“Rate hikes are starting to work, but core inflation is still too high”. This is one of the fundamental issues touched upon by the president of the ECB Christine Lagarde who, three days after a road accident in which she was slightly injured, arrived in Italy to participate in the event "New meetings for the future”. organized at Palazzo Corsini in Florence byYoung Publishers Permanent Observatory.
The first woman to lead the European Central Bank met 400 European students participating in the project economic and financial education "Young Factor" to talk about what future awaits Europe and what are the challenges to face, but also the need to focus on financial education, the only way to "understand the facts of our time and interpret the events that surround us" , said the president of the Observatory Andrea Ceccherini.
Lagarde: inflation still too high
“We raised rates by 350 basis points in a very short time, simply because we had to cover a lot of ground to reduce inflation” and Rate hikes “are starting to work now”, said Lagarde answering a question during the event organized by the Young Publishers. "The new data on inflation tell us that in Italy we have fallen to 6,9%", but "core inflation is still too high”, said the number one of the ECB, explaining that in our country core inflation has gone from 5,6% to 5,7%. "So there is still work to be done", he said. However, Lagarde reiterated that uncertainty is still very high and therefore the ECB will decide on possible future increases only on the basis of the data that will be available before each board meeting. “We depend on the data – he confirmed – and we decide in each meeting what to do to reduce inflation and reach 2%. Because that's the goal and we'll do whatever it takes to get there."
Lagarde: "In Europe there will be no Silicon Valley Bank, solid and controlled banks"
“In the United States, only 13-14 banks have to comply with the capital ratio, that is, have to meet the capital requirements and have enough liquidity in case something happens. In Europe they are 2000 banks on which we carry out stress tests to verify that they have sufficient capital and liquidity. There is a big difference. In the EU after the last crisis we have very strict rules, the system is robust, the banks have good liquidity, solid capital, they are supervised and must answer to the competent authorities at national and European level”, said Lagarde, who then underlined: “What happened to SVB is unlikely to happen in Europe, because we don't have the same concentration, i.e. an exclusive sector of venture capitalists who left many uninsured deposits in this bank and within a very short time decided to remove them”. "Our system is robust - he added - very different from what we had in 2008 at the time of the great financial crisis and we monitor the situation very carefully".
Answering a question about Credit Suisse and Deutsche Bank, Lagarde said she would not equate the two banks, "they are distinct stories and different fundamentals." However, the number one of the Eurotower reassured that the ECB will ensure that banks have access to all the liquidity they need. “There is no trade-off between financial stability and price stability,” she added.
Permacrisis: Covid, war, energy crisis and climate change
This period of “permacrisis”, that is, a period characterized by a series of unprecedented shocks, must not make us pessimistic, Lagarde told the 400 students present in the audience. “We had the illusion of peace and we had war. We had the illusion of health and then came the worst pandemic in history. We had the illusion of cheap energy and suddenly prices shot up: should we be pessimistic? No, because when let's look at what we managed to do on the basis of resilience it is extraordinary”, he said, recalling that “In the crisis in Ukraine, Europe remained united and chose to remain on the side of those who suffer. In the crisis caused by the pandemic, vaccines arrived in less than a year, everyone thought that the Europeans would go their own way and instead we went ahead together, making common loans. In the case of energy we expected rationing and instead in a few months we found alternative supplies. As Europeans we have to roll up our sleeves but we know we will do things we didn't imagine we could do".
Lagarde then spoke of another fundamental problem that the world is called to face, the climate change: “People will say that the ECB has to think about its own priorities, price stability. But I say that climate change has an effect on price stability and we have to predict what the damage will be from climate change,” explained Lagarde.
Lagarde: “Cryptocurrencies? A stupid risk"
“Cryptocurrencies? Forget them. Cryptocurrencies are a stupid risk”. This is the peremptory response that Lagarde gave when answering a student's question. “You take risks in life but not stupid risks,” he added, then moving on to talk about thedigital euro: “It is a project that the Bank follows closely because “everything becomes digital”, said the number one of Eurotower, recalling that the decision whether to go ahead or not with the digital euro will be taken by the Governing Council in October.
Remaining on technology, Lagarde also answered a question about theartificial intelligence, arguing that there is a risk that "this extraordinary innovation will get out of hand". For Lagarde "it is essential to overcome the risk, people want to control their own destiny and do not want it to be governed by an algorithm".
Ceccherini: "A Eurobarometer to measure citizens' economic and financial education"
“As one can still in a community born around the Euro, continuing to wonder about the usefulness or otherwise of doing more economic and financial education is sincerely an inexplicable mystery. Unless you guys don't want to grow up as citizens, but as subjects. – said the president of the Osservatorio Giovani-Editori Andrea Ceccherini – This is the risk that together you must and must avoid. And to those who, with a raised finger, allow themselves to tell us that education costs money, we respond convincingly with the words of the legendary President of Harvard University Darek Bok, 'if you think that education costs money, then try ignorance '.
Ceccherini then launched a proposal: "If it is true that today, in the age of social networks, a tweet can trigger the race to withdraw deposits as seems to have happened to SVB in the USA, why not think about theestablishment of a Eurobarometer which measures the competence and level of education of future citizens of the Union? And why not set up an annual European day of economic and financial education for young people, where the results of the Eurobarometer are illustrated annually and reflect on the most effective strategies for overcoming this challenge and making the European Union the community that stands out among all in this field ?”.
An idea that Christine Lagarde welcomed “The idea is excellent and we can create something with a great continental dimension. It's an excellent proposition to explore with central banks. Italy and France, for example, already have financial literacy programs and the ECB is also attentive to young people. In fact, we have doubled the number of scholarships and we are promoting the study of macroeconomics by female students”.
