In Europe, there would be little sense in giving a cheque to every household, which forms part of the US recovery plan. We do not have – fortunately, to my way of thinking – the same social model. Given the various social protection schemes in place in Europe, to which we can add forced saving during periods of lockdown, household demand should recover quite spontaneously. In terms of total demand, greater uncertainty remains around investment and external demand, particularly with regard to the time needed for the global economy to overcome the public health crisis. Supply from businesses could remain stymied in some sectors due to lasting loss of capacity (bankruptcies) and supply chain difficulties. This is therefore likely to require investment programmes and climate transition programmes that sustain demand while improving production capacity; and for that, priority will have to be given to financing joint initiatives at the European level , particularly given its higher "debt capacity". In this instance, our remedies for the crisis will be in step with our long-term priorities. At the national level, any initiatives to further education, professional training and more skilled employment will continue to be the best investment for growth: France had fortunately created one million extra jobs during the four years preceding the coronavirus shock; tomorrow, it will still be through our wealth-producing work that we will cover the price of this shock. 2/ How to treat the debts inherited from the crisis? Secondly, the question of public and private debt will arise.
The Exchange Rate Regulation of 6 May 1994 states that monetary policy in Norway should be aimed at maintaining a stable exchange rate in relation to European currencies over time. Norges Bank has defined “European currencies” as the euro. What we mean by a “stable exchange rate…. over time” needs to be made more precise. The krone exchange rate has fluctuated in recent years, in spite of Norges Bank’s active use of instruments, indicating that Norges Bank cannot fine-tune movements in the krone exchange rate. Thus, in its use of the interest rate Norges Bank focuses on the fundamental preconditions for stability of the krone exchange rate over time. Empirical work on the Norwegian economy suggests that there is mean reversion in the real exchange rate. This implies that higher inflation in Norway than among its trading partners tends to be followed by a nominal exchange rate depreciation. Thus, in order to stabilise the nominal exchange rate against the euro, monetary policy instruments must be oriented towards bringing inflation down to the level aimed at by the Eurosystem. However, we cannot exclude the possibility that a shock that leads to a change in the equilibrium real exchange rate occurs. Examples of such shocks are a large permanent shock to the oil price or a permanent increase in the government expenditure. If such shocks occur, Norges Bank must prevent monetary policy from contributing to higher inflation or a deflationary recession, since that would undermine the confidence in the krone.