Brussels, 20/12/2006 (Agence Europe) - Returning to the subject of the latest rise in interest rates in the eurozone as he addressed the EP Committee on Economic and Monetary Affairs on Wednesday, Jean-Claude Trichet mainly defended the independence of the European Central Bank (ECB) given the criticism that the institution under his presidency is currently having vented upon it.
Sticking to the position presented after the meeting of the Governing Council on 7 December (EUROPE 9323), Trichet first of all pointed out that economic activity remains sound and that this is a low-risk zone. Overall inflation rates should, however, be around 2% next year and it will be necessary to monitor the situation very closely, he said, above all underlining salary developments which “could be stronger than expected”. According to the forecasts made by ECB services, the level of prices will be between 1.5% and 2.5% in 2007 and between 1.3% and 2.5% in 2008. Addressing Sarah Wagenknecht (GUE/NGL, Germany), the ECB president thus repeated his general message of “caution and moderation”. Shedding light on the relationship between productiveness, potential growth and monetary policy, Mr Trichet welcomed the new jobs that have been created since the introduction of single currency. Over the past eight years, the rate of unemployment has fallen (by 1.9 percentage points, he said) and 11.73 million jobs have been created with introduction of the euro, he stressed. Earlier, for the same geographic area and for the same duration, job creation stood at 2.65 million. At its policy level, the Frankfurt institution, he said, “did not take a mechanical approach”, but rather worked hard to analyse the real meaning of monetary changes alongside its analysis of economic data. It found the various rate increases, by 150 base points since December 2005, were totally justified.
Although many politicians slam the bank's monetary policy in the context of the pre-electoral campaign in France, the bank's independence must not be brought into question, Trichet asserted. He conscientiously sought to answer German CSU member Alexander Radwan, who expressed concern at seeing a “large coalition in France” blaming the ECB and the euro for the country's poor economic situation. Such an accusation is “unfair”, Trichet said, stating that, when he was at the head of the Banque de France before single currency came in, “70% of the French population supported our monetary policy”. “I have every reason to believe that we have the same level of support from the French people and the euro zone as a whole” and “the last indication available to me is that, to the question 'is it important for the ECB to be independent of governments to ensure price stability?', the answer was 73% affirmative in the eurozone and 75% affirmative in France”. He went on to point out that, on several occasions, the independence of the ECB had been approved in France (constitutional amendment in 1992, yes in Maastricht, votes at the French Parliament) and that “moderates and the left called for the Bank's independence”. At any rate, he stressed, the Bank carries out a collective exercise by managing the currency on behalf of all political sensitivities of all countries, for 315 million citizens.
“You are right, your monetary policy is coherent and correct”, approved German Liberal Wolf Klinz, expressing concern about the inadequacies of Member States in terms of budgetary consolidation. The situation is far better than previously because of the cyclical recovery in growth, said the ECB president, but, although in some countries things have been done “very seriously”, in others, he warned, there “could be some difficulties” if economic activity slows down.
In answer to questions raised on several occasions by the Chairperson of the parliamentary committee, French Socialist Pervenche Berès, Trichet did not, however, wish to comment on the decision by Tehran to replace the dollar by the euro when calculating foreign currency resources and oil revenue (EUROPE 9330). Saying that information was still somewhat inexact, if not “contradictory”, he simply pointed out that: “We are not campaigning for international use of the euro but we shall not be discouraging it either”. (ab)