Local view for "http://purl.org/linkedpolitics/eu/plenary/2005-07-04-Speech-1-080"
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"en.20050704.17.1-080"2
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".
Mr President, ladies and gentlemen, I have the honour of presenting to you today the 2004 Annual Report of the ECB. The European Central Bank is aware of the crucial importance of its democratic responsibility and has always stressed that its independence must go hand in hand with a strict obligation to justify its actions. The ECB therefore attaches the utmost importance to holding regular dialogues with the elected representatives of the European citizens. Allow me to say that I listened with the greatest interest to Mr Lauk’s report and to Mr Maaten’s report.
Finally, 2004 saw significant revisions of past deficits and debt figures in a few countries, undermining the effectiveness of EU fiscal surveillance. It is of vital importance that the reliable compilation and timely reporting of government finance statistics is ensured.
Turning to the crucial issue of structural reforms, the ECB welcomes and supports the renewed impetus for economic reform as a result of the relaunch of the Lisbon Strategy, its stronger focus on growth and employment, and the new governance framework aimed at improving the delivery of reforms. The new Integrated Guidelines for 2005-2008, comprising both the new Broad Economic Policy Guidelines and the new Employment Guidelines, should now set the stage for concrete action at EU level and by Member States.
I shall now say a few words about monetary policy in a vast and diversified euro area. The magnitude of inflation dispersion across euro-area countries is similar to the dispersion observed in the 14 US Metropolitan Statistical Areas. In a monetary union inflation and labour-cost differentials across regions or countries are the natural way of adjusting relative prices in the face of asymmetric demand or supply developments. Such adjustments within the euro area have been larger and more frequent than anticipated. From that standpoint the euro area is more flexible than had been expected by many observers. Whilst generally adjustments of relative prices are economically justified, there are cases where inflation differentials may be due to inappropriate national economic policies and rigidities in labour and product markets. For these countries structural reforms are very highly advisable.
I was pleased to note, whilst listening to the rapporteur, that you share our view that the regular dialogue is a very important part of the overall framework. The ECB is grateful for the suggestions made by the European Parliament and considers them with great care. In this respect, I can report that last year the ECB decided that it would henceforth publish its Financial Stability Review, in line with a proposal made by the European Parliament.
I note that on many important issues the views expressed in the motion for a resolution are very close to those held by the ECB, such as the statements regarding the ECB’s monetary policy conduct in 2004 and the diagnosis that the relative weakness of economic activity can be attributed to lack of structural reform. Your position with regard to the reform of the Stability and Growth Pact was also very close to the ECB’s views in this respect.
I also welcome the fact that the motion for a resolution compliments us for the work we undertook to prepare for the enlargement of the European Union, which marked another milestone towards an ever closer Union. The thorough preparations for this enlargement enabled the smooth entry of the ten new national central banks into the ESCB. We share your view on this particular point that the best possible preparation for adopting the euro is a high level of sustainable convergence, in accordance with the Maastricht criteria.
Although there are many topics on which we entirely share the views expressed in the motion for a resolution, there are some issues where we have a slightly different opinion. The motion for a resolution urged the ECB to consider the publication of 'summary minutes'. Yet I must say we continue to see great advantages in the communication channels chosen by the ECB. The approach chosen by the ECB to communicate its monetary policy decisions to the public almost in real time facilitates expectation formation and thus enhances the effectiveness of monetary policy. The ECB approach has achieved a high degree of monetary policy predictability and has allowed long-term inflation expectations to be anchored at healthy levels.
We have provided the European Parliament with extensive and up-to-date information through various channels and stand ready to continue to do so as regards the very important question of clearing and settlement. Should a directive on clearing and settlement be adopted at a later stage, these standards would have to be amended accordingly, if necessary.
Let me also tell you that we have read with the utmost interest the motion for a resolution on the implementation of an information and communication strategy on the euro and EMU. Amongst the measures suggested in this resolution is for the ECB to undertake a yearly quantitative analysis of the benefits of the single currency for citizens. I am not sure at this stage that such a yearly quantitative report would be the most appropriate means, for reasons of methodological and data constraints. But we will reflect on all appropriate means to enhance communication on the interest of the single currency for our fellow citizens of the euro area through the widest possible range of tools at our disposal – press conferences, publication of the annual reports and monthly bulletins, and speeches delivered and articles published all over the euro area.
Mr President, if I may, I should like to conclude by adding three remarks on Europe’s current situation, following the outcome of the French and Dutch referenda.
In my introductory remarks, I shall first review the economic and monetary developments in 2004 and set out our view of our economic prospects and of the monetary policy strategy.
First of all, the development of Europe has a rhythm of its own, which can only be evaluated with the passage of time. The European Central Bank and its President have confidence in Europe’s ability to overcome the current difficulties, and I fully shared the feeling of confidence and determination immediately expressed in the statement signed by your President, Josep Borrell Fontelles, and Jean-Claude Juncker and José Manuel Barroso.
My second point is that the challenges and the opportunities offered to Europe at the present time by European and world history, demography, technology and the economy are so significant that they make it even more urgent to implement the necessary programme of reforms devised in Lisbon and relaunched in Brussels during the March European Council. On this issue, as on many others, I fully agree with the rapporteur’s conclusion.
Finally, everyone can be sure that in the future, as in the past, we will fully adhere to our mandate: the draft Constitution does not comprise any changes to the operation of the European Central Bank and of the single currency, which are based on the extremely solid foundations bestowed upon them by the Treaty of Maastricht. Europe can rely on the European Central Bank and the euro system to remain, in all circumstances, anchors of stability and credibility, and on the ECB, within the limits of its responsibilities, to preserve confidence.
I shall then have something to say about a number of comments and proposals in the draft report on the ECB Annual Report for 2004.
Allow me to begin with the economic and monetary issues.
In 2004 the ECB’s monetary policy operated in an environment of gradual economic recovery in the euro area. Real GDP growth for the year as a whole stood at 1.8 %, compared with 0.5 % in the previous year. During the first half of 2004 economic activity showed relatively dynamic growth. In the second half, however, economic growth was only modest, partly on account of rising oil prices.
As regards price developments, underlying domestic inflationary pressures in the euro area remained contained, reflecting subdued increases in labour compensation and well-anchored inflation expectations. While the appreciation of the euro exchange rate in 2004 contributed to lower inflationary pressures, increases in administered prices, indirect taxes and rises in the oil price visibly affected headline inflation rates. Overall, the annual HICP inflation was 2.1 %, unchanged from the previous year.
Against the background of subdued domestic price pressure and a favourable outlook for price stability over the medium term, key ECB interest rates remained unchanged throughout the year at historically low levels. Interest rates remained low over the entire maturity spectrum, thereby lending considerable support to economic activity. As a matter of fact, our long-term rates are at their lowest level for 100 years.
Fiscal developments in the euro area in 2004 were, as has been said by the rapporteur, far from satisfactory. The average fiscal deficit in the euro area broadly stabilised at 2.7 % of GDP. This is a level which not only implies a rising debt ratio which could become unsustainable, but also leaves little safety margin for short-term budgetary relief in the event of adverse developments.
Discussions on a revision of the Stability and Growth Pact continued in 2004, resulting in a report adopted in March 2005. The budget implementation in 2005 and the preparation of the budget for 2006 both provide the first opportunities for all parties involved to rigorously implement the provisions of the Pact, so as to show that the Pact remains an effective framework for fiscal policy coordination and discipline. As the rapporteur said, everybody in this Parliament knows what was the ECB’s position throughout these discussions."@en1
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