Brussels, 22/04/2002 (Agence Europe) - Price stability is the European Central Bank's key objective and it does not contradict the supplementary objectives of sustainable growth and high employment, not to mention the economic and social benefits that flow from it for European citizens, who have often suffered from the impact of high inflation rates. This is one of the main messages on Monday afternoon from Lucas Papademos, Christian Noyer's successor (when his term of office runs out at the end of May 2002) as Vice-President of the European Central Bank, addressing MEPs on the European Parliament's Economic and Monetary Committee.
The hearing was more than simple rubber-stamping, since it forms part of the EU's transparent monetary policy strategy, pointed out the President of the EP Committee, Christa Randzio-Plath, noting that experts already knew Mr Papademos, but not citizens, although they had the right to know who the new member of the ECB's Governing Council was. Lucas Papademos is already a member of the Board of Governors since he is the Governor of Greece's Central Bank, and he clearly acknowledged the importance of the ECB's independence, but noted that this did not mean that it did not have to account for its policies, particularly to the European Parliament and "extensively and actively" provide information for the public. He said that transparency was also important for the "speed" with which monetary policy decisions could influence the real economy, added Mr Papademos. Responding to a question from the Luxembourg Socialist Robert Goebbels he said that the ECB felt that detailed publication of the subject matter of its meetings and the breakdown of votes could have "detrimental effects" on the quality of debate and expose the members of the ECB to national pressure.
To underline the importance that people had attributed to the "value of money" for centuries, Mr Papademos spoke in Greek first, but then in English to highlight the supranational nature of the ECB, quoting Aristotle who had noted that "if those who employ a currency system chose to change the agreed arrangement, this currency ceases to have its value and you can have plenty of money but not be able to use it". Price stability is a "common feature" of the policy of most Central Banks, he said, with the possible exception of the Federal Reserve. (In the 1980s, Mr Papademos worked as an economist at the Federal Reserve Bank of Boston.) To a question from Ms Randzio-Plath about whether the ECB's decisions had sometimes been wrong or too late, he said that the ECB's interest rate decisions had so far all abided by the Bank's mandate.
Asked by Otmar Karas (EPP-ED, Austria) about the Stability and Growth Pact and enlargement, Mr Papademos said that there was no reason to amend the convergence criteria that form the basis of the Stability and Growth Pact for the accession of new countries. In this connection, he said that Greece had experienced very high inflation accompanied by considerable budget imbalance and "rather mediocre growth performance", but the "stability path" went hand in hand with a "steady increase in economic growth".
Price stability, OK, but why this 2% dogma that you at the ECB have decreed and which isn't in the Treaties, rather than a normal range of for example between 1 and 3% that would make it possible to take better account of the real situation, asked Philippe Herzog, French United Left MEP. Mr Papademos said they'd chosen 2% to meet the demands of citizens who had long experienced high inflation and also to maintain continuity with regard to the policies pursued by most national central banks. As for Mr Herzog's suggestion that the ECB organise ex ante consultation, discreetly even, on the economic situation and the components of its policy, Mr Papademos replied that he favoured sharing information, dialogue about changes in the situation, economic perspectives and the ECB's policy stance, but didn't support consultation that didn't respect the respective responsibilities of economic and monetary institutions in the EU and "may raise doubts about the ability" of the ECB to carry out its mandate.
EUROPE will return to the remainder of this hearing and its conclusions tomorrow.