Brussels, 22/04/2008 (Agence Europe) - On Monday 21 April, Lucas Papademos, Vice President of the European Central Bank (ECB) pointed out that the dual challenge of a slowdown in growth and a spectacular rise in inflation (which the institution began to tackle last year) is still very much on the agenda. In his plenary session presentation of the ECB's annual report for 2007 to the economic and monetary affairs committee in Strasbourg, Papademos stressed that the uncertainty created by the financial turbulence that began last August, put the eurozone's macro-economic forecasts at risk.
Mr Papademos stated that “current temporarily high annual inflation rates, which may persist for a rather protracted period of time, could have second-round effects on wage and price setting." He also explained that “the risks to euro area financial system stability have materially increased over the past eight months” and that the difficulties on the financial markets were not going away. He told MEPs that adjustment on the world financial markets was still expected to go on for a certain time and its interaction with the real economy could prove to be more significant than previously assumed. MEPs had questions regarding the current level of inflation in a context of rising oil and food prices and Papademos explained that "there should be no doubt that preservation of price stability is our prime objective and monetary policy is determined by this objective". He insisted that the independence of the ECB in this regard was essential. On this last point, he was backed up by Olle Schmidt (ALDE, Sweden), who will be the EP rapporteur for the ECB's 2007 report. In the context of exchange rate fluctuations, which every day pushes the Euro up to new heights, Mr Papademos would only reiterate concerns recently expressed by the G7 (EUROPE 9642). (A.B.)
European Parliament plenary session