Frankfurt, 09/01/2003 (Agence Europe) - During the first meeting in 2003 of its Governing Council, on 9 January in Frankfurt, attended by Ecofin Council President Nicos Christodoulakis and European Commissioner Pedro Solbes, the European Central Bank did not change its key rates. The deposit facility stays at 1.75% (as it has done since the 0.5% cut decided on 5 December last: see EUROPE of 6 December, p.9), the minimum bid rate applied to main refinancing operations stands at 2.75% and the marginal lending facility at 3.75%.
"We consider that the outlook for price stability in the medium term has not changed since our decision of 5 December to reduce the key ECB interest rates", ECB President Wim Duisenberg said on Thursday during his press conference. While considering that the uncertainty prevailing over oil prices makes any short term forecasts difficult, he pointed out that the inflation rate will probably stabilise in 2003 at a level below 2%. On condition, he specified, that wage developments are moderate. Wage moderation, he said, is crucial for maintaining price stability and for improving economic and job prospects. However, he regretted the fact that, despite the weakening of economic activity, wage rises continued until early 2002 and "it is not yet clear whether this trend has come to a halt".
Regarding growth prospects in the euro zone, the most likely scenario remains that of gradual increase in the growth rates of GDP at levels close to the growth potential later on in the year, Mr Duisenberg said. He warned, however, that this is "provided that the factors currently contributing to the general climate of uncertainty gradually unwind". He went on to admit that investors continue to feel a "high level of uncertainty", and that there are still "risks relating to a disorderly adjustment of the past accumulation of macroeconomic imbalances, especially outside the euro area" without counting the impact of current "geopolitical tension". "I would have hoped that this climate would disappear" but the uncertainty that "permeates the minds of consumers and investors" remains my "main concern", Mr Duisenberg admitted. He repeated that a major contribution to growth in the euro zone should also come from fiscal and structural policies. Governments, he said, should place emphasis on "growth-oriented consolidation policies that strengthen the productive forces of the economy". When asked whether he were "frustrated" by the slowness of reform, the ECB President answered: "Not frustrated, but disappointed".
Will the European Commission end up being lenient with Germany despite its warning on Wednesday?, he was asked. Mr Duisenberg did not describe the Commission's behaviour as lenient as, and "rightly so", it has initiated procedure for excessive deficit, a procedure that the German government has "rightly" accepted. It is the Commission that is the "guardian" of the Stability and Growth Pact, and the ECB does not play any role, Mr Duisenberg recalled.
Furthermore, Mr Duisenberg mainly answered questions on:
- His early departure from office, announced for 9 July this year. Today, he said, he wrote to the Secretary General of the Council , Javier Solana, to request that he set in motion the process for the appointment of the successors for himself and for Ms Hämäläinen (Ed.: the Finnish official at the ECB Executive Board for the management of risks, operations and payment systems). It is a pure formality, he said, insisting that, in his letter, he repeated what he had told Mr Aznar last year, when he was President of the European Council, namely that he requests to leave on 9 July 2003 or when the "Heads of State and government find it is in the interest of an orderly transition". In response to a journalist who wished to know whether, should Mr Trichet not be able to succeed him because of the trial under way in France, he would be in favour of another French candidate, he said that, of course, he could not answer.
- The share of the euro in world reserves: end 2001, it was 13% of the total (as, hitherto, all the currencies that disappeared with the euro: DM, franc, lira, peseta ….) but one has the impression that this percentage increased in 2002, Mr Duisenberg remarked (data for end 2002 are not yet available). At any rate, it will be a very slow process, he added. When questioned on the ECB's "strategy" on this subject, he admitted: "we are more or less indifferent", as their aim is not to have more euros in official world reserves. When asked how he would invest his own reserves today as, when he was governor of the bank of the Netherlands, he wanted to maintain dollar/DM reserves at 50/50, he playfully replied: "Personally, I am in the happy circumstance that I don't have reserves".