Highlights: Trichet comments to EU Parliament committee

(BestGrowthStock) – Following are comments by European Central Bank President Jean-Claude Trichet to a hearing of the Economic and Monetary Affairs Committee of the European Parliament in Brussels.


“I only clarify that for us we have the monetary policy stance, which is designed to ensure price stability; and we have the non-standard measures that are there to permit to have, when needed, a better functioning of the monetary policy transmission mechanism when you have markets that are hampered and difficulty precisely to channel the interest rates that we are deciding.”


“I don’t believe that financial stability in the euro zone, given what I know could really be called into question in a serious way. Now, okay, for the moment we can see that there is a problem; but I don’t think it will really be called into question fundamentally.”


“For me, the governments, aware of what happened and faced with this situation that is doubtless difficult, are now taking the decisions that they regard as appropriate and which are particularly — perhaps undervalued by commentators at the moment. I would say by the way that pundits are tending to underestimate the determination of governments and the determination of the college that makes up the Eurogroup, and indeed the 27-member state Council.”


“In stating very explicitly that the euro area will be fully consistent with IMF policy and IMF practices as regard private sector involvement, the position made public by governments last Sunday is a useful clarification.”


“I had the opportunity last week to mention in the Parliament’s 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 (ECB) 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.”

“We agree in principle with your 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 open.

“Regarding the second main innovation, the operationalisation of the debt criterion on the basis of 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.”

“There is a need to reinforce the independence of surveillance by strengthening further the Commission’s 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.”


“The concept of currency war is one which is completely inappropriate to use in my view. We need no wars of any kind, but a strong and renewed commitment to confident and resolute cooperation.”

“First there is the relationship between the major floating currencies of the advanced economies such as the dollar, the euro, the yen, the pound sterling, Canadian dollar, and so forth. These currencies. And in the case of the euro, that currency, the currencies that preceded the euro have been floating since the collapse of the Bretton Woods system at the beginning of the ’70s. 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 toward more flexible exchange rates involving a gradual and orderly appreciation of their currencies vis-a-vis the major convertible currencies is also in the interest of the emerging economies concerned and in the interest of the international community.”


“Recent surveys and data releases have generally confirmed our view of a positive underlying momentum in the economic recovery in the euro area. Inflation rates in the euro area are currently at 1.9 percent.

“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 our aim of keeping inflation rates below 2 percent, but close to 2 percent over the medium term.

“Our monetary analysis confirms that inflationary pressures remain contained, as reflected in low growth rates of borrowed money and loans. Developments in recent months suggest that the growth of loans to nonfinancial corporations has earlier this year started to show again an increasing trend, while the growth of loans to households has remained positive.”


“I cannot prejudge according to our rules the upcoming decisions of the Governing Council. However, as you know better than anybody, 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 for the treaty, which is to maintain price stability in the euro area over the medium term.”

Highlights: Trichet comments to EU Parliament committee