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19 December 2011

ECON Committee: Deeper economic governance and credit ratings dominated debate with ECB President Draghi


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In his first exchange with the ECON Committee as ECB President, Mario Draghi again defended the ECB's traditional role as laid down in the EU treaty, and resisted calls for it to tackle the eurozone crisis more aggressively.


Draghi also said the "fiscal compact" deal was "a breakthrough", albeit one that could be improved upon, and that it was time to pay less attention to credit ratings.

Mr Draghi took the opportunity to set out his vision for better risk analysis and also the steps needed to emerge from the crisis.

Eurozone on the brink?

The question on everyone's lips and asked by Jean-Paul Gauzes (EPP, FR) was where the eurozone currently stood. Mr Draghi took the opportunity to explain his comments as reported the same day by a leading financial newspaper and interpreted as doubting the eurozone's survival prospects. "I have no doubt in the strength, permanence and irreversability of the euro", Mr Draghi said, adding that "morbid speculators" needed to be made aware of the potential cost of their actions.

Many MEPs pressed Mr Draghi on the need for growth. Sylvie Goulard (ALDE, FR) contested the view that the fiscal compact was a step in the right direction on the grounds that it did not address the growth needs and lacked democratic processes. "Austerity is not avoidable. There was no choice", Mr Draghi said. "To restore trust, we need the elements contained in the compact. On top of this we then need structural reforms to ensure growth", he added, outlining a two-step process which would also address growth.

Asked by Sven Giegold (Greens/EFA, DE) about the negative effects on growth resulting from the high interest rates demanded by the markets of certain EU countries, Mr Draghi denied that it was these rates which were hampering economic development. "These countries' growth is not blocked by high rates but by structural problems", he replied.

Towards more mature risk analysis

Both Mr Draghi and many MEPs focused on the role in the eurozone crisis of risk analysis in general and credit rating agencies in particular. In his opening remarks, Mr Draghi said it was time to move away from an automatic risk analysis process based solely on a "mechanistic interpretation" of credit rating agency opinions.  

Asked by Antolin Sanchez-Presedo (S&D, ES) whether markets were judging eurozone risk levels correctly, Mr Draghi replied that whereas before the Lehman crisis market players underestimated the weaknesses of some EU economies, they were now overestimating the level of risk. He added however that differences between EU economies would remain and that bond spreads would therefore persist.

A new year, more economic governance work

The European Parliament's work on economic governance will continue in earnest, both at the legislative level as co-legislator of two pieces of law to beef up fiscal surveillance by the Commission, and also in drafting the new intergovernmental agreement for closer economic governance, through its four representatives on the drafting working group. 

Apart from this, Parliament will also be co-legislator on rules to regulate credit rating agencies, bodies intrinsically involved in the evolving eurozone crisis.

Press release



© European Parliament


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