Brussels, 26/04/2006 (Agence Europe) - During a short hearing on Tuesday organised by the European Parliament's Economic and Monetary Affairs Committee, the Vice-President of the European Central Bank (ECB), Lucas Papademos, unveiled the Frankfurt-based ECB's 2005 annual report. He started by outlining the elements covered by the ECB in its economic and monetary analyses, leading it to raise interest rates in the eurozone in December 2005 (see EUROPE 9080) and March 2006 (see EUROPE 9143). In the substance and drift of his speech, Papademos took the same line as has become customary for the President of the Governing Council, Jean-Claude Trichet.
Arguing that recent data showed the ECB was right about its past decisions, Papademos said in response to MEPs' questions that new interest rate rises were on the cards for this year. He said the aim of the ECB's monetary policy was principally to ensure price stability in the medium-term. In line with inflationary risks identified in economic analysis and corroborated by monetary analysis, new interest rate rises are guaranteed later this year in order to effectively counteract inflationary risks in time, he told the President of the Economic and Monetary Affairs Committee, Pervenche Beres (PES, France).
Monetary policy is not the appropriate instrument for increasing growth because it has no effect on supply and for this reason, he said, the ECB has to consider structural measures, telling Cristobal Montoro Romero (EPP-ED, Spain) for reforms to stimulate productivity and increase the use of manpower, thereby creating jobs and leading to a better use of workers' resources. To a question from Alexander Radwan (CSU, Germany) on the impact of economic protectionism on growth in the eurozone, Papademos said economic protectionism was out of step with the EU's objectives. On implementation of the revised Stability and Growth Pact, Papademos said there had not been much progress. He said Member States had not made much of an effort and while it was totally reasonable to set mid-term targets, public deficits seemed to be being reduced at an extremely slow rate. He was very disappointed that many countries had not submitted credible stability programmes.
Papademos said that when examining the convergence reports on Slovenia and Lithuania, to be published by the European Commission and the ECB on 16 May, the ECB would be using the same analysis framework as in the past in order to ensure there was a high level of convergence on the economic front and whether it is being made tangible in the most sustainable manner.