Local view for "http://purl.org/linkedpolitics/eu/plenary/2010-03-25-Speech-4-009"
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"en.20100325.3.4-009"2
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"Mr President, the last two years have certainly been the most challenging for the ECB, in its role as guardian of financial and price stability, since its inception. My report on the ECB’s 2008 annual report was drafted in this context.
Like previous rapporteurs, I believe that the dialogue between this Parliament and the ECB is constructive and is developing positively. This is something to build upon. I believe that Parliament should be more closely involved in the appointments of the ECB Executive Board members – including the next President of the ECB – by following the precedent that has recently been set by the procedure taken for the appointment of the new Vice-President of the institution.
The ECB is accountable to the citizens of Europe through the European Parliament. We must strengthen that accountability. Above all, the crisis has demonstrated that markets left unregulated do not always self-correct and are prone to systemic risk. For this reason, it is important to support and complete the comprehensive set of reforms to the financial architecture of the EU and, in particular, the establishment of a European Systemic Risk Board, a body designed to act as a watchdog, giving an early warning of any systemic risks of instability in the financial…
The report focuses on the ECB’s continued response to the crisis, its exit strategy proposals, the increasing imbalances within the eurozone, the reform of the EU’s financial architecture and, finally, issues related to the governance and accountability of this institution. I hope that a good balance has been found.
The financial and economic crisis has seen the worst global economic decline since the 1930s. After a relatively benign period of economic growth enjoyed across most of Europe, most Member States have had their economies stress-tested, not through a simulated model but in real time and with painfully real consequences. The result has been GDP growth of a meagre 0.7% in 2008, followed by a 4% contraction in 2009. Meanwhile, Member States across the EU have forecast a very sluggish and uneven return to growth in 2010 and 2011.
Most Member States are experiencing rising budgetary deficits and debts. The Commission’s economic forecast in autumn 2009 predicted average budget deficits across the eurozone of 6.4% and average government debts of 78.2%, figures which, in turn, are both expected to increase in 2010. It will take years for these figures, brought about by the financial and economic crisis, to return to the pre-crisis levels.
I believe that the ECB has responded fairly well to the crisis. The primary function of the ECB is to maintain price stability. Although inflation was far above the ECB’s self-imposed ceiling when it peaked at 4% in June and July 2008, inflation rates have since tumbled. The ECB has also steadily cut interest rates from a peak of 4.25% in June 2008 down to the current rate of 1% in May 2009, in a bid to reinvigorate lending and to kick-start the European economy.
The ECB’s additional role during the crisis has been to expand liquidity provisions through the use of non-standard measures. Without such financial life-support, many financial institutions holding the savings and pensions of many European citizens would undoubtedly have collapsed.
Of course, it could be suggested that the ECB’s interest rate cuts were not as radical as those taken by the likes of the US Federal Reserve or the Bank of England.
Similarly, while the ECB’s massive cash injections have kept many institutions from collapse, the reality is that many banks have not passed on the liquidity to customers, particularly to the detriment of the small and medium-sized businesses on whom economic recovery rests. Instead, many banks have used the liquidity to buttress their own position. To justified public revulsion, it has allowed them to make bonus payments as well.
I also cannot avoid making a quick reference to the policy responses needed to the current fiscal imbalances, a subject which is surrounded by a lot of confusion and which requires timely and decisive action. However, I will leave it to my colleagues here perhaps to amplify on this."@en1
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