The subject easily gives rise to heated debate: on the one hand, there are the "conservatives" – not to mention the climate sceptics – who are concerned only about central banks' action against inflation, and denounce the risks of "politicisation" and “mission creep". And on the other hand, there are the activists who are calling for a change of mandate, with a focus on the fight against climate change and the conversion of instruments – including the American movement for a "Green QE". In my opinion, the truth is simpler and stronger. The Eurosystem's consideration for climate change is neither an abuse of its mission, nor a mere militant conviction or a fad; it is an imperative that we must pursue in the very name of our current mandate and to ensure the smooth implementation of monetary policy. 1.1 In the very name of our mandate Without even having to mention our "secondary iii" objectives, which include environmental protection, climate change is linked to the core of the Eurosystem’s monetary mandate: price stability. Shocks related to climate change are potentially difficult to manage for central banks because of their stagflationary nature, as they may result in both upward pressure on prices and a slowdown in activity. Transitional policies – which bring about taxation changes, such as a carbon tax, or regulatory changes – can affect prices, notably energy prices, generate inflationary pressures and weigh on activity, as is already the case in the automotive sector.
Undoubtedly, Europe has been strengthened during this crisis. But Europe now has the opportunity to show that it can be more than the sum of the solutions adopted in this crisis. Once again, Monnet’s words offer inspiration: “Europe itself is only a step towards the forms of organisation of the world of tomorrow”. [2] With these words in mind, we must seize this invaluable opportunity to strengthen our Union. We must shape the recovery from this crisis in such a way that our economies are fit for the world of tomorrow. The unique strength of the European project The pandemic and the measures to contain the spread of the virus have caused a contraction in euro area economic activity that is unprecedented in peacetime. [3] While incoming data suggest that we will see a strong rebound during the third quarter[4] , the strength of the recovery remains very uncertain, as well as uneven and incomplete. It continues to be highly dependent on the future evolution of the pandemic and the success of containment policies. One major reason why we can expect a rebound in activity in the second half of the year is because, when faced with the largest economic shock since the Second World War, Europe and its leaders showed the unique strength of the European project: by acting together, we can achieve more. The ECB has played its part in this collective effort in the face of an unprecedented crisis. The nature of the pandemic shock called for an extraordinary monetary policy response.