François Villeroy de Galhau: The euro – which way to go? Keynote speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the EconPol Europe (European Network for Economic and Fiscal Policy Research) Founding Conference and first Annual Meeting "The Euro - Which Way to Go? ", Brussels, 9 November 2017. * * * Mr President, Ladies and Gentlemen,1 It is a pleasure to be in Brussels today, which doesn’t happen so often for a central banker… who has just arrived from Frankfurt. I welcome the fact that you at EconPol Europe have chosen the euro as the theme of your founding conference, and invited me to give this keynote speech. Since Maastricht 25 years ago, we have succeeded in building a Monetary Union. However we have not delivered on Economic Union. To avoid overburdening monetary policy, our Union must stand on two feet rather than just one: that is why it is legitimate that we, as central bankers, propose ideas on this subject, even if we are not those who legitimately make decisions. It is now urgent to make concrete progress on Economic Union, all the more so as the economic context is now favourable, as confirmed today by the European Commission. Euro area growth of 2.2% in 2017 should be the highest rate in 10 years, and as strong as in the United States.
A corporate sponsor of a defined-benefit pension scheme is, in effect, providing a guarantee or, broadly, writing a very complex option 4 : one on which the present value of the payoffs is related to, amongst other things, the future growth in earnings of its workforce, their longevity, and the yield on an equivalent-maturity risk-free bond. Apart from the design of the scheme itself and the associated balance of wages and pensions in employee remuneration, the sponsor makes two big choices: the level of contributions it makes to the fund, and the asset allocation of the fund. (It may seem odd to say that the sponsor makes a decision about fund asset allocation, because of course that is formally the responsibility of trustees. But as guarantors, those decisions affect the risk run by sponsors who, in principle, could make adjustments to their own balance sheet if they regarded trustee choices as suboptimal.) Past increases in life expectancy entail higher contributions and, other things being equal, add to the marginal cost of a firm’s labour force. An unavoidable source of uncertainty is future developments in longevity. 1  See footnote 18, Chapter IV ‘Awash with cash: why are corporate savings so high?’, World Economic Outlook, April 2006, page 151. 2  For the household sector, the effect has been that employer contributions more than account for total net savings. 3  A breakdown of contributions into ‘one-off’ and ‘regular’ is available only for self-administered schemes.