It now has 95 members, including the US Fed since last December and this number will still grow in coming weeks. The Banque de France provides its global secretariat with 15 staff, and we created last April our Climate Change Centre chaired by Nathalie Aufauvre. We are indeed making good progress across the board. But each year that passes without sufficient emission reductions makes the issue more severe, and the solutions more radical. To grapple with this dynamic situation, it is imperative that we are able to better understand and forecast the macroeconomic impacts of climate developments. 2. An imperative for the year to come: forge models that gauge the interaction between climate and the economy One aspect of the ECB’s action plan launched on the back of the strategy review may have received too little attention: macroeconomic modelling and scenario analyses. The challenge is huge as we face a triple source of uncertainty: first, how climate change will materialise, second, what the transition could look like and, third, how both will translate to the macroeconomy. The NGFS has produced detailed macro financial scenarios and the corresponding data that provide the most comprehensive framework to date for financial risk assessment. To make such scenarios possible, the central banking community – with a strong involvement of Bank of England and Banque de France among others - has collaborated with first tier research institutes in climate science and economic modelling. This is a huge step forward.
In the long term, wouldn’t “Grexit” risk putting on record that a country can, in fact, leave the euro area, and thus that the euro is not irreversible? If Greece had to leave the euro area, that would risk casting doubt on the nature and functioning of the monetary union. That would create fragility. It would be a tragedy for Greece and, moreover, for its economy. It would be a challenge that Europe would have to rise to as quickly as possible, by substantially reinforcing its institutional framework. The stability of the euro area depends on a balance between responsibility and solidarity. In order to be stronger and more convincing, concrete initiatives are required to reinforce these two dimensions. What would you say to the Greeks to convince them not to leave? It is vital to put Greece back on a growth path, to reach a consensus in order to recreate a viable economic model for the country. Total factor productivity in Greece grew at a rate of only 1% per year between 1981 and 2014, against 2% per year in the euro area, and that happened despite the sizeable transfers Greece has benefited from. To achieve this, the Greek economy must remain within the single European market and be able to rely on its institutions. What’s more, were Greece to leave, austerity would be far worse. The country would no longer benefit from the solidarity of the euro area, which has given it the time to make the necessary adjustments.