Strasbourg, 02/07/2002 (Agence Europe) - At the European Parliament's annual debate with the President of the European Central Bank (the first such debate since the changeover to the euro) in Strasbourg on Tuesday several MEPs said that the single currently had demonstrated its capacity to resist external shocks. This was hammered home by German Social Democrat Christa Randzio-Plath, President of the Economic and Monetary Committee, but she was less happy about the feeling citizens have about prices since the changeover to the single currency. Wim Duisenberg, ECB President, said "the increase in annual consumer price inflation in the euro area from 2.0% in December 2001 to 2.7% in January 2002 has unfortunately been associated, in many people's minds, with the cash changeover. In reality, other factors contributed to this increase, such as the rise in vegetable prices related to adverse weather conditions and higher tobacco taxes in several euro area countries. But it has to be recognised that, in particular in some sectors with a low level of competition, some upward price adjustments might have occurred in connection with the cash changeover. However, there were also price reductions in the euro area associated with the cash changeover". Duisenberg admitted he was "not satisfied" with inflation, but added that factors that contributed to the rise inflation "could not be controlled by the ECB".
Moving on to the economic situation, Duisenberg said that the "impact of the terrorist attacks on economic confidence has gradually faded away and economic activity has stabilised. While the strength of the ongoing recovery is still subject to uncertainty, the most likely scenario is for economic activity to gradually accelerate and reach levels in line with trend potential growth later this year. Regarding monetary developments, we saw a high demand for liquid and safe assets in the autumn of last year, particularly associated with financial market uncertainty following the terrorist attacks"… "Recent data indicate a new increase in the demand for liquid assets… these developments need to be closely monitored, as they may start to point to upward risks to price stability". He repeated yet again that wage moderation was "crucial" for maintaining price stability, with "wage moderation" being "a key factor in favouring the expansion of employment" and growth. He said the ECB would contribute to growth by "focussing on maintaining price stability in the medium term. But other policy actors also have to take up their responsibilities"… "Worrying developments in fiscal policy in some countries over the last few months" led him to call for the Stability Pact to be respected, along with pledges to reach budget equilibrium in 2003 or 2004.
Rapporteur Piia-Noora Kauppi (EPP-ED, Finland) raised the issue of the euro catching up with the dollar, wondering how this would impact on inflation. She said it was a good development, especially since it is a gradual change that was not taking place too quickly.