Christian Noyer: The euro area sovereign debt crisis Speech by Mr Christian Noyer, Governor of the Bank of France and Chairman of the Board of Directors of the Bank for International Settlements, at the Bank of France / Toulouse School of Economics Conference “The euro area sovereign debt crisis”, Paris, 19 December 2011. *  *  *  Ladies and Gentlemen, It is a great pleasure for me to give the introductory address to this stimulating conference that the Banque de France is very pleased to organize jointly with Toulouse School of Economics. Obviously, finding a more topical subject would be difficult, now that euro area’s sovereign debt markets are caught in the vortex of the financial turmoil that has been plaguing the world economy for the last four years. This topic is also the one we have chosen for our next Financial Stability Review, to be released next March, with a significant number of contributions stemming from today’s presentations. The current crisis is indeed extremely challenging. Many complex factors are currently interacting, making policy decision-making particularly difficult. In such a context, academics have a critical role to play to help us clarify the tradeoffs and available options, so that we are better able to make the right choices in real time.
Three years ago, the Federal Reserve’s decision to curtail the quantitative easing policy, quite unexpected for the market, became such a ‘black swan’. Two years ago, both the market and experts witnessed quite an unprecedented fall in oil prices. Last year saw a rather high market volatility caused by the reassessment of risks related to the situation in China. This year is not yet over but a ‘black swan’ has already flown out. I mean Brexit, which has also turned out to be quite unexpected for the market. We should try to foresee risks. However, it is not always possible. That is why it is important to ensure resilience of the system facing various risks, even unexpected ones, and have tools to stabilise the financial markets and the economy as a whole. As far as Brexit is concerned, in our estimates, its explicit impact on the Russian economy and financial system will be rather limited. We have already seen that Russian markets withstood the surge of volatility in global markets caused by the outcome of the referendum in the United Kingdom. Long-term implications will depend upon specific arrangements between the UK and EU and their influence on the global economy and financial markets. Brexit, however, can be seen in a wider context, i.e., as a manifest of public appeal for changes related not only to politics, but also largely to the economy, since the low growth rates of the world economy lead to a loss of confidence and dissatisfaction among people in many countries.