Local view for "http://purl.org/linkedpolitics/eu/plenary/2008-07-09-Speech-3-038"
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"en.20080709.2.3-038"2
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"Madam President, I appreciate enormously the remarks that have been made both in the remarkable report of the rapporteur and in the very large number of interventions which echo the independence of the Central Bank, as mentioned very clearly by Mr Jean-Claude Juncker himself. I think it is extremely important and I have to say that it is not questioned anywhere. It is an essential part of the credibility of the institution and it is because we have this very visible independence and this primary mandate – which is clear on price stability – that we have been successful up until now in anchoring inflation expectations.
On the question of the price of oil, commodities and energy and the price of food and more generally all those prices that are rising, I think that there is a triangle. As was very eloquently said by a number of Members, we certainly have the demand-driven phenomenon; the big emerging economies are introducing at global level a new element of buoyant demand and that has to be fully recognised.
We have, undoubtedly, a second side to the triangle, which is certainly the supply, and on the supply side we have a lot of responsibilities. Cartels are not good, and it is clear that we have cartels operating in a number of domains. Apart from the cartels, a number of countries and economies are also creating scarcity by preventing drilling, preventing exploration, preventing the construction of refineries. So I draw your attention to that point too. We have to see, on the supply side, whether we are doing all that we can.
As for the demand side, all economy, all energy savings are absolutely essential and are part of the mastering of the demand side; as well as recognising the real price and not having artificial prices for oil and energy, which would continue to permit the demand to be buoyant.
There is the case of the third side of the triangle, which is the reallocation of capital at a global level in the direction of commodities. That is not exactly the same in the case of oil, other energies or raw materials of all kinds. But there is such a phenomenon and that phenomenon obviously plays a role, and we have to recognise that. We have to call for markets to be as transparent as possible, to function in a fully transparent way. That is the way I will present that phenomenon and I would say that, as is the case with certain diseases where you have to treat the disease on a multidimensional basis, you have to make all possible efforts on the three sides of the triangle.
Many Members mentioned prudential supervision and the necessity to improve the situation, I would certainly echo what many Members have said. We have a situation which must be improved – that is absolutely clear. Since the setting-up of the ECB we said that we would call on all authorities to cooperate as intimately as possible. We also said that we were in favour of a very close relationship between the central banks and the supervisory authorities. Recent events since the turbulence that started in August 2007 have proven that this doctrine was right: a very close relationship between central banks and supervisory authorities is necessary.
I would say at this stage that we fully support the orientation that has been retained by the Committee on Economic and Monetary Affairs on a consensus basis. We think that there are a lot of workshops and that we have to proceed as rapidly and expeditiously as possible in this direction. I know that Parliament is reflecting on perhaps bolder initiatives. I would say that we, ourselves, would like all that has already been decided to be implemented – for nobody to take the pretext of a second stage, not to do what has been already decided. Then, I think we have to look very carefully at the proposals before us, because we believe that the more intimately we cooperate – and more intimately than is the case today – the better, certainly, for Europe. What I say for Europe is, in our opinion, valid for all other systemic parts in the global finance.
My last point concerns the exchange rate, which a number of Members mentioned. I think that the Governing Council of the ECB is in favour of the full implementation of the Treaty as it is. It seems to me that when we are in China, as Jean-Claude Juncker said, or when we are in the G7, where Jean-Claude and I are signing the communiqué of the G7, we are doing what is appropriate and if I am myself cautious – because it was mentioned that I am very prudent and very cautious when I speak on exchange rates – it is because we are in a domain which is extraordinarily touchy and a domain where, in my opinion, one has to fully respect the orientation which we have agreed upon. That is the reason why I would say that, again, at this stage we agree with all the partners of the G7 on the message for China. There is absolutely no ambiguity there. We made that very clear in the last G7 communiqué. We also consider it important that we look very carefully at the possible adverse effects of excessive fluctuations on both financial stability and growth.
I should also mention that it is very important that the US authorities repeat that a strong dollar is in the interests of the United States of America.
I strongly emphasised the point that anchoring inflation expectations is absolutely decisive, because it permits us to continue to have, in the medium- and long-term market rates, the incorporation of these inflation expectations over the medium and long run. Some governments in Europe are borrowing on a 50-year basis. They are borrowing on a 50-year basis at rates which incorporate the credibility of the Central Bank to deliver price stability, not only over two, or five or ten or twenty years, but even much longer. It is because we are entirely aiming at anchoring, preserving the solid anchoring of inflation expectations, that we have taken the decision which has been mentioned.
In the understanding of the ECB Governing Council – and I take it, in the decision which has been taken by the European democracies in creating the ECB, the euro system and the euro area – there is no contradiction between price stability, and solid anchoring of expectations of price stability, and growth and job creation.
I have to say that it is very much considered now at global level that the appropriate way of looking at things is that through price stability and credible price stability over time you are paving the way for sustainable growth and job creation. The mention of the almost 16 million jobs which were created since the setting-up of the euro is an illustration of what I just said.
Having said that, I would also echo what was said by a large number of Members on the fact that in order to get price stability we had to get some cooperation from other decision-makers, authorities and the private sector. That is the reason why we are so clear in our own messages, fully recognising that we are independent and that those who are taking those decisions are independent. But we always insist on the Stability and Growth Pact because over-burdening of monetary policies through a lax fiscal policy is always a danger.
We are also calling on the price-setters in general – corporate businesses, the production sector, retail businesses – to incorporate the fact that we will deliver price stability over the medium term so that we do not have second-round effects in this domain.
I mentioned price-setters. I also mention of course social partners and that is the reason why we are calling strongly not only on price-setters, but also on social partners to incorporate in their decisions the fact that we will deliver price stability in line with our definition in the medium run.
The situation is obviously difficult because of the price of oil, the price of commodities or the scarcity of raw materials, which are pushing up prices. We should recall what happened in 1973-1974. It is absolutely clear that those economies which let the second-round effects gallop and had inflation on a lasting basis had both inflation and very low growth, and it was the start, in a large number of economies in Europe, of mass unemployment that we are still fighting and on our way to eliminating. Therefore, there is much at stake here in this domain and that is important.
I would also like to mention here, because it seems to me an extremely important element, that it is the most vulnerable and the poorest of our fellow citizens who suffer the most in times of lasting high-level inflation. Therefore, when we are aiming at delivering price stability in the medium run, not only do we respect the Treaty, not only do we respect the mandate – which we did not create ourselves but which was given to us by the democracies of Europe – but we are doing what is best for the most vulnerable of our fellow citizens."@en1
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