to get inflation to 2%. Is the conclusion that there is a reason to rethink the target and relate it to the aging population or is completely out? So you may find it hard to believe Francesco, but we do believe that inflation in the long term is a monetary phenomenon. And so aging can have a huge impact in terms of relative prices and a lasting impact. And so that's something that we have to understand and factor in when we do monetary policy, of course. But I don't think it should have an impact on the inflation objective, which is a long-term discussion. Let's throw the big bomb here on Italy that everybody's expecting, but we have to get there sooner or later. So the question asked whether you see there is economic situation as a threat for the Eurozone? Just to put it very blindly. Look, so the answer is no, the answer is no. Italy has challenges. I mean, all countries have different challenges. Italy has a short-term challenge in so far as, Italy is the only Eurozone member which is technically in a recession. There have been two consecutive numbers of releases of negative GDP growth. It's a technical recession, there is no reason why it could remain in a recession. Growth is low, for different reasons, one of them being financial conditions tightening, in particular long-term yields tightening because of policy uncertainties, so that's specific to Italy, but it's a short-term discussion, right? So I think the most important discussion is more on the long-term. It's on how to create, to create total factor productivity in Italy in a way that can lift Italian growth towards or even above Eurozone average. And that's a discussion, by the way, that has nothing to do with the EU or with the Euro, whatsoever, because the slowdown in Italian total factor productivity growth has started before accession to the Euro, actually. So that has to do with better leveraging the assets of the Italian economy and the productive strength of the Italian economy. So that's not something on which the ECB can say much because that's about how to help Italian companies export to global markets and how to leverage the comparative advantages of the Italian economy. So I think the right discussion is really on the long-term, strength of the Italian economy. Not that much on the short term. Any more questions from the floor? Yes, please. Thank you. So following that, the situation about the Italian economy, I would ask about another economy. We just recently had the growth forecast of the European Commission. Everybody shared that because Italy was on the last place. But what scares me more is the second last place, which is Germany. And the recent slowdown and a lot of key sectors to Germany which, namely the automotive sectors, the chemicals. And then we heard just like two days ago that the interest will stay low, at least for this year and the next year, as far as I got that. In case Germany would struggle, and I heard already there were some hedge funds speculating on a German recession and so on. In case Germany would start to struggle by, let's say, the end of this year or next year, would that influence the decision making? Or would you say that Germany, since they have a lot of fiscal, let's say, a lot of things they can do on a fiscal basis, should figure that out by themselves? So, well, of course, Germany does influence our decision making. It's the largest economy in the eurozone, so it does influence the aggregate numbers in the eurozone. When we discussed the economic outlook and when we discussed our policy mix last week in the governing council, Germany was part of that discussion. And I would say Germany, in a sense, is a case in point of a broader discussion which is about the impact of global growth on the European economy. I mean, in our assessment, most of the slowdown that we've seen recently in the eurozone is due to global factors, is due to the slowdown in global trade, is due to anxiety created by trade tensions, trade frictions. I'm not calling that a trade war because we always hope that there will be no such thing as a trade war. But there are trade discussions, obviously, trade tensions, and these trade tensions have created anxiety globally. And they have created, they have raised questions on the sustainability of value chains globally, starting with, by the way, with Eastern Asia and China, but also in Germany, which is really at the heart of the global value chains. So Germany, in a sense, is an example of how uncertainty over global trade and over the structure of global trade, as we know it, can have an impact on growth and being a very large exporter, Germany is at the forefront of the discussion. So it has been impacted directly by the global slowdown and that also is reflected in eurozone numbers. So if anything, that also shows that the German economy has been very reliant and one could say excessively reliant on global trade and that also is reflected in the German current accounts surplus. The ECB has been in agreement with, say, the Commission when the European Commission says Germany has fiscal space, Germany has space to invest more for its own future in areas which would be good for the future of the German economy. That's something we support and that would contribute to rebalancing and that would contribute to make German growth more resilient and less dependent on global shocks. First of all, thank you, Mr. Curry, for being here. My question is, could the ECB use its bond buying program as leverage to incentivize countries to implement fiscal reform? For example, if Italy were to suddenly massively increase its debt load, could the ECB lower its debt purchases as a punishment or as a leverage? No, the answer is no because we do monetary policy and we don't do fiscal policy. At Bocconi, we are very good in political economy, I guess more than in monetary policy. It's a political economy-motivating question. Yeah, I can see that, but it doesn't change the answer. So the answer is we do monetary policy, so we do what's best to fulfill our monetary policy mandate, which is bringing inflation back to close to 2%, and we've done it in a particular way, which is buying bonds, and we're still buying bonds, by the way, because lots of people say that's not your question, but lots of people around say they've stopped QE. We haven't stopped QE. We are reinvesting the repayments, the principal repayments on the bonds we've purchased, and that's still quite substantial. It's in the 20 billion euros per month that we're still buying on Eurozone capital markets, so it's quite substantial. So reinvestment is an essential part of QE, and it's still going on, and it's part of our monetary policy. So we do it in a way which we want to be as neutral as possible in terms of political economy, right? So when it comes to private bonds, we do it in a market-neutral way. That is, we buy roughly, quite precisely actually, in proportion to the market structure. When we buy corporate bonds, we buy in proportion to the market structure, which also some people don't like because they say you buy too much of carbon-intensive companies, et cetera, et cetera, and they have a point, but the point is we do monetary policy, so we want it to be neutral. And when we buy government bonds, we buy according to the capital key of the ECB, and from the start we've done that, and we're not changing it. So we don't want to pollute monetary policy by internalizing other policy objectives which should be addressed by other institutions. So let fiscal policy be done by member states and by the European Commission. We don't have to do it. Do you think that the gap existing in the employment rate between men and women and also the gap between men and women employed in some subjects is a limit for growth? And how can and should you fix that? Yeah, I mean, obviously yes. Obviously, yes, it's a limit to growth. I mean, that's not something that is, I mean, that's relatively far away from what the ECB does, right? Because we don't have any instrument that would speak to that discussion or it's not part of our mandate, et cetera. Now, so that's something for the member states and maybe for the Commission to discuss, but it's a fact that if the, if women participation rate and also if women compensation in terms of gender equality in compensations would be, if all of that would be fairer, that would be good for Europe and growth and that would be good for the standards of living in Europe. So even from our perspective, we would see it positively. Now we don't have the instruments. It's for the EU to do it. And the IMF, as you may know, the IMF has done a lot about that. Christine Lagarde has been kind of pushing her staff to work on that in an effective way. And the IMF has produced very compelling studies on how gender fairness or equality can improve economic outcomes. So mostly in emerging market economies but also in advanced economies. Thank you. So I would like to turn to another subject, the Brexit. So yesterday the British Parliament rejected for the second time the agreement proposed by the European Union. Michel Barnier said that no deal issue was more probable than the never. And my question is how can Europe prepare itself for a no-deal issue concerning the Brexit? Can Europe prepare itself? And also what are the immediate impacts that we can expect in that scenario? Thank you. So on the political underpinnings of that discussion, I don't have much to say because that's a political discussion. And I can only quote from what Michel Barnier said yesterday night. He tweeted, the EU has done everything it can to help get the agreement over the line. The impasse can only be solved in the UK. So that's what Michel Barnier said. And obviously I agree with that. But then he goes on saying no-deal preparation is more important than ever, which is your question. So we've been preparing for a no-deal Brexit for some time. We've spent quite a lot of time jointly with the Bank of England, by the way, which is important, because we had to come to a joint assessment of the risks. We've spent quite a lot of time in the second half of last year to map the risks coming with a no-deal Brexit in the financial industry, obviously. There are many other risks which we don't... which are further away from what the ECB does, but we've done it for the financial industry. And at that, when we've reported to the... to Her Majesty's Treasury and to the European Commission, which had commissioned that work, our conclusion was by and large, risks are well addressed in the financial sector by banks, by the financial industry themselves. Even though some more could be done, but it's by and large well-prepared, except in one area, which is clearing, right? The clearing of derivatives and of swaps, where there is so much concentration in London that discontinuity in the provision of clearing services would have created major disruptions. And this has been... so that was in November, and this has been addressed by the European Commission and by ESMA, and they have granted equivalence to clearing services in London. So I think it's... and separately, our supervisory arms, it's a single supervisory mechanism, which is part of the ECB, has spent a lot of time discussing with UK-based banks and international banks to prepare for possible relocation in the eurozone in terms of risk management, in terms of staff to make sure that any relocation to the eurozone would be safe in terms of prudential standards and would not create risk for the eurozone. And that has been done. So I would... I think it's fair to conclude that the financial sector is probably one of the best-prepared industries for a no-deal Brexit because the preparation has started early on and because a lot of issues have been addressed and whatever was not done could not be done by the industry itself has been addressed also through regulatory measures. So I would say that the main risks are outside of the financial industry as of today. First of all, is it a goal of the European Union to maybe expand the eurozone into some other European Union countries like Romania, Hungary, Bulgaria, Croatia and if so, what implications would this have on the rest of the eurozone? So, I mean, it's a natural process that the eurozone expands. And by the way, through the crisis, the global... the great financial crisis started in 2007 or 2008 and then we had the eurozone crisis and throughout the crisis the eurozone has kept widening with new countries joining like Estonia, Latvia, Lithuania have joined the eurozone and we are now 19 countries. And as you know, legally all countries are bound to join the euro eventually except for two countries, the UK which maybe may not be part of the EU next week anyway and Denmark because they have a derogation but for all countries that's a relevant question. So, there is a process which is in the treaty and the process is you've got to be part of the exchange rate mechanism for two years before joining the euro so the kind of first question to ask is are there countries that would be ready and willing to join the exchange rate mechanism and we have one such... we have one country in the exchange rate mechanism which is Denmark but they don't want to join the euro and they have the right not to join the euro because it's in the treaty so it's entirely for them to decide and then we have a second country which has expressed a will to join which is Bulgaria and so Bulgaria has officially sent a request and they are in a process whereby they are expected to join the exchange rate mechanism by mid-19 roughly and since they would be the first country to join the eurozone after we've created Banking Union which is really a new feature of the eurozone Member States together with us and with the Commission have told the Bulgarians it's fine but if you want to join the exchange rate mechanism you've got to be part of Banking Union meaning you've got to enter into close cooperation with the ECB for bank supervision which the Bulgarians are preparing so that's a process we have now and it's only one country, Bulgaria and so the eurozone would come later anyway so the short term milestone is Bulgaria joining the exchange rate mechanism which is expected around mid-19 What is your opinion on the low interest rates and in how far do you think that low interest rates are preventing millennials and our generation to have safe and secure savings? Well low interest rates are part of the policy which has been there to restore growth in the eurozone ultimately to restore inflation and to achieve price stability bringing inflation back to 2% but that essentially implies that we support growth and we support job creation because that's the way prices can be lifted up and so low rates are part of the centre of the policy which has supported job creation in Europe including as I showed earlier in the slides job creation for the young so if you want to save for your retirement it's good to, before you care about the interest rate on your savings it's also good to have income in the first place that is to have a job and that's why rates are low so that's really why we've been doing it How would you compare the policy mixes that the Fed uses in the US to the ones that the ECB uses here in the EU? Sorry but that's a very broad question so we can spend like 2 hours on it so can you specify a little bit? Yeah, when it comes most importantly to setting the proper interest rates in order to ensure proper high enough GDP growth to keep up with emerging economies such as India and China So why then? So it's even broader now So, I mean there can be no direct comparison between monetary policies in different areas because we are so different, right? I mean the ECB is essentially different because we are doing monetary policy for 19 countries with their own fiscal policies their own social policies their own social policies, etc Also we have a different mandate from the Fed ECB mandate is primarily price stability while the Fed has a dual mandate as you know price stability and full employment I don't think it makes a lot of difference today because today both objectives are essentially aligned so it doesn't make such a difference but still legally the mandate is different and financial markets are extremely different So for instance it has proven we had for instance when we decided to do quantitative easing we had to do it in a very different way from the US because we don't have private capital markets that are as deep as in the US so when the Federal Reserve has been doing QE they've been primarily buying mortgages, right? We don't have a mortgage market that we could use in Europe it just doesn't exist to the same extent so we had to buy government bonds and then we run into what Francesco would call political economy issues such as how do we do it what's the breakdown of what we're buying, etc which are issues that the Fed doesn't have I mean it wouldn't cause the mind of the Fed to start buying municipal bonds or bonds issued by states in the US because there is a federal budget, a federal government and so the natural safe assets in the US is US treasuries we don't have that in Europe so we had to invent to create something totally different so I would guard against any direct comparison since can I jump in? since there was a question on the US and they raised another issue a big discussion in the US today on monetary policy and probably one of the central issues of the campaign for the next presidential election is what is called MMT the modern monetary theory could you explain to us how you understand what this thing is because Octavia Cortez, the leading figure in the US Congress will make of this the leading electoral campaign Francesco, that's not really kind to me because whatever you see on MMT you start being trolled on Twitter I've got to be prepared for that so I don't claim to be a specialist of MMT what I understand from what I've read so I may be totally wrong I'm sure that within 10 minutes there will be people sending emails and tweets to tell me that I am totally wrong actually so we'll see but what I understand from MMT is that there are two kind of basic premises, assumptions first is I mean I see MMT as a theory of fiscal dominance essentially of fiscal dominance, no while what we do the way I mean kind of mainstream macro and certainly the way legally we organize in Europe is around monetary dominance, no so you want the government to be solvent to be inter-temporary solvent to have a balanced budget over time and provided that the government budget is balanced over time then you do monetary policy in an indefinite way that's how we do it in Europe that's what underpins the Maastricht Treaty and MMT kind of reverses the assumptions saying whatever can be achieved through fiscal policy should be achieved through fiscal policy and monetary policy will adjust because the interest rate is a policy variable among other policy variables it's not something different so you don't have separation between fiscal policy and monetary policy the way we see it in Europe and the way it is legally enshrined in the treaty so that's the first assumption as I understand it and the second assumption is whenever you issue bonds and you create money in your own currency your sovereign currency is going to be fine because you can issue as much sovereign currency as you wish provided it is your own currency so I think there are limits to both arguments first I don't think you can issue as much debt as you can without triggering inflation and at some point there will be inflation and so that sets a limit to how much debt you can issue so the notion that MMT can in a sense give a free hand to fiscal policy because you would be able to fund anything I don't think that's true in the real world because eventually there would be inflation coming anyway and second the notion that you can issue as much currency as you want in your sovereign currency I also don't think that's true because you need someone to hold it and even your own citizens at some point may want to hold foreign currency and that's what we've seen in dollarized countries when you're a dollarized country or a euroized country and you have an unrealistic or unreasonable domestic monetary policy or fiscal policy citizens start using US dollars or they start using euros so that also sets a limit to how much you can print or issue in your own currency so I think it's a good discussion to have that challenges a kind of traditional way to look at fiscal policy and monetary policy but I think there are severe limitations to the assumptions and I would say eventually we have a legal framework in Europe which is a separation between dichotomy between fiscal policy and monetary policy and that was decided by European citizens in a treaty so we're not going to change it There's a question I wanted to ask but I'm picking from the list so the key word is populism I don't fully understand the logical connection but still I'm going to ask the question and pose the question because it's an argument that I hear a lot it's an argument about unconventional policies that the ECB followed after the greater recession and the rise of populism so do you see any connection between the ECB policy and the aftermath of the recession and the alleged rise of populism this relationship I think the question hints to the role of QE QE and the banking system the ECB so again this is an argument that in a sort of unstructured way you hear a lot especially on social media I mean first I mean I myself I don't want to use words such as populism too much because that's politics the ECB is not a political institution so we take politics as they come in a sense I don't want to pass value judgments on politics because that's not my job but then to your question I would say that's what econometricians would call a spurious correlation so both unconventional monetary policies and populism or anti-European feelings anti-institutional feelings are the consequences of the same cause and the same cause is a crisis that has inflicted a lot of damage on the economic fabric and on the social fabric so we had to react to it using monetary policy instruments and it takes time people are upset there is a lot of anger because of the outcome of the crisis which you can understand so there is a lack of economic literacy I would say in some places where people focus on partial equilibrium and they forget about or they overlook general equilibrium so yes, monetary policy today implies low rates which have an impact on savers that's a fact of course but monetary policy also supports aggregate demand has supported job creation which has helped reduce unemployment but that's a general equilibrium mechanism which is much more difficult to understand you will notice a famous book by Frédéric Bastia so a 19th century French economist who wrote a book called second voie et second voie pas so what you see is partial equilibrium what you don't see is general equilibrium and the core difficulty in explaining monetary policy is that people see the partial equilibrium which is general equilibrium some questions, yes ok, let's do this I'll come back don't you think that the assumption about modern monetary policy that you have just explained to us may hold in the case of US because it's a leading economy and because of that benefits from a high level of trust yeah, that may be the case but again, I don't claim to be a specialist of modern monetary theory so I'm just answering in a superficial way based on what I've read which may not be all of it and indeed from what I've read I see a lot of US centricism a lot of US US biases and by the way, there is a broader discussion which doesn't require MMT which is about having the new discussion that you see emerging on fiscal policy there being more space for fiscal policy because interest rates are low and Olivier Blanchard started that discussion in his presidential address at the American Economic Association et cetera and that has nothing to do with MMT because you don't need MMT to make the point that R is lower than G which is I guess a much simpler point but there is also a lot of US centricism in that discussion it is a fact that interest rates are lower than the gross rates in the US and they've been lower for some time and they will remain lower for a lot of time but it's not through everywhere and in many places in Europe including in Italy I don't think you can safely assume that interest rates will are or will be lower than the gross rate to the extent that they would allow more fiscal policy so even though it has become less likely to happen thanks to the OMT program and the presence of the ESM is there any emergency plan or how would ECB react in case of Eurozone countries default? Look that's exactly the kind of question that central bankers don't like because we don't comment on contingency scenarios right we have to be prepared for contingency but we don't comment on it because because that's not a relevant question today I don't see any Eurozone country today being on the verge of default so I'm just explaining to you why I'm not answering Can I follow? You just said that in the discussion about a real interest rate being exceptionally low and you will learn in your macro course if R is below G the more that you have the better off you are and you said in some kind but let me read to you a tweet that Olivier Blanchard issued I guess Sunday he says on R-G there are some striking statistics on the IMF fiscal monitor which is the publication of the IMF forecast of R-G over 2018-23 negative for 29 out of 34 advanced countries negative for 33 out of 39 emerging market and middle income countries so this seems to be at least currently IMF a very widespread phenomenon we should not worry about that It is a widespread phenomenon that R is lower than G widespread but not universal as I said and I think Olivier makes a lot of good points I think he has a perfectly reasonable and kind of balanced way to raise the issue so I'm not taking issues at him I'm just saying first you need to assume that R will remain lower than G for an extended period of time in all these countries which I don't know so maybe that's what the IMF fiscal monitor says and second there is clearly a difference between the rates the rate at which governments fund themselves that is the rate of issuance on government bonds and the rate of return on the project they would invest in right so I think that kind of misses an important part in my view the most important part of the discussion which is how are you going to spend the money and I try to kind of give some examples here in my presentation and your funding rate may be low you've got to identify projects where the social rate of return is positive and I've got to tell you from my experience as you you introduced me earlier on saying I spent some time in the France Treasury and at some point my job was to coordinate economic studies in Treasury which included computing the social rate of return for a lot of public projects and that was very often negative there are lots of investment projects which actually are not worthwhile socially and which are vastly overestimated by because of vested interests and lobbies so I think Olivier is factually correct but then you've got to use the money in a way that is good for social welfare which is easier said than done I love to see also very technical questions so a question asks whether it's possible in a cashless economy so let's remind ourselves that we are far away from being in a cashless economy but that's an argument a lot of economists and monetary economists discuss about to have a lower than zero policy rate and which implications would that have so do you think that would make the life of monetary policy easier or not so by allowing more easily for interest rates to go negative so the easy answer is we are not a cashless economy and still we do have negative rates so that's the answer in a sense you don't need a cashless economy to have negative rates the rate on our deposit facility which is our main policy rate today because that's what drives money market rates is minus 0.4% and we are clearly not in a cashless economy so the kind of natural limit to nominal rates is lower than zero because it's and you know the discussion it's about the cost of hoarding cash the cost of buying safes to hold banknotes etc which kind of creates a wedge between zero and the how far you can go and then you have an economic limit to how far you can go I mean Marcus Brunner Meyer at Princeton called the reversal rate which is the rate at which having negative rates starts being negative in terms of monetary policy transmission because it's bad for banks banks earn money on the difference between the short-term rate and the long-term rate so if you have a flat and negative yield curve that's bad for banks and at some point it's also bad for monetary policy transmission so according to that line of thinking you have a reversal rate that is you have a limit to how much rates can go negative for economic reasons and that has nothing to do with being cashless or not cashless so cash is not the only part of the discussion but for me the real answer is means of payments have to be driven by social demand so there are countries where the use of cash is collapsing like Sweden maybe China is not so far from that countries where the use of mobile payments and payment direct payment on social network and the like is expanding very fast and there are countries where it's not happening so by and large in the eurozone it is not happening and we still see strong demand for cash for banknotes for me cash are such an essential part of trust in the currency that that discussion has to be driven by social demand so when we'll see demand for cash collapsing in the eurozone then we'll have to think about issuing a digital central bank currency and the like but it has to be driven by what society wants that's not something that has to be forced by central banks for the purpose of doing monetary policy it's too important talking about cashless economies I think also the experiment that we saw in India some banknotes were unexpectedly taken off the market actually generated a lot of negative real effects and so also talking about going towards the cashless economy it's something that should be taken with care of course the Indian economy is different from Sweden but as you're saying some countries including Italy they still use a lot of cash making the transition towards the cashless economy should be actually very very good so right now there are certain countries outside of the eurozone that still make purchases in euros because of the price stability and we have countries like Montenegro who aren't in the eurozone but they use only the euro what difficulties does that pose in the implementation of monetary policy I think the difficulty is more for them than for us that is those countries are not large enough that they would have a big issue for monetary policy in the eurozone now euroization in countries which do not belong to the euro can be an issue for instance it has been an issue in terms of financial stability in some countries where you've seen a lot of euro borrowing by households or borrowing in foreign currency generally by households which creates currency mismatch on the balance sheet of banks in these countries and our policy generally has been to encourage countries, neighboring countries not belonging to the eurozone to support the use of their domestic currency and to dis-incentivize the use of the euro to limit currency mismatches in their economies and also because eventually they are lenders of less resort in their currency it's not in euros so I think the financial stability argument goes towards encouraging the use of local currency not the euro but that's an issue for them we don't see it as a major issue for the conduct of monetary policy in the eurozone because it's not that big so you have already talked about the differences between the federal reserve system and the euro system what are the restrictions that you would like to see fall first if you could decide on that I wouldn't think of it in terms of restrictions we have a monetary union in Europe whose main features have been decided back in 1992 in the Maastricht Treaty based on what was the best compromise among European countries and that's what allowed the Maastricht Treaty to be agreed and voted and the single currency to start so it's a contract so the way we work reflects a contract between different visions, sensitivities traditions in Europe and we've been doing monetary policy in a way that kind of synthesize all these different views and by the way one of the reason we have a governing council in the ECB with 19 national governors and 6 board members based in Frankfurt all these 25 people doing monetary policy is that we want to aggregate these different views this heterogeneity of preferences that we have in Europe is being aggregated through the governing council to build consensus so that's how we are that's what we are so I don't see it in terms of restrictions and then the ECB mandate and the way the monetary union is organized it's a political discussion and it's reflected in a treaty in regulations which are voted by parliaments so in a sense I'm the last to have an opinion on it I take whatever the European people give me and tell me to do that's what we do I think I have one question because another 4 minutes okay so maybe one last question you have a mic coming coming Good evening Mr. Carré the European Union has been as revived investment the stock market has been very volatile in that period and for instance it's falling since more than 2 weeks and many media are talking about a coming crisis in the next future because of too high depth complexity of financial tools and derivatives so could financial crisis happen again and do you think if another big crisis happens it's very broad so we're ending on a gloomy note but yes financial crisis will happen I think it would be a delusion to believe that financial crisis don't happen financial crisis always happen I mean you may have read this Kindelberger book on financial crisis since the 17th century or even earlier and crisis are a feature of finance because finance is about risk taking so it inevitably leads to crisis so the whole point is first trying to identify what can be the where the next crisis can originate and obviously it will come from a different place than the last crisis so the last crisis was about subprime mortgages and the originate the distribution model in securitized products and also the last crisis was about banks having too little capital and too little liquidity and this I would say has been fixed securitization is much less opaque and complex than it used to be and banks are much better capitalized and much more liquid than they used to be and that's an achievement it only means that the next crisis and so in terms of the kind of flashing lights on the dashboard or the area where we should be very careful I would identify two of them first is non-bank finance that is what used to be called shadow banking the financial stability board took a big decision that we're not calling it shadow banking anymore we're calling it non-bank financial intermediation so that's a big step forward but most of the issues remain to be fixed and that's about all forms of lending that are performed by non-banks so money market funds, investment funds asset managers etc where we don't have the same rules in terms of liquidity mismatch or the same kind of intrusiveness of regulation than in banks and that's an area of not concern but attention and the second I would flag is cyber risk where the financial sector is particularly vulnerable to cyber risk either individual institutions or globally financial infrastructures we see a lot of fraud, a lot of cyber attacks against financial infrastructures so we're working on it we now have global standards we're working a lot with the industry but that for me is a major area where the next crisis could come from provided you're fast so how long can a system such as target 2 be sustainable given a persistent negative current account of peripheral countries well target 2 is a it's a thermometer it's just an indicator of underlying financial flows inside the eurozone it's not a problem per se it's an accounting device so there can be no no issue that could directly come from target 2 it is a good indicator of underlying issues so it's it's worth being followed just as an indicator or as an accounting device and actually as a matter of fact we've seen in terms of target 2 imbalances is a big increase in target 2 imbalances so surpluses and deficits driven by quantitative easing because we're buying a lot of bonds which are being purchased from say non-eurozone institutions institutions based on London these bonds are being settled in core European countries so whenever say the bank in Italy buys a BTP under QE from a bank in London typically the bank in London will have an account in Frankfurt and so the money will go to Frankfurt even though it's being purchased by the book at Italia and that in itself mechanically drives a wedge between the target 2 surplus of Germany and the target 2 deficit of Italy so that has been a big driver of target 2 imbalances until we've stabilized QE we've stopped net increases in QE in December so we see now with target 2 imbalances being quite stable so before closing and thanking Benoit for this very unusual I want to make one observation that I was in a high school in Milan a few weeks ago with a debate on economics finance and it was not a single question on the euro and the question about banks they were asking me how can we do a society without banks can we kid all the bankers and and then I went to a young student a girl who must have been 15 in the front row and I asked we've been here 2 hours discussing finance and not a single question on the euro so she looked at me and said professor do you want us to use the dollar I think when she was born so maybe you're too old for this very unusual evening it is very unusual first of all to have such an open and sincere dialogue with a member of the executive board of the ECB they usually do 2 things they deliver prepared speeches which are prepared speeches or they have press conferences but I think it's very rare correct me if I'm wrong to have an open discussion with students open to questions both from this room and from the outside so I think it is for Bocconi this has been a unique experience and we'd like to thank you a lot thank you