ECB President Mario Draghi stressed on Monday 26 November the importance for euro area countries to use the current period of growth and accommodative monetary policy to rebuild their fiscal buffer in order to be better able to cope with any downturn in economic conditions.
"Room from our monetary policy should be used to rebuild fiscal buffers" to be mobilised when a new crisis breaks out, Mr Draghi said during a monetary dialogue with the European Parliament's Committee on Economic and Monetary Affairs.
In his view, restoring such a budgetary margin requires responsible fiscal policies to reduce debt.
"In reducing debt, [euro area countries] strengthen themselves," Draghi said in response to a question from Ramon Tremosa i Balcells (ALDE, Spain) on the Italian fiscal situation.
On Monday, signs of openness came from Rome as part of the budgetary arm wrestling match at the European level (see EUROPE 11242). In particular, the leader of the 5-star Movement, Luigi Di Maio, did not oppose a reduction in the budget deficit in nominal terms.
A meeting was scheduled for Monday evening on the Italian draft budget for 2019 in the presence of Prime Minister Giuseppe Conte, who had just returned from Brussels where he had raised the issue with his counterparts from the European Council (see EUROPE 12145), the Minister of Finance, Giovanni Tria, and Mr Di Maio and Mr Salvini.
QE. Mr Draghi also reiterated the ECB's wish to terminate the quantitative easing(QE) operation for the massive repurchase of mainly public securities ‘in December’, if the updated inflation path confirms it. In November and December, redemptions will be reduced to €15 billion per month.
In 2019, the ECB's monetary policy will remain largely accommodative, Mr Draghi assured, through its policy of reinvesting maturing securities and forward guidance on key policy rates, which will remain at very low current levels until at least next summer.
On Thursday 13 December, the Council will discuss the future of monetary policy on the basis of new economic data.
Deepening the euro area. The President of the ECB also discussed with MEPs the deepening of Economic and Monetary Union, while the Eurogroup will make concrete proposals to the European Council (see EUROPE 12140) on 3 December.
Mr Draghi called for progress in three areas: - increased coordination of economic and budgetary policies, provided that "confidence in our common rules is revived"; - the establishment of a stabilisation budgetary function to help countries facing external shocks, provided that they comply with European budgetary rules; - the completion of the banking union in the euro area and the capital markets union in the EU. (Original version in French by Mathieu Bion)