12 November 2015

Hearing at the European Parliament’s Economic and Monetary Affairs Committee

Introductory statement by Mario Draghi, President of the ECB, Brussels

Economic developments and monetary policy

Incoming data confirm that the recovery in the euro area is progressing moderately. So far, economic activity in the euro area has shown some degree of resilience in the face of external influences that tend to weaken demand. While external demand has receded, euro area exports market shares have increased. The lower cost of energy and our monetary policy measures are supporting consumption and, increasingly, new capital formation.

However, downside risks stemming from global growth and trade are clearly visible. Moreover, inflation dynamics have somewhat weakened, mainly due to lower oil prices and the delayed effects of the stronger euro exchange rate seen earlier in the year. In addition, price pressures – such as from producer prices – remain very subdued. [...]

If we were to conclude that our medium-term price stability objective is at risk, we would act by using all the instruments available within our mandate to ensure that an appropriate degree of monetary accommodation is maintained. Consistent with our forward guidance, the asset purchase programme is considered to be a particularly powerful and flexible instrument. In fact, we have always said that our purchases would run beyond end-September 2016 in case we do not see a sustained adjustment in the path of inflation that is consistent with our aim of achieving inflation rates below, but close to, 2% over the medium term. Other instruments could also be activated to strengthen the impact of the purchase programme if necessary.

The ECB and the macroeconomic adjustment programmes

[...] Since 2010, three countries have now successfully completed their programmes, and Ireland is a particularly good example of how such programmes can deliver the necessary adjustment and restore financial stability, economic competitiveness and fiscal sustainability. It has shown that a country which takes strong ownership of its programme can come out of it with robust growth and a more stable financial system, and that eventually employment will also rebound. [...]

Throughout the programmes in Ireland and elsewhere, the ECB has played the role assigned to it under the Treaty – to be the central bank for the euro area and to provide liquidity to financial institutions, including those in programme countries, when warranted. At times, this meant that risk-management considerations made it necessary for us to consider the progress of programme implementation when deciding on provision of further liquidity if the soundness of the domestic financial sector was intimately linked to programme success. We did so in full accordance with our rules and legal framework and in full independence. This was the case for Ireland. And this continues to be the case for Greece and Cyprus.

Please allow me to conclude.

Five years ago, the programme framework came to life. It is certainly part of our path toward a genuine Economic and Monetary Union to integrate the European Stability Mechanism and the related programme work fully into the legal framework of the European Union; we again called for this most recently in the Five Presidents’ Report. But it is even more important that we take decisive steps to avoid a Member State needing a programme in the first place. That is why completing the banking union, embarking on a new economic convergence process towards more resilient economies and achieving a fiscal union that ensures both fiscal sustainability and fiscal stabilisation are all crucial to providing a long-term vision of where EMU is heading. The Commission package adopted three weeks ago is a first step in this direction. But more will need to follow.

Full speech

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