It is essential that we all ensure that there is a real-time and ambitious approach across the globe. Second, central banks shall continue to be active players in innovation. A few have already launched digital currencies, some – including the Eurosystem – are testing it in pilot experiments. We at the ECB decided a two-year investigation phase under the leadership of my colleague Fabio Panetta, before taking a decision about whether to go further by the end of 2023. Retail CBDCs have caught the attention of the public; however, they raise sensitive questions, especially regarding the use cases for households and the role of commercial banks. That is why I would call for a ceiling of the individual CBDC holdings. Let us not forget the other possible digital currency, a “wholesale” CBDC for banking institutions. DLT could bring the benefits of central bank money digitalisation to a new level, with increased efficiency of some interbank processes and the development of new services, especially in a cross-border context. Let me be clear, CBDC is not about the Big Brother of central banks threatening the free world of decentralized finance. Rather it could be about providing further tools to help make Defi successful and sustainable. The Banque de France carried out nine successful experiments in 2021, with a wide array of partners and on different segments, and a new series of experiments focusing on cross-border payments will take place in 2022.
The teething problems with the Stability and Growth Pact have been an example of these challenges. One of the key motivations of the Pact was an effort to avoid free riding by national governments in a multinational currency area. In other words, the desire to achieve a proper policy mix was present at the birth of this rule. In spite of that, the Pact is now criticised for being too rigid, not allowing for a proper policy response in times of distress, and thus ultimately leading to poor real economic performance. This naturally undermines its credibility and supports calls for various “escape clauses”, to use the inflation-targeting terminology. The Pact is thus fighting the same battle that the conservative central banker was some time ago. It should evolve towards a “constrained discretion” system that will fulfil its major goals - sustainability, credibility and co-ordination of stabilisation policies - yet at the same time be sufficiently flexible to allow for proper responses in adverse periods. It has yet to convince policy-makers and the public that it can deliver the lunch without them having to pay too high a price for it in terms of cyclical stabilisation. So far, the Pact has seemed to be losing the battle. This is somewhat unfair, as the adverse period came before most EU countries had achieved the target of balanced structural budgets, which reduced their manoeuvring space considerably. In a sense, the Pact is thus paying a price for being too lax in the previous period, i.e.