Brussels, 21/03/2007 (Agence Europe) - Addressing the European Parliament's economic and monetary affairs committee (chaired by French Socialist Pervenche Berès), the president of the European Central Bank (ECB), Jean-Claude Trichet, said he was expecting the eurozone economy to grow at a healthy pace in 2007 but said there were still inflationary pressures in the medium and long term. Following the recent hike in euro interest rates (see EUROPE 9382), Trichet confirmed the ECB's forecasts on Wednesday of GDP growing by between 2.1% and 2.98% in 2007 and between 1.9% and 2.9% in 2008 in the eurozone, and general inflation of between 1.5% and 2.1% in 2007 and between 1.4% and 2.6% in 2008. He said the ECB was continuing to pursue a moderate, flexible monetary policy with moderate but not reliable interest rates - he stressed there was an important difference between the two terms. He added it was vital and crucial for employers and trade unions to take a responsible attitude in current or future wage negotiations, focussing in his speech on the social benefits of price stability.
In a response to a question from Piia Noora Kauppi (EPP-ED, Finland), Trichet said that pay rises and employment costs would cause problems for price stability if they were not moderate. Every country should be judged according to its own situation but he said three important factors entered the equation when it came to assessing pay reviews - the 'vital criterion' of employment levels; the current level of competitiveness compared with labour costs; and increased productivity. He said it should be appreciated that pay moderation tends to prevail in the EU. In response to Ieke van den Burg (PES, Netherlands) who pointed out that pay rises over the last ten years had been in line with inflation but the share of pay in the economy as a whole was not high enough, Trichet said that progress in job creation had in part been due to this pay moderation and low costs. With high unemployment levels in several member states, increasing minimum pay benefitted people already in work but did no favour for the unemployed, he argued.
Urged by Dariusz Rosati (PES, Poland) to do more to stimulate growth, Trichet said he'd done his share of the work. Looking at the situation in the EU and the US, he said, one cannot say that the EU has backed the economy less than the US. Keeping euro interest rates at the historically low level of 2% for over two years, he said, showed courage and daring and had made it possible to get through a period when the economy needed help while restricting inflationary pressure and building on ECB credibility. He said EU citizens also wanted the ECB to be credible.
Responding to German EPP-ED MEPs Alexander Radwan and Werner Langen, who expressed concern at the criticisms of ECB policy made during the French presidential election campaign, Trichet said all opinion polls confirmed strong popular support in both France and elsewhere. 73% of eurozone citizens and French people too support ECB independence to ensure price stability, said Trichet, adding that the single currency had made a positive contribution and politicians should see what share of the responsibility lay in their hands. It is clear that the euro is positive, he said, but more can be done through reforms. He pointed out that more than 12 million jobs have been created since the euro was introduced in 1999, compared with less than 3 million in the eight years before the euro was introduced. Critics would do well to consider these figures, he said, because the figures undermine their criticisms. Trichet added that the criticism seemed to be restricted to France, listing other countries where there had been elections recently (Germany, Italy and the Netherlands) but where the ECB had not been taken to task the way it had been in France. (ab)