Brussels, 23/05/2005 (Agence Europe) - Stating that the conditions for moderate growth in 2005 and 2006 were in place, the President of the European Central Bank, Jean-Claude Trichet, on Monday afternoon delivered the MEPs an analysis of the economic situation which was in line with that presented in previous quarterly meetings with the members of the economic and monetary committee. He also reiterated the ECB's calls for a very strict application of the rules of the Stability Pact and gave an overview of a euro zone where differences in growth between the Member States are not exactly a cause for concern, but cannot be ignored. On the flexibility of the Asian currencies, Mr Trichet described the Yuan as a currency which is undervalued compared to the dollar and the euro.
“The risks of a downturn have partially become reality in recent months”, Mr Trichet stressed. The increase in GDP of 0.5% in the first quarter may seem more favourable than 0.2% in the last quarter of 2004, but this increase is down to technical adjustments (notably the number of days worked) and the modest real growth of last quarter will continue in the first half of 2005, the ECB President observed. “Investment should continue to benefit from solid results, improved company efficiency and extremely favourable financing conditions. Externally speaking, euro zone exports should continue to benefit from world economic growth”, he added. “There is no significant evidence” of underlying inflationary pressure either, even though risks that this could increase remain, he said. “The currencies of a number of emerging countries in Asia are undervalued compared to international currencies, particularly the euro and the dollar”, he also pointed out, stressing that “this is the case with the Chinese currency, but it is not alone”. Karsten Friedrich Hoppenstedt (EPP-ED, Germany) asked Mr Trichet to put figures to the order of magnitude of the undervaluation of the Yuan compared to the euro, and was told that “there is a problem, and it must be resolved”, but “it is up to our Chinese partners to think about this”.
On disparities in inflation and growth within the euro zone, Mr Trichet repeated the point he made after the informal Ecofin (EUROPE 8948) that this was a “recurring theme of large monetary zones”, but that they “should be talked about because they reflect structural differences”. There are also disparities in terms of budgetary figures, because in 2005, many countries are set to record a deficit above 3%, Mr Trichet noted, going on to say that the Stability and Growth Pact (SGP) should be “applied strictly and in a timely fashion, to bring us back to good budgetary positions very quickly”. He reminded German CSU MEP Alexander Radwan of this point of view, adding: “this is extremely important; it's the credibility of the entire European system, of the euro zone and the economic and monetary union which are at stake”. “Why does the ECB keep trying to scare us?”, asked Luxembourg Socialist Robert Goebbels, referring to several studies which conclude that there are similar levels of productivity on either side of the Atlantic. “We are trying to understand”, Mr Trichet replied, explaining that the ECB and economists have observed an acceleration of progress in the productivity of work in the United States and a deceleration per employee and per hour in the EU, since 1995.
The ECB President objected to a question by the German Liberal Wolf Klinz, who asked about the possibility of the ECB offering loans based on different remuneration criteria depending on the quality of efforts made by the Member States in terms of budgetary stability. “We will ask for more guarantees if the market analysis is less favourable”, he told Werner Langen (EPP-ED, Germany), preferring to leave it up to the markets to ask themselves the same question. In answer to criticism on the ECB's “one size fits all” monetary policy, Mr Trichet said that “all economies, without exception, derive benefit from the single currency”. When asked by Cristobal Montoro Romero (EPP-ED, Spain) about the relationship between public deficit and confidence in economic agents, Mr Trichet explained that a certain level of deficit “does not stimulate growth or job creation”, but brings about “an absence of investment and consumption decisions”. He conceded to French Socialist Pervenche Berès that the “level of saving in Europe is about at the level of our investments”, even though “we could invest better, or maybe even much better, and maybe even better than that”.
Answering repeated questions on referendums on the Constitutional Treaty, especially from Dutch Socialist Ieke van den Burg, Mr Trichet gave the same answer: “I start from the assumption that they ayes will have it”. He told Paolo Cirino Pomicino (EPP-ED, Italy) that “I am a militant pro-European” and “I say that the ayes will have it, because I have confidence”.