FRANKFURT (MNI) – The following is the first part of a text of
European Central Bank President Jean-Claude Trichet’s opening statement
to the Economic and Monetary Affairs committee of the European
Parliament in Brussels on Tuesday:
“Dear Madam Chair, Dear Honourable Members,
Since our last meeting in September, the euro area governments were
called upon to demonstrate their ability and willingness to safeguard
economic stability in the euro area. I refer in particular to the
economic and financial adjustment programme which was agreed by the
Irish government following the successful negotiations with the European
Commission, in liaison with the ECB, and the IMF, and which the
Governing Council welcomes.
In Hinblick auf diese Entwicklungen moechte ich mich in meiner
Einfuehrung im Wesentlichen auf zwei Themen konzentrieren: die
allgemeine wirtschaftliche Lage im Eurogebiet and das geplante neue
wirtschaftspolitische Rahmenwerk fuer die EU und insbesondere das
Eurogebiet. Le sujet crucial de la reforme de la gouvernance economique
est particulierement important pour cette Commission. Je me pencherai
enfin brievement sur les reformes en cours en matiere de regulation
financiere.
I. Economic and Monetary Developments
With regard to the euro area macroeconomic situation, recent
surveys and data releases have generally confirmed our view of a
positive underlying momentum of the economic recovery in the euro area.
Inflation rates in the euro area are currently at 1.9%. Looking ahead,
we expect inflation to hover around that level for the next few months
before moderating in the course of next year. In the absence of
inflationary and deflationary pressures, inflation expectations over the
medium to longer term continue to be firmly anchored in line with the
Governing Councils aim of keeping inflation rates below 2%, close to 2%
over the medium term.
Our monetary analysis confirms that inflationary pressures over the
medium term remain contained, as reflected in low growth rates of broad
money and loans. Developments in recent months suggest that the growth
of loans to non-financial corporations has, earlier this year, started
to show again an increasing trend, while the growth of loans to
households has remained positive.
As regards the Governing Council’s assessment of the monetary
policy stance, please note that, with only two days before our next
monetary policy meeting this Thursday, I am in the ‘purdah’ period. I
cannot prejudge in any respect, according to our rules, the upcoming
decisions of the Governing Council. However, as you know, what I can
tell you is that all decisions by the
Governing Council have been and will be taken with a view to
deliver on our mandate from the Treaty, which is to maintain price
stability in the euro area over the medium term. Now turning to the
issues that you raised, let me say a few words on exchange rate
developments. The concept of ‘currency war’ is one which is completely
inappropriate to use. We need no ‘wars’ of any kind, but a strong and
renewed commitment to confident and resolute cooperation. There are two
main topics that need to be tackled seriously. First, there is the
relationship between the major floating convertible currencies of the
industrialised countries, such as the dollar, the euro, the yen and the
pound sterling. These currencies – or, in the case of the euro, the
currencies that preceded it – have been floating since the collapse of
the Bretton Woods system at the beginning of the 1970s. In this respect,
we all consider that excess volatility and disorderly movements in
exchange rates have adverse implications for economic and financial
stability. The second topic is that of emerging market economies which
have considerable current account surpluses and exchange rates that are
not sufficiently flexible. On this issue, commitments have been made by
the G20. A move towards more flexible exchange rates, involving a
gradual and orderly appreciation of their currencies vis–vis the major
convertible currencies, is also in the interests of the emerging
economies concerned and in the interests of the international community.
II.
II. Reform of Economic Governance
Honourable members, as you know, the ECB is responsible for the ‘M’
in EMU. But we have our views on the ‘E.’ You have asked me to address
in more detail in this meeting economic governance. I had the
opportunity last week to mention in the Parliaments Plenary that the
Commission proposals represent an improvement of the current fiscal and
macroeconomic surveillance framework for EU members outside the euro
area. However, the Governing Council considers that these proposals are
not bold enough to appropriately consolidate and reinforce the
functioning of Economic and Monetary Union. Indeed, a better functioning
of economic union is crucial for the long-term stability, prosperity and
balanced economic development of the euro area. Now that Council and
Parliament have started their legislative work, let me elaborate on the
proposed legal acts.
With regard to the fiscal aspects, and the Stability and Growth
Pacts preventive arm, the Commission proposals go in the right
direction on a number of issues. We agree in principle with the approach
to define prudent fiscal policies on the basis of expenditure growth.
However, for the implementation of this approach some detail needs to be
added and we think that the limits for deviations from prudent policies
should not be overly generous.
Regarding the second main innovation, the operationalisation of the
debt criterion on the basis of a numerical benchmark, is in principle
welcome. However, we are concerned that the proposed numerical benchmark
may not be sufficiently ambitious. Moreover, to ensure strict
enforcement of the provision, it is important that the room for
interference is limited to the absolute minimum. Thirdly, the
introduction of new and graduated financial enforcement measures and
sanctions, along with strengthened decision-making procedures (the right
of proposal for the Commission and the reverse majority rule) go in the
right direction of a rules-based quasi-automatic regime. However, the
ECB has serious concerns regarding the provisions according to which,
following a reasoned request by the relevant Member State, or on grounds
of “exceptional economic circumstances”, the sanction could be lifted.
Such provisions leave considerable room for discretion and weaken the ex
ante effectiveness of the new framework. In the same vein, the ECB has
serious doubts whether the proposed exemption clause in case of a
‘severe economic downturn of a general nature’ should be introduced and
specified ex ante. Moreover, we need more independent assessments. There
is a need to reinforce the independence of surveillance by strengthening
further the Commissions internal procedures and by setting up an
independent body of “wise persons” at the EU level to provide external
assessment of fiscal policies and of the implementation of the
surveillance framework. In our view, those issues are not sufficiently
addressed in the Commission proposals.
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