European Central Bank Annual Report (2005) (debate) 
President
The next item is the report by Mrs Berès on behalf of the Committee on Economic and Monetary Affairs on the 2005 Annual Report of the European Bank.
Pervenche Berès 
rapporteur. - (FR) Mr President, Mr President of the European Central Bank, ladies and gentlemen, the annual report of the European Central Bank always offers an opportunity for the European Parliament to review monetary policy and to supplement the work carried out by the Committee on Economic and Monetary Affairs through the monetary dialogue conducted four times a year with the President of the European Central Bank. You will all remember that last year we rejected the report, as it did not correspond to the guidelines advocated by this Parliament.
The year 2005 was an unusual year, in which the Central Bank initiated a movement raising interest rates five times, the first of which was on 1 December. These successive rises took place in an unusual economic context, determined by both the rise in oil prices and a disadvantageous exchange rate for euro zone exports, and in the context of an upturn in economic growth considered by more acute observers as fragile.
In these circumstances, this report specifically invites the Central Bank to analyse carefully the conditions in which it conducts its monetary policy. I am pleased that this report also emphasises that euro-dollar parity is important to growth in the European Union and that it draws from this a number of conclusions, which have been drafted in a spirit of compromise, bearing in mind the need for each monetary authority to exercise in full its responsibilities in terms of exchange rates. I hope that this compromise will still be present at the time of the vote.
I should like to express my regret, nonetheless, that it was not possible in this report to include both the subject of household debt and the improvement needed in the coordination of economic policies. Allow me, Mr President, to mention a number of points on which I believe this report provides original and valuable insights.
Consider, for example, the invitation made to the Central Bank to examine closely the use of EUR 500 notes and the possibility of freezing the issue of these notes. Let us come now to the key issue for this Parliament, namely the conditions in which democratic control is exercised and the way in which the Central Bank operates as an institution. From this point of view, we wanted to make our contribution, before the next renewal of a member of the Executive Board, to the necessary debate that must take place among the institutions in order that the members of the Executive Board may represent the interests of the euro zone in the best way possible. We believe that, to this end, the best approach would be to apply to the ECB the arrangement seen on the executive boards of all other central banks, namely a variety of backgrounds and a balance of portfolios. We are in agreement within this Parliament on requesting that the balance between nations should not be enshrined as an eternal status quo, and we believe, moreover, that a variety of backgrounds should enable the contributions and plurality within the Executive Board to be enhanced.
I also hope that this Parliament will advocate that the Council, when giving its opinion on approving a nomination to the Board, should exercise its decision-making power in full by making its choice on the basis of a number of different candidates. I am familiar with the argument used frequently by yourself, Mr President of the European Central Bank, and also used by Jean-Claude Trichet from time to time: having several candidates would damage the careers of those not accepted for the position.
Allow me to say that, as observers of international nomination procedures, our assessment is entirely different. At international level, the only post that is filled without competition or without a variety of candidates - and I come from a party that, as you know, is currently experiencing this process and all its virtues - is the Presidency of the World Bank. This process does not apply in the case of the International Monetary Fund, the Organisation for Economic Cooperation and Development or the World Trade Organisation. That is why we believe that, from this point of view, the euro zone as an integrated area should allow a number of different candidates.
Obviously, we also request that the European Parliament should finally be given the power to approve the appointment of the members of the Executive Board, which, in my opinion, would only strengthen the Board's authority and legitimacy and ability to embody a strong voice for the euro zone, on the international stage also. This is the primary objective of this Parliament, namely that, on the international stage, the Central Bank, alongside the Council and the Eurogroup, should be the key legitimate spokesman that we need for Europe's voice to carry loud and clear on such important subjects as you have wanted to raise, Mr President, and on which this Parliament would like to make a contribution. I am of course thinking of the question of the alternative funds, on which, I hope, the compromise drawn up by the Committee on Economic and Monetary Affairs will be supported by all the groups at the time of the vote.
Jean-Claude Trichet
European Central Bank. (FR) Mr President, ladies and gentlemen, it is a great honour and a great pleasure to speak to you today. I am here to present to the European Parliament the 2005 annual report of the European Central Bank. However, as you know, relations between Parliament and the European Central Bank go beyond the specific obligations imposed by the Treaty. In fact, as Mrs Berès has just said, we have over the years established a very close dialogue, which, I should like to emphasise, has been enhanced once again this year. Honourable Members, it is therefore the third time that I have spoken before you this month. Furthermore, my colleagues on the board of the ECB have been in close contact with the European Parliament regarding various issues such as reform of the International Monetary Fund, payment systems and clearing and settlement systems. For our part, we attach great importance to the contacts on these issues.
(DE) I would like to start by giving you a brief overview of the economic and monetary policy developments of 2005 and by outlining the European Central Bank's monetary policy measures. I would then like to make some comments with regard to points and proposals that you have raised in your draft resolution on the ECB's annual report for 2005.
Mr President, Let me first of all welcome the assessment of the Economic and Monetary Affairs Committee as regards the ECB's monetary policy in 2005 and beyond. As recognised in the draft report, the ECB's monetary policy - which is designed to fulfil our primary objective of maintaining price stability - has continued to be successful in anchoring inflation expectations at levels consistent with price stability, despite a number of challenges mentioned by Mrs Berès, relating in particular to the continued strong surge in oil prices until the most recent period.
As already emphasised on several occasions, such anchoring is a prerequisite for monetary policy to make an ongoing contribution towards supporting sustainable economic growth and job creation in the euro area, fully in line with Article 105 of the EC Treaty.
In this respect, let me emphasise that the ECB's open and transparent communication is a key element in guiding market expectations. In particular, my introductory statement at the press conference after the first Governing Council meeting each month provides a clear view, on the part of the Governing Council, on the current monetary policy stance in real time. Hence, we make the outcome of our deliberations public. As such, the introductory statement is comparable with what other central banks call 'summary minutes'.
In 2005, the ECB's monetary policy operated in an environment of increasingly improving economic conditions. While real GDP growth remained moderate in the first half of the year, in an environment of heightened uncertainties surrounding domestic demand, the pace of economic activity gradually strengthened during the second half of the year, from around 1.2% year-on-year on average in the first half of 2005 to around 1.7% year-on-year on average in the second half. Overall, real GDP in the euro area grew by 1.4%.
As regards price developments, annual HICP inflation averaged 2.2% in 2005, compared to 2.1% in each of the two preceding years. While annual HICP inflation eased to 2.0% in the first half of 2005, mainly reflecting base effects, HICP inflation rates accelerated to levels significantly above 2% in the second half, reaching a peak of 2.6% in September, mainly on the back of substantial increases in energy prices.
Thus, reviewing the ECB's monetary policy decisions in 2005 and early 2006, it is useful to split this period into two parts. In the first half of 2005, against the background of subdued inflation developments and with inflation expectations for the euro area solidly anchored at levels in line with price stability, the Governing Council concluded that it remained appropriate to keep interest rates at their historically low levels. At the same time, the Governing Council was constantly alert with regard to the materialisation of upside risks to price stability, as signalled by both the ECB's economic and monetary analyses.
In the second half of 2005 and early 2006, the likelihood that average annual HICP inflation could remain above 2% over the medium term increased and a spill-over to inflation expectations had to be avoided. This scenario of elevated inflation rates remained subject to previously identified upside risks, notably further increases in oil prices and indirect taxes and, more particularly, potential second-round effects in wage and price-setting. It was also confirmed by the monetary analysis, given strong monetary growth, robust credit expansion and ample liquidity.
As a consequence, by the end of 2005, the regular cross-checking of the ECB's economic and monetary analyses indicated that an adjustment of the very accommodative stance of the ECB's monetary policy was clearly warranted in order to contain upside risks to price stability and preserve the firm anchoring of long-term inflation expectations in the euro area. The Governing Council of the ECB therefore decided in December to raise the key ECB interest rates by 25 basis points, after two and a half years of maintaining these rates at historically low levels. Since then the Governing Council has continued to withdraw monetary accommodation, thereby establishing the minimum bid rate of the main refinancing operations of the Eurosystem at 3.25% by now.
Turning to recent developments, all the main indicators of economic activity in the euro area that have become available in the course of 2006 confirm the Governing Council's assessment that economic growth has gained momentum and, in addition, become more broadly-based and sustained, mainly supported by domestic demand.
With regard to consumer prices, annual HICP inflation rates, notwithstanding their decline in most recent months, will remain elevated, at levels above 2% on average in 2006.
As regards 2007, inflation risks remain on the upside. These risks include, in particular, a stronger than expected rise in wages on the back of improving labour markets and a stronger than expected pass-through of past oil price rises. The assessment of upside risks prevailing is confirmed when cross-checked with the monetary analysis, given the ongoing dynamism of monetary and credit growth, ample liquidity and, from a medium-term perspective, a persistent upward trend in the underlying rate of monetary expansion. This has been noted in the Commission report. Monetary developments therefore require enhanced monitoring, in particular against the background of improved economic conditions and strong property market developments in many parts of the euro area.
As I said publicly on behalf of the Governing Council after our last decision, if our assumptions and baseline scenario are confirmed, further withdrawal of monetary accommodation will remain warranted. The Governing Council will therefore continue to monitor all developments very closely, so as to ensure price stability over the medium to longer term.
As regards fiscal policy, budgetary developments in 2005 and 2006 and plans for 2007 point to further, albeit slow, improvements in budget balances. However, this should not give rise to complacency. It remains of the essence that budgetary consolidation is strengthened in the current upswing and that pro-cyclical policies are avoided, which would boost the confidence of both the markets and the public.
As regards structural reforms, I welcome the view of the European Parliament that comprehensive structural reforms are needed to raise the potential growth rate of the euro area and underpin the momentum of the ongoing economic recovery. In this respect, the reform measures initiated in the context of the renewed Lisbon Strategy were a welcome additional step in the right direction. The successful implementation of national reforms aimed at removing rigidities and inefficiencies in euro area countries would improve the smooth functioning of EMU and facilitate the conduct of the ECB's single monetary policy.
In your motion for a resolution you raise a large number of issues of relevance to the ECB and I would like to assure you that we will consider them with great care. I should like to share our assessment on two issues straight away, in view of their topical nature and the exchanges of views I and my fellow members of the Executive Board had with you on those points.
In the motion for a resolution, the ECB is called upon to carry out further analysis in the area of hedge funds - a point you have underlined. Amid the increasing attention being paid to the activities of hedge funds, I think that it would be unfair not to mention their role as regards enhancing market liquidity, providing significant diversification opportunities for investors and fostering financial innovation. That being said, it is clear that there are potential risks for financial stability from their very rapidly growing presence in the financial system and it has yet to be tested whether they would amplify market volatility or pose greater counterparty risks in a less benign financial market environment. Against that background, the ECB will definitely follow up on your request for further analysis. It is possible that we will conclude that there is a real case for enhancing the current framework, which relies essentially on the vigilance of the financial institutions that are themselves under supervision as regards their counterparty risks on the hedge funds. But I also note that any such enhancement should be agreed upon at the level of the international community and, in particular, on the basis of an appropriate transatlantic discussion.
As regards payment and settlement issues, let me first thank the European Parliament for the support expressed for the implementation by November 2007 of the TARGET2 system. Being an integrated large-value payment system, TARGET2 will provide for efficiency gains and improved liquidity management by banks. In this regard, I should like to refer to the increased pressure also to have an integrated platform for the settlement of securities transactions in euro. The Eurosystem is therefore currently examining, in coordination with the European Commission and in close cooperation with the market, the feasibility of setting up a Eurosystem infrastructure for the provision of securities settlement services in central bank money. A decision on whether to offer such a service, referred to as 'TARGET2-Securities', is expected early in 2007. In the field of retail payments, we strongly support the efforts to establish a Single Euro Payment Area - SEPA. We welcome the European Commission's initiative for a directive on payment services and I warmly welcome the European Parliament's contribution to a swift adoption of this directive to assist the banking industry in its implementation of SEPA payment instruments as from 1 January 2008.
I thank you very much for your attention. I am now available to answer your questions.
(Applause)
Kurt Joachim Lauk
Mr President, allow me to begin by saying that - as can be seen from the report - we generally endorse what the European Central Bank has done over the past year. It is particularly important that the independence of the ECB has been, and remains, secure.
It has proven to be the case that the Bank's moderate interest rates policy has contributed to the invigoration of the economy, even though that same policy has very often been criticised in recent years. That being the case, we believe that it would be absolutely right to raise the current level of interest rates, which is very low in historical terms, a little, if the situation so requires it, in order to control inflationary trends.
We also welcome the ECB's comments with regard to the necessary structural reforms in the Member States that it is constantly calling for. It is quite right to do this, as inflation would hit those on middle and lower incomes particularly hard. Higher inflation would make these people poorer. We are opposed to that.
We also welcome the clear statement by the President of the ECB in relation to the development of European stock exchanges. It is imperative that we ensure that European stock exchanges are consolidated within Europe and are not simply taken over from abroad - from the US, for example. That is the only way that we can prevent the US Securities and Exchange Commission regulations and the Sarbanes-Oxley Act being implemented in Europe via the back door. We have sound and transparent market regulations in Europe that are suited to our European situation, and they should not be undermined.
As regards the report, we have resolutely advocated that the ECB does not become politicised. We, the Group of the European People's Party (Christian Democrats) and European Democrats, are thus very clear in our rejection of the publication of ECB voting results. Doing so would lead to politicisation, because voting results would then be discussed. We are also opposed to a publicly debated nomination process, as qualified candidates would be discussed to death. We thus do not feel that we can support these two elements, as they would mean politicisation of the ECB.
We would, on the other hand, like to point out that, if the ECB becomes a market operator in the areas of settlement and the clearing of payments and instalments within the framework of TARGET 2, it must also subject itself to appropriate corporate governance. Corporate governance of this nature still has to be developed. The independence of the ECB will then be ensured and that will result in a stable economic policy that will call for structural reforms in Europe.
Ieke van den Burg
on behalf of the PSE Group. - (NL) Mr President, I shall refrain from dwelling, on behalf of my group, on the first part of Mr Trichet's account or on what Mr Lauk stated a moment ago. Suffice for me to say that I welcome such a political dialogue - as Mr Lauk's viewpoint is also a political viewpoint obviously - with you on a regular basis. We have ourselves conducted such a dialogue only recently, and I think we should persevere with it. The report that is now before us reflects, in my view, just how mature this dialogue has become, touching, as it does, upon very serious subjects, including the link between monetary policy and macro-economic policy, which is of huge importance to our group. Allow me to single out two or three items which have been subject of discussion.
First of all, I am delighted with what Mr Trichet had to say about hedge funds, his commitment to better analysis of them and to the adoption of a much more serious stance with respect to them. Whilst we stated this in very specific terms a few weeks ago during the dialogue, he was a little more hesitant back then. I am therefore pleased that this has now been spelled out much more clearly - I have referred to this in a different connection as the black hole of the financial markets - because that black hole is widening all the time and must be plugged very deliberately by monitoring financial markets, not least with stability in mind.
The second point is the appointment of the members of the ECB's Executive Board. In the spring, we debated this very subject further to Mr Stark's appointment. We then said quite clearly, because we did not have anything against Mr Stark himself, who was well-qualified, but wanted to talk about the procedure, that we would not dwell on the appointment procedure and would come back to it in this report, which is what we are doing now.
I regret that the Group of the European People's Party (Christian Democrats) and European Democrats refuses to help improve - by making it more fully-developed - this appointment procedure, and also the role we in this House can play in this. I am pleased, though, that at least the Liberals and other groups are prepared to lend their support. I hope that we can make the necessary progress in time for the next appointment, which, as it happens, will not be until 2009/2010. This is very important, because it should not be the case that large countries have a qualified seat and that it is, in this case, only in the Federal Chancellery in Berlin that it is decided who is a good candidate.
Finally, I should like to turn to the subject of Target II. We have clearly decided not to speak out on this, or on the code of conduct that is being prepared by the Commission for that matter, but to closely monitor your next move instead. What we would say at this stage is that if, and only if, the ECB and the euro system are to have an active decision-making role in this, this should involve sound monitoring and democratic decision-making; that much we agree on.
Jules Maaten
on behalf of the ALDE Group. - (NL) Mr President, this report does, in any event - and indeed, as has already been indicated - represent an opportunity to take another good look at not only the ECB's annual report but also at where we as Parliament stand in the debate on monetary policy. I have to say that this time round, as indeed in recent years, my group has taken a traditional line. First of all, our viewpoint on monetary policy is clear. The ECB's independence may not be affected, there should be no political pressure and we must prevent monetary policy in the euro zone from being politicised.
We believe that there is a need for confidence in the European Central Bank to be restored. In September 2005, when the rate of inflation rose by 2.6%, the European Central Bank responded well by increasing the historically very low interest rate. Price stability is the ECB's Number One priority and that is how it should stay, as described in the Treaty. Having said this, we also take the view, and will do in future, that more transparency is possible. This is, in fact, what Mr Huhne said as long as six years ago, when he produced a report on this. I also value the ECB's efforts on this score, and the President's being present in this plenary is a very different matter - although the same people are involved - from his visits to us in the Committee on Economic and Monetary Affairs; this is also very much appreciated; and I also think that this has not been done before.
Despite this, much of the ECB's decision-making is done in what appears to us to be dark backrooms. It is, of course, not the case that we want the whole of the European Parliament and the BBC to attend the meetings of the ECB's Executive Board, but we would like to know the arguments in favour or against any decisions taken and whether these were taken unanimously or not, so that the market can gain a better insight into monetary policy.
Finally, we would ask that the procedure for appointing members of the ECB's Executive Board be reviewed. We think the current de facto division of ECB seats according to the size of Member States should be abandoned. This should not involve a major public debate, but choosing from various candidates really strikes us as being a better system.
Jacky Henin
on behalf of the GUE/NGL Group. - (FR) Mr President, ladies and gentlemen, since we are discussing the European Central Bank's report, allow me to address these few words to its president.
Mr Trichet, you really are the reviver of a very poor system for all the peoples of Europe. As such, you have probably been - inadvertently, otherwise it would have been common knowledge - the best campaigner for the 'no' vote of the French and Dutch people on the European Constitutional Treaty, and we thank you for it.
The principles on which the European Central Bank is founded are already in themselves an obstacle to growth in the euro zone, but when there is growth, in spite of your actions, it creates few or no jobs and only benefits the richest in society. The European Central Bank claims to have stopped inflation. In reality, the working and middle classes have seen their purchasing power plummet, while the rich have never been so rich. You champion the worst kind of capitalism, that of shareholders and the pauperisation of the middle and working classes. Day after day, your inertia faced with the weak dollar policy pursued by the United States destroys thousands of qualified industrial jobs creating added value in the euro zone. You represent the bank of discontent and mass unemployment.
For all these reasons, we must break with a European Central Bank controlled by the financial markets and with no link to the will of the peoples of the Union. We urgently need a new treaty entrusting the European Central Bank with responsibilities in the field of employment, training and research, all under the strict control of our Parliament and the national parliaments. This new treaty must, imperatively, replace the financial stability pact with a social progress pact for employment and growth, reviving public spending throughout the Union on health, training, education, social housing, culture, transport and infrastructure.
Through these decisions we will be able to restore the confidence of the European people. If this were not the case, the gap would continue to widen between our institutions and the various peoples. The differences in wealth between the peoples of the Union and between citizens of a single country would continue to increase. This would therefore encourage the rise of extremism and anti-European nationalism.
John Whittaker
on behalf of the IND/DEM Group. - Mr President, here we are again telling the European Central Bank how to do its job! Not only is this against the spirit of the Treaty, which states that the ECB is independent, it is also largely a waste of time, because, as always, the ECB will listen politely but, quite rightly, take little notice. Indeed, the ECB has enough trouble of its own, without listening to this Parliament, in finding an interest rate that suits 12 different economies, soon to be more.
The one-size-fits-all problem does not go away. At the moment, the larger euro zone economies are enjoying slightly higher growth but, as Mr Trichet accepts, this is fragile. When it falters, his problem of choosing the right interest rate will become more critical. Effectively, the ECB will be forced into a choice between inflation in Germany or recession in southern Europe, with all the dire implications for government debts that this will entail.
I wonder what advice this Parliament will be giving then.
Jean-Claude Martinez
(FR) Mr President, Mr President of the European Central Bank, in this Chamber yesterday we were debating breast cancer, and no one appeared worried about the fight against inflation. That is to say that in situations of life and death our priorities change: we discover what is truly important.
However, is the fight against inflation really the most important thing in economic life? Beginning our resolution with a reference to the Father-like status of the independence of the Central Bank, followed by the Son-like status of price stability, in the hope that the Holy Spirit of prosperity will descend from the United States may be good for the independence of the Central Bank, but it is bad for the people. Personally, Mr Trichet, I fully appreciate that you are bound by monetary aggregates one, two and three and by the need for fine-tuning and for steering interest rates. Yet even in the country of Milton Friedman, Chile is left to practise a budgetary surplus of 1%, while the United States itself takes a budgetary overdose. I must therefore conclude by asking the real question: just because our German grandmother had inflationist diabetes in the 1920s, should that mean that, 80 years on, the whole of Europe should go on a sugar-free budgetary and monetary diet?
Alexander Radwan
(DE) Mr President, Mr President of the European Central Bank, the Group of the European People's Party (Christian Democrats) and European Democrats endorses the European Central Bank's position on currency stability. We should not succumb to the temptation to add to the ECB's responsibilities areas in which the nation states refuse to act, in other words the areas of economic and social reforms. The ECB cannot pay for such reforms alone, nor can it afford to. In this case it is essential that the nation states finally fulfil their obligations.
We also support the independence of the European Central Bank, its political independence and the independence of its monetary policy, and all of this right from the selection procedure for its members. I do not know what the results of today's votes will be. I can only tell you that the European People's Party supports the idea of non-politicisation, starting with the selection procedure, and believes that the form of transparency proposed is not helpful. The European Central Bank has numerous other tools in its dialogue and does make use of them, just as other central banks around the world do. There is broad support for this in this House.
On the subject of independence, I would like to add that we are fighting for the independence of monetary policy. I also hope, however, that the European Central Bank realises that it should not overplay the subject of independence. We have had an on-going discussing with the European Central Bank for years now on the subject of 'clearing and settlement', in particular with Mrs Tumpel-Gugerell, and I would just like to remind the House that the European Central Bank has begun a dialogue with the Committee of European Securities Regulators (CESR) on this subject and is now entering into a dialogue with those involved in the market.
I would like to state clearly that we are not opposed to dialogue. Perhaps the route that the European Central Bank is proposing, and that it is taking, will be the right one in the end. For us, this is not about a material assessment, but the route by which the European Central Bank becomes a part of the market cannot be chosen unsupervised and in a vacuum cut off from politics. That is why we have been calling so urgently for this - and we hope that the vote today will proceed as we had all envisaged - we need governance, we need a regulatory framework for this area.
We cannot have a situation where Parliament and the Commission are deliberating about whether to create a directive, whether to produce with a suitable framework, and the European Central Bank then comes out and claims that none of that affects it and that it will take the route it thinks is right. Do not overdo it here; where monetary policy is concerned, we are on your side.
Robert Goebbels
(FR) Mr President, since its creation, the European Central Bank has fulfilled its primary mission, namely the fight against inflation. Rates of inflation in the euro zone have thus remained below those in the United States and Great Britain. The public is mistaken in believing that the euro has made prices soar. Admittedly, there was an inflationist surge during the transition to the euro, mainly in the catering and retail sectors, where prices were rounded up a little too high. That said, since this surge of initial excitement, underlying inflation has in general remained under control. The price boom on the oil and gas markets represents an external shock over which the Union has very little control. However, because the euro has risen against the dollar, which remains the currency in which raw materials are listed, the shock has been less severe for the euro zone than for the Americans.
The euro is in fact a shield that has protected the whole of Europe during events such as the war in Iraq, the war in Afghanistan or even 11 September 2001. Without the euro, many European currencies would have been under pressure and would have threatened the internal market with collapse. As Mr Zapatero pointed out, Spain would never have been able to withdraw its troops from Iraq if its currency had been the peseta instead of the euro. Although the euro has served Europe well, and although I congratulate the ECB on the work accomplished, I remain convinced that the ECB could do better. President Trichet and his colleagues attach too much importance to the fight against inflation, while inflationist risks remain very limited.
On the other hand, the ECB refuses to lend its support to the Union's general economic policies and justifies its position by arguing that the Constitutional Treaty stipulates that maintaining price stability represents the only possible support for Europe's general economic policy. The ECB is independent and will remain so, even without Mr Radwan's support. This is another reason to be open to dialogue. Those who are independent, Mr President, can allow themselves to maintain a more active cooperation with the Eurogroup, for example with a view to achieving more sustained economic development for Europe. Growth and stability are the two feet moving Europe forward.
Wolf Klinz
(DE) Mr President, I would like to thank Mr Trichet and his colleagues for their solid cooperation thus far. The ECB annual report is a very important document for this House. It forms the basis of the debate on fundamental monetary policy issues. Not for nothing has the chairman of the Committee on Economic and Monetary Affairs taken personal responsibility as rapporteur for this issue.
There is, however, always controversy when we debate appointments to the ECB and the primary task of the Bank. We have just experienced this once again. It is therefore no surprise that it was only through innumerable compromise proposals that it was possible to achieve something like a common view in the committee. Personally speaking, I find it regrettable that the Socialist Group in the European Parliament abstained from the final vote in committee, despite all these compromises. Their decision shows the difficulties the Socialist Group still has with a handful of points in the report. The Group of the Alliance of Liberals and Democrats for Europe supported the independence of the ECB without ifs and buts.
The primary function of the Bank is, and remains, to ensure the stability of the euro. Thus far, it has performed this job admirably. We cannot go soft on independence or on price stability under any circumstances. There must thus continue to be an absence of political pressure in future, and the members of the Executive Board must be chosen purely on the basis of their expertise and not according to nationality.
Ashley Mote
Mr President, yet again it is necessary to draw attention to the fact that the ECB continues to print large numbers of 500-euro notes, which are only useful to those who are hoarding ill-gotten gains or laundering money. Indeed, the volume of printing has recently even gone up. Yet the Sunday Times in London recently published an extensive article detailing much evidence about the use of these notes in Spain, Italy and Greece, directly for money-laundering purposes. The only possible conclusion we can reach is that the ECB is actively involved in aiding and abetting money laundering.
Dariusz Rosati
(PL) Mr President, I would like to express a favourable opinion of the activities of the European Central Bank in 2005. I would also like to categorically state that the Socialist Group in the European Parliament fully supports and respects the independence of the Central Bank. We believe that this independence is a sine qua non for conducting an appropriate monetary policy within the economic and monetary union. It also guarantees the value of our common currency.
I would now like to highlight three issues that have long been debated in this House. Firstly, the relative importance of the two pillars of monetary policy adopted by the ECB remains unclear. I refer here to monetary supply as opposed to other information on future inflation. As a result, we do not know whether, or to what extent, developments in monetary supply constitute a decisive factor for the ECB when setting interest rates. Laying down clear rules in this matter would improve the transparency and effectiveness of monetary policy.
Secondly, a clear interpretation of the ECB's mandate, as laid down in Article 105(1) of the Treaty, is urgently required. In particular, the ECB needs to state how it intends to fulfil its Treaty obligations to support the European Union's economic policy while simultaneously maintaining price stability, and what resources it intends to draw upon to do so. I would point out that the Treaty draws a clear distinction between these two aims, and that they cannot therefore be deemed to be interchangeable. If the ECB adopted a clear stance on this question, it would be possible to avoid misunderstandings as to whether or not the ECB is responsible for attaining aims other than price stability.
Thirdly, the ECB is mistaken in its interpretation of the inflation criterion applied in assessing how prepared new Member States are for entry into the euro zone. The Treaty clearly states that the point of reference should be the average inflation rate of, and I quote: 'the three best performing Member States in terms of price stability'. The Treaty makes no mention of the lowest prices. The ECB defined price stability as a rate of inflation under 2% but close to 2%. However, when assessing the degree of preparedness of the candidate countries, the ECB applies another definition, namely the average of the three countries with the lowest inflation. There cannot be two different definitions of the same Treaty provision, and I therefore call on the ECB to clarify the situation.
Antolín Sánchez Presedo
(ES) Mr President, President Trichet, ladies and gentlemen, the presentation and debate in Parliament of the European Central Bank Annual Report 2005 is the annual account that makes the independence of the Central Bank compatible with its democratic control.
I would like to make three brief comments on the impact of the monetary policy, the need for financial integration and the future composition of the Management Board.
The objectives of the monetary policy are to control inflation and to contribute to economic objectives of a general nature. At the end of 2005, and following two and a half years without taking any action, the European Central Bank increased interest rates, inflation stood at 2 tenths above the 2%, and there was a modest growth in the euro zone of 1.4%.
Those are the macroeconomic data, but the results of the monetary policy require that a more precise approach be taken, which I believe requires, on the one hand, an examination of internal divergences, which are considerable in terms of inflation and growth, amongst the Member States of the euro zone. This is important in order to ascertain the impact of the monetary policy, and, in particular, to ensure that there are no persistent imbalances. Secondly, we also need to know how these monetary policy conditions translate to the market and, in particular, small and medium-sized businesses.
During 2005, the European Central Bank published its first report on financial integration in the euro zone, and I congratulate it on that. It makes a very significant contribution. Accelerated globalisation is creating changes in financial products and markets that bring new challenges. When the single currency was drawn up, the risks of the system could be dealt with by means of monetary policy instruments. Now we need new initiatives. This is why it is important to carry on making progress on the Economic and Monetary Union, in order to achieve new goals, but also in order to maintain the efficiency of the monetary policy in the face of new challenges.
Finally, on the composition of the Management Board, I am in favour of greater parliamentary control, in order to achieve more professionalism and competence, and also a gender perspective, Mr President. The group photo of its governing body contains just one woman.
Jean-Claude Trichet
European Central Bank (FR) Mr President, might I perhaps say a word or two, since a number of issues have been broached?
I should like first of all to thank the honourable Members. I have indeed been very alert to the precise nature of the remarks, observations and recommendations made to us.
On the subject of independence, I should like to say, on behalf of all the members of the Executive Board and the Governing Council, how important it is to hear so very many MEPs state how crucial it is for the European Central Bank to be independent. I must confess that we should certainly not have been able to give the European economy its particular monetary and financial environment without the credibility conferred on us by this principle of independence recognised by your Parliament, by the whole world and by all market participants, wherever in the world they might be. The Bank's independence is stated in the Treaty, it is a recognised fact and it is one of Europe's basic assets.
I should like once again to thank all the MEPs who expressed themselves so clearly on this point.
Let me now deal with some of the other points raised, which are certainly important in the eyes of a number of Members of Parliament. I have to say that the question of the appointment of the members of the Executive Board is one that should be addressed to the executive branches, particularly the Council, because they are responsible for such matters. We are appointed according to the Treaty provisions and, as you know, not only does Parliament give its assessment of the quality of the various persons concerned, but so do we in the Governing Council. I know that Parliament would like to have not only an advisory role but also responsibility for the decision itself. I respect that sentiment. I realise that the ECB has to let Parliament and the Council discuss the matter, provided full independence and absence of politicisation are totally assured, for, clearly, if the institution were to suffer from politicisation, it would not be able to deliver what it has to deliver, namely, price stability, something which also depends on it enjoying sound credibility, so that inflation expectations can be firmly anchored.
As regards the various remarks on the dialogue between Parliament and the ECB, in my opinion this dialogue has improved in terms of both frequency and interaction and I will take good note of all the remarks made here, including those concerning the governance of our possible Target2 Securities system. On that issue, which is dear to your heart, Mr Radwan, and to that of other Members of Parliament, I would say that our aspiration - and it is really a work in progress - was to maximise the benefits of European integration following the successful introduction of the euro, since it is clear that the availability of a single settlement engine for securities denominated in euros would undoubtedly represent progress.
The second objective would be to maximise settlement efficiency and that would probably require cash and securities to be settled on the same IT platform, according to what is known technically as an 'integrated model'.
The third issue, which is important from our own perspective, is how to maximise the Central Bank's control over the bank accounts opened in our own book. We take a very strong line on this, believing that solutions which avoid forcing central banks to outsource the management of their accounts would not be good ones.
These are the three main reasons why we are working on this matter, through a dialogue with the market, which is very important, and, of course, with Parliament.
A number of other points have been mentioned. I will not return to the matter of hedge funds raised by Mrs van den Burg, in particular. As to the question of whether or not we are sufficiently transparent and open as regards communication, I reiterate that we do not take decisions alone behind closed doors. The Commissioner and the President of the Eurogroup, Jean-Claude Juncker, are invited to all meetings of the Governing Council. They are also invited every fortnight to our discussions and deliberations, so that they can be as close as possible to the decisions taken. I myself have the privilege of appearing before the Eurogroup every month. So there are three opportunities each month to exchange views and gain as full as possible an understanding of how the decision-making process really works. It seems to me that, from that standpoint, we have the most highly-organised system of contacts anywhere in the world. It is not new; it was the tradition of the Bundesbank, the Banque de France and a number of central banks. Let us not underestimate its significance. Some of the remarks made fail to take this into account.
As regards the transparency of our concept of monetary policy, we are in a position where we say that our primary goal is price stability, because that is what the Treaty stipulates. We give an arithmetical definition of price stability as inflation rates of below and close to 2%. Everyone is aware of this. We have a two-pillar strategy that is very clear. In that respect, we are much more transparent and precise. We provide a greater yardstick with which to measure our performance than other sister central banks do. I do not want to address myself to any of them in particular, but across the Atlantic there is a sister central bank which, for very good reasons of its own, has a different approach to the definition of price stability, with regard to the clarity of that goal. From that standpoint we are very transparent. The entire world knows that we are transparent and it is one of the reasons why inflation expectations are anchored in line with our definition of price stability, which is a fundamental result.
(FR) Mr President, I should like to reply briefly to a number of MEPs. The fact that we are credible and that our predictions concerning inflation correspond to our definition of price stability offer the European economy a particularly favourable financial environment.
I would ask those Members who have criticised our monetary policy, accusing it of being too orthodox, simply to remember what the rates of interest for the medium- and long-term markets in their countries were before the introduction of the euro. In reality, inflation predictions assumed a rate of inflation much higher than that which we ourselves are now able to guarantee to Europeans. It should be noted that low inflation represents, above all, a crucial factor for the poorest sections of our societies, preserving as it does their purchasing power. I noted, moreover, that many Members were asking us to remain very vigilant in this respect. I am, therefore, deeply convinced that there exists a very simple relationship between our primary objective, as assigned by the Treaty, and Article 105.
Meeting our primary objective is a necessary, but not sufficient, condition of our being able to move in the direction desired by everyone in this Chamber, that being, of course, the direction of growth and employment. Price stability is a necessary condition for sustainable growth and for the creation of lasting employment.
If I have time I shall make two or three other remarks. Regarding the 500-euro note, I do not agree at all with the remark that was made suggesting that we would actively assist money-laundering. As you know, large denomination notes were a strong tradition in many of the countries forming part of the euro area and we decided not to change the various traditions drastically. So the note is used in some countries, but not in others. It remains an option and we decided not to eliminate that option for those countries and economies that were used to it.
I believe I have covered all the other questions that were raised. However, Mr Whittaker mentioned the 'one-size-fits-all' angle. Europe is a vast continental economy and, from 1 January next year when Slovenia joins, the euro zone will have 315 million citizens. This compares with 300 million in the United States and thus represents an economy of the same order of magnitude. When you measure the dispersion, the standard deviation of growth and of inflation at the level of various states of various different sizes, you will see that it is roughly the same for both economies. This is not widely known, but is worth pointing out, since it appears to be a characteristic of a vast continental economy.
This does not mean that we have to cater for persistent differences, and it is one of the things that we have discussed, particularly in the Eurogroup. We need to reflect on this question, but again, it would probably be wrong to forget that an element of dispersion is always associated with the size of the economy concerned.
(FR) Mr President, I think I have covered most of the questions put, but it goes without saying that I remain at Parliament's disposal.
President
Thank you, Mr Trichet.
The debate is closed.
The vote will take place today at 11.30 a.m.
Written statement (Rule 142)
Jean-Pierre Audy
(FR) Mrs Berès's report on the Annual Report (for 2005) of the European Central Bank is disappointing as it does not sufficiently underline the need for political reflection on the use of the euro to support growth and employment.
In an ever more complex world, characterised by an extremely violent economic and social war, not to have an extensive and high-quality political debate on this subject is, at present, an error but may, in future, prove to have been an act of negligence. The European Central Bank and its President, Mr Trichet, must not lose sight of the fact that Article 105 of the Treaty establishing the European Community clearly indicates that, without prejudice to the objective of price stability, the European System of Central Banks shall support the EU's economic policies. At a time when increases in the prices of raw materials and of energy are giving rise to natural inflationary tensions in the world, we need to reflect on the impact of this situation on our internal market and our common currency, while seriously asking ourselves whether the time might not have come to develop the euro so that, as well as being a truly remarkable technical success, it is also a political currency.
