Brussels, 23/09/2015 (Agence Europe) - The ECB will not hesitate to act if the medium-term inflation trajectory slows again, its President, Mario Draghi, reiterated on Wednesday 23 September.
“Should some of the downwards risks weaken the inflation outlook over the medium term more fundamentally than we project at present, we would not hesitate to act. The asset purchase programme has sufficient in-built flexibility. We will adjust its size, composition and duration as appropriate, if more monetary policy impulse should become necessary”, Draghi told a debate with the committee on economic and monetary affairs of the European Parliament.
Annual inflation dropped from 0.2% to 0.1% between July and August due to the fall in energy prices, according to the latest figures of the statistical office of the EU. “We are far from the 2% objective”, the ECB President noted, referring to “renewed” downwards risks.
Through its programme for the mass buy-back of public securities ('quantitative easing'), which will run until at least September 2016, the ECB had bought back €326 billion worth of public bonds as of Friday 18 September (see EUROPE 11381).
EMU. Draghi referred to the debate currently underway at European level on reinforcing economic and monetary union (EMU) (see EUROPE 11388). “The crisis has shown that monetary union requires a political centre”, which is capable of taking decisions in the “relevant fiscal, economic and financial fields for the euro area as a whole in a swift and transparent manner”, and based on full democratic legitimacy, he said. He went on to add: “It is in this spirit I have called repeatedly for a move from rules-based coordination to sharing of sovereignty within common institutions”, such as a euro area treasury. Additionally, in order to promote economic convergence, Draghi called for “stronger governance over structural reforms and tighter control of national fiscal policies”.
The former Governor of Banca d'Italia argued in favour of completing banking union in the eurozone by creating a common backstop for the Single Resolution Fund (SRF), the financial arm of banking union, and the creation of a European bank deposit guarantee scheme (see EUROPE 11394). It is a question of credibility to break the links between the banking crisis and the sovereign debt crisis, Draghi explained, adding that all savers should be dealt with on an equal footing. In response to Elisa Ferreira (S&D, Portugal), who asked about resistance (most notably from Germany: Ed) to the creation of a European deposit guarantee scheme, he agreed that the member states had to stick to the commitments they have made by getting to work on banking union.
The author of a draft report on the external representation of the eurozone (see EUROPE 11389), Sylvie Goulard (ALDE, France) asked the ECB President whether the European institution was prepared to communicate more about its activities within the Council on financial stability and the Basel Committee. “We can improve things”, but it is for the member states to make this decision, he replied.
When asked by Fabio Masi (GUE/NGL, Germany) about the structural reform of the banking sector (see EUROPE 11382), Draghi stressed the importance of ensuring that an initiative of this kind - which would potentially provide for a separation between high-risk market activities and retail activities - does not put the European banks in a situation of disadvantage compared to their international competitors. “We have to leave the member states a certain amount of discretionary leeway and they will in any case be coordinating with each other within the single supervision mechanism”, he said.
Greece. Draghi praised the “considerable” progress made in Greece in terms of budget and reforms. As regards the purchase by the ECB of Greek debt securities through the “quantitative easing” programme, he reiterated that such an “important” measure was linked to Greece sticking to the following conditions: complying with the third bailout plan, adopting prior actions to show its appropriation of the aid plan. “Once this has been done, there is still one step to undertake: an assessment of the debt sustainability. Then, space for debt relief opens up”, he said, warning that no Greek securities would be purchased until the first monitoring mission of the third bailout plan had been completed. (Original version in French by Mathieu Bion)