Local view for "http://purl.org/linkedpolitics/eu/plenary/2010-03-25-Speech-4-011"
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"Mr President, ladies and gentlemen, I am pleased to be here with you on the occasion of the debate on the resolution concerning the European Central Bank annual report for 2008.
The Governing Council is of the opinion that the current monetary policy stance is appropriate, and that the continued firm anchoring of inflation expectations bodes well for price stability in the medium term.
Let me now turn to some of the issues you raise in the resolution and which were mentioned in the report.
On the issues of accountability and transparency, we very much appreciate the regular dialogue with the European Parliament and the constructive spirit with which this exchange is conducted.
I therefore welcome the repeated support by the Committee on Economic and Monetary Affairs for our quarterly monetary dialogue. I think, as it was said again very eloquently by the rapporteur, we are accountable to the European people, which means to Parliament.
We consider the ECB to be one of the world’s most transparent central banks. Our practice of holding a press conference immediately after the Governing Council meeting on monetary policy each month remains a pioneering initiative that has not yet been replicated by our major sister institutions. With the publication of our comprehensive introductory statement in real time, we explain policy decisions and their underlying rationale.
During the crisis, as you know, we have further intensified our communication efforts and thereby helped to smooth financial market reactions, to build confidence and lay the foundations for recovery.
You have also requested the views of the ECB on the establishment of a clearing house for instruments such as credit default swaps (CDSs) within the euro area. I would like to say that the robustness of euro-denominated CDS markets is of direct relevance for the Eurosystem as regards control over its currency and financial stability in the euro area.
Central counterparty clearing is very important, not only for delivering transparency, but also for diversifying and sharing risk exposures and reducing the incentives to take excessive risks. Certain financial instruments which were introduced for hedging should not be misused for speculation. Regulators should be able to undertake effective investigations into possible improper conduct, and there it seems to me that we are very much in line with Parliament’s concerns.
Let me say just a word on the outlook for EMU during challenging times. An economic recovery is in progress, but this does not mean that the crisis is over. For one thing, we know that the pace of recovery will be uneven and we cannot rule out setbacks.
For another, we are still facing numerous challenges regarding the reform of our financial system. Finance must play a constructive role, and not a destructive one, in our economies. The litmus test for a constructive role is that finance serves the real economy. To ensure such a role, we still need to improve the functioning of financial systems considerably further.
As a result of the parliamentary elections last year, this year’s debate has been postponed for a long period. However, this gives me the opportunity to discuss the current situation at the end of the debate.
Thus far, a great deal of attention has been focused on the banking sector. Effective reforms also have to look very closely at non-bank financial institutions and at the set-up and functioning of financial markets. We have to devise mechanisms and incentives to ensure that finance does not spiral out of control in the destructive way that it did just prior to the crisis.
We have to contain systemic disruptions that lead to economic hardship for the people of Europe. Setting up the European Systemic Risk Board, legislation for which is currently being considered by the Parliament, is part of the correct response to this challenge.
There are other challenges facing the European economy, and they are associated with public finances, as was again stressed by the rapporteur, and sovereign financial health.
Within Europe’s economic and monetary union, there is a clear allocation of responsibilities. With respect to that allocation of responsibilities, everyone can count on the commitment of the ECB to maintain price stability in the euro area as a whole over the medium term.
Based on our last projections for this year, we will have at the end of this year, after 12 years of the euro, inflation at a yearly average of 1.95%. That is in line with our definition of price stability: less than 2%, but close to 2%.
The commitment of the ECB, the strategy of the ECB and its track record are consistent. The smooth functioning of Europe’s economic and monetary union does not rest only on monetary union but also on economic union. Policy makers at the national level must keep public finances sound and their economies competitive.
In the current circumstances, where Europe faces pivotal decisions, it is more important than ever to recognise that a prosperous union requires determined action by all. Monetary union in Europe is far more, in my opinion, than a monetary arrangement. It is a union of shared destiny.
This destiny is for our common good, and it is the vision of our founding fathers. Monetary union is not a matter of convenience. It is part of an overarching process of advancing the integration of the people in Europe that began after the Second World War.
I believe we often play down the achievement that Europe has attained. We are often too quick to criticise our institutions and processes. But they have generally worked well, even in the most difficult times. I trust that European institutions and processes have remained effective during the financial crisis.
Mr President, as you know, the European Central Bank welcomes the very close links with Parliament, which incidentally go far beyond the obligations provided for by the treaty. Over the years, we have established very fruitful dialogue, and I would say that the excellent reports that we have just heard from Mr Scicluna and Mr Giegold are further evidence of this.
On this side of the Atlantic, we have avoided dramatic events that could have triggered a new intensification of the crisis, which started in the United States in September 2008. It is within this present context that I appreciate the commitment of euro area Member States, made on the occasion of the last European Council meeting, to take determined and coordinated action, if needed, to safeguard financial stability in the euro area.
I would also take advantage of my presence in front of the European Parliament to lay out what I have already mentioned at the hearing before the Committee on Economic and Monetary Affairs on Monday. It is the intention of the ECB’s Governing Council to keep the minimum credit threshold in the collateral framework at investment grade level (BBB-) beyond the end of 2010. In parallel, we will introduce, as of January 2011, a graded haircut schedule, which will continue to adequately protect the Eurosystem. I will provide the technical details when reporting on the Governing Council decisions of our next meeting on 8 April.
Let me conclude. The introduction of the single currency just over a decade ago represents the greatest achievement, in my view, in the history of European integration to date – a process that has ensured peace and prosperity in Europe.
The global financial crisis has brought fresh challenges to which we in Europe have risen. Our monetary union and our very close ties, inside the single market, with all EU Member States’ economies have prevented the crisis from being compounded by currency crises, as was the experience in the early 1990s.
Today, Europe faces further pivotal decisions. Our common task is to continue to ensure peace and prosperity, to make our union an even more attractive place to live and work in.
For this we need strengthened surveillance as again was said by the rapporteurs, and strengthened cooperation. We also need to revive the sense of common purpose, the shared ideals that motivated our founding fathers. Their endeavour was visionary and all that we see in today’s world confirms their lucidity.
Today, in my statement, I will briefly review the economic developments observed in the past and the monetary policy measures taken by the European Central Bank. Then I will address a few points that were raised in the proposal for a resolution and I will say a few words about the current situation.
First, on the economic developments and monetary policy over the past year. In 2009, as was said very eloquently by Mr Scicluna, the European Central Bank was operating in an environment that future economic historians are likely to describe as the most difficult one for advanced economies since the Second World War.
Following the profound intensification of the financial crisis in the autumn of 2008, 2009 started with a continued synchronised freefall in economic activity worldwide. Until around April last year, economic activity was declining, month after month. During this period, the trade-mark which was vital for maintaining confidence – and it was the trade-mark of the ECB – was the ability to take the immediate and exceptional decisions that were necessary whilst, at the same time, remaining inflexibly attached to our primary objective of maintaining price stability in the medium term.
Overall, our non-standard monetary policy measures, which are known collectively as enhanced credit support, have served, we trust, the euro area economy well. They have supported the functioning of the money market, contributed to improving financing conditions and allowed for a better flow of credit to the real economy than could have been achieved through interest rate reductions alone. By and large, banks have been passing on the sharply lower key ECB interest rates to households and businesses.
The guiding principle is that, to the extent that the situation returns to normal, keeping these measures in place for longer than required risks changing the behaviour of financial market participants in an undesirable manner, and we do not wish to breed dependency.
This is why, in December 2009, we began to gradually phase out some of our extraordinary liquidity measures, taking account of improvements in financial markets. In particular, we scaled back the number, frequency and maturity of longer-term refinancing operations. At the same time, we have committed to maintaining fully accommodating liquidity support to the euro area banking system until at least October this year."@en1
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"(The speaker added in French and German: ‘We share a destiny in common.’)"1
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