“Cross-border mergers” between European banks so that they can “actually compete at the scale, at the depth and at the range” of other financial institutions around the world, “including the American banks or the Chinese banks, is in my view desirable”, declared the President of the European Central Bank (ECB), Christine Lagarde, on Monday 30 September at a hearing of the European Parliament’s Committee on Economic and Monetary Affairs.
Ms Lagarde was answering a number of questions from MEPs such as Fernando Navarrete Rojas (EPP, Spanish), Jónas Fernández (S&D, Spanish) and Giovanni Crosetto (ECR, Italian) on the Italian bank Unicredit increasing its stake in the German bank Commerzbank, despite the reluctance of the German government (see EUROPE 13488/23).
The President of the ECB also reiterated the importance of completing the banking union with the creation of a European deposit insurance scheme (EDIS) and making the capital markets union (CMU) a reality during this legislature.
CMU. Ms Lagarde felt that progress in integrating capital markets in the EU should be “a cornerstone of the EU’s competitiveness strategy”. In her view, this will depend on the EU’s ability to “rise above individual interests and competing national priorities”.
The ECB President advocated three levels of action: (1) improve the way Europeans save, by allowing them to invest part of their deposits - €1,100 billion by 2022 - in capital markets; (2) put in place “a single regulatory and supervisory ecosystem”, taking inspiration from the ‘Single Banking Supervision Mechanism’ (SSM) to develop the European Securities and Markets Authority; (3) promote the integration of financial infrastructures, especially market and post-market structures.
Damian Boeselager (Greens/EFA, German) asked her what she would say to European leaders to convince them to move forward on this issue. The main factor is “innovation” and the EU’s ability to close its productivity gap, Mrs Lagarde emphasised. Creators in Europe need capital, and if they can’t find it in the EU, they’ll look elsewhere, she warned.
Inflation. The ECB President also explained the decisions taken by the monetary institute at the beginning of September, in particular the further cut in the interest rate on the deposit facility (see EUROPE 13481/2). She noted the progress made in the fight against inflation in the euro area: price rises reached 10.6% in October 2022, 5.2% in September 2023 - when the key interest rates were last raised - and 2.6% in June, when they were cut for the first time.
The ECB forecasts inflation of 2.5% in 2024, 2.2% in 2025 and 1.9% in 2026.
Finally, Ms Lagarde indicated that the European institution had launched a new evaluation of its monetary policy strategy, more limited in scope than the July 2021 review. This assessment will be twofold: - changes in the inflationary environment; - the implications of these developments for monetary policy strategy, including the lessons to be learned from periods of low and high inflation. The results will be known in the second half of 2025. (Original version in French by Mathieu Bion)