Brussels, 14/03/2005 (Agence Europe) - During his quarterly speech on 14 March with the economic and monetary committee of the European Parliament, chaired by French Socialist Pervenche Berès, the president of the European Central Bank Jean-Claude Trichet declared that the discussion on the Stability and Growth Pact “needs to be brought to a convincing conclusion”. Trichet pointed out that since the beginning, they had clearly pointed out the need to say whether they needed to improve pact implementation, particularly its “preventive arm” but without weakening its “corrective arm”. He declared that the European Commission had an important role to play and welcomed the idea expressed by Dutch Socialist Ieke van den Burg. He said on several occasions that each institution had to exercise its own role, explaining that the Commission had the “monopoly regarding the proposal” and that the Council and the Bank had the duty to say what they thought. Questioned by CSU MEP Alexander Radwan, Mr Trichet explained why he considered the pact “crucial”, with the obvious considerations regarding price stability considered separately. He stated that they had a single currency in twelve countries but that they did not have a “federal budget or a fully fledged political federation…and the pact is our only response to the Euro-sceptics…when they say we've put the cart before the horses”. He explained that they were able to answer them, “yes, we do have a federal structure but we have a pact that enables us to organise monitoring of our economies and…peers surveillance…in order to reach cohesion and coherence in the Euro-zone. Danish Liberal Karin Rijs-Joergensen asked Trichet if he agreed with the “long” list of pertinent factors that allowed for greater flexibility in implementing the pact presented by the Luxembourg presidency. Mr Trichet explained tersely that, “we don't call for changes” in the pact. Astrid Lulling Luxembourg Christian Democrat asked what should be found when faced with such a “Cornelian dilemma” of leaving the pact as it stood or changing it with the risk of weakening it. Trichet said that he did not want to enter into this dilemma, “this is the Council's dilemma …we're going to see how the Council, Ecofin and the European Council decide, under the presidency of Jean-Claude Juncker. Mr Juncker has been very clear…each institution has to prepare to take its own responsibilities. Our mandate remains the same, to provide all Europeans with monetary stability over a long period”.
Speaking on the role of the different institutions, in the context of economic and monetary union, Pervenche Berès told Mr Trichet that she had the impression of getting contradictory messages, “Why tease Jean-Claude Juncker over the issue of who is Mr Euro? Don't we have room for two Mr Euros, one for the monetary chapter and the other for the economic angle? Trichet, smiling, said that he agreed with Mr Juncker and there was no problem between us. He added that he was delighted when Mr Juncker had been given the presidency of Eurogroup for a substantial time, which he described as a heavy and important responsibility. Hungarian MEP Laszlo Becsey (EPP-ED) asked about prospects for the ten new Member States to join the Euro zone. Trichet pointed out that three of these countries: Lithuania, Estonia and Slovenia, since June 2004: editor's note) like Denmark belong to the “Exchange rate 2 mechanism”. Trichet added that this process went very well and that the mechanism could perhaps be regarded as a sort of waiting room before joining the Euro, as soon as convergence criteria were established.
Several MEPs, like Cristobal Monotoro Romero (EPP-ED, Spain) were concerned at interest rates in the Euro zone. British Conservative Theresa Villiers asked whether a hike was inevitable. Trichet replied that their rates had remained unchanged since June 2003 and were at their lowest for thirty or even fifty years, which was good for growth and jobs, repeating the fact that current interest rates were appropriate. He added that they would remain vigilant and if they were convinced of the need to change rates they would not hesitate. However, replying to Italian Christian Democrat Paolo Cirino Pomicino, he was keen to point out that it was clear what the markets thought. There would be an increase in rates “later on” but the bank would remain loyal to its mandate, assuring price stability. On the question of inflation (one of the major concerns), Mr Trichet said, addressing consumers, that if they were afraid of consumers they were afraid of purchasing power, “don't hesitate, purchase, we are there to guarantee price stability, you can have confidence”.
In response to Pervenche Berès, who is concerned about the possible social impact of Guy Verhofstadt's proposal to make direct taxation slide toward more indirect taxation (see p.12), Mr Trichet gave his personal view as the ECB has not yet deliberated on this idea. He said, “generally speaking, in today's world, I am of the opinion that the guidance given by the Belgian prime minister is good guidance”. Between Member States, he recalled, there are enormous differences in the proportions of direct/indirect tax.
The next regular dialogue with President Trichet is foreseen for 23 May. In the meantime, Pervenche Berès announced, there will be: - on 30 March, a meeting in Paris with the governor of the Bank of France, Christian Noyer (formerly ECB vice-president); - on 19 April, a meeting with Mr Bini-Smaghi, successor to Padoa Schioppa at the ECB executive board; - and, on 25 April, a dinner with President Trichet and members of parliament.