Local view for "http://purl.org/linkedpolitics/eu/plenary/2010-11-22-Speech-1-067"
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"en.20101122.13.1-067"2
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"Firstly, let me say that the questions that have been asked are extremely pertinent and cover all the issues that are important today in great depth.
I say that also for us to have an idea of the order of magnitude. So what we have is bad behaviour on the part of a number of countries that are creating problems in their own country and are creating financial instability. It is not the euro which is at stake; it is financial instability driven by bad behaviour of fiscal policies, of course, with the interaction with markets which is always there, as we are in market economies. Again, fundamentally, our diagnosis is that what was abnormal in the functioning of Europe was that we had poor governance, poor governance of the economic union.
I can say, sadly, that this is not surprising because the Stability and Growth Pact has been criticised wrongly by some since the very beginning. And I have to remind you that I was myself reporting in Parliament on our battle because major countries wanted to blow up the pact, or at least to considerably weaken it. Sadly, I have to say that this was the major countries inside the euro area and that the small and medium-sized countries were resisting this tendency. This was in 2004 and 2005. You will remember it was a fierce battle because it went up to the Court of Justice, and the Commission – and I have to pay homage to the Commission – was lucid, more lucid at the time than the Council, and we were fully supporting the Commission. So I have to remind all of you of that.
Now I have had a number of questions on precisely what we are calling for at this stage. I have to say that we already said, when the Commission made its proposal, that we thought it was not enough.
Taking into account what we feel, taking into account what we see, in the functioning of Europe as a whole, the 27 and the 16 (and tomorrow 17), we considered that the first proposal of the Commission was too weak in terms of automaticity and in terms of rigour of the governance, both for the fiscal surveillance and for the competitiveness indicators, the imbalances.
So, to the extent that the present state of the proposal which is made by the Council is even weakening the Commission proposal, we cannot say anything to you, honourable Members of Parliament, but that we trust that we are up to the demands of the situation; and the demands of the situation are that we need very strong surveillance, very strong governance.
In 2005, on behalf of the Governing Council, I said that we were not satisfied at all by what was, at the time, the position of the Council, and what was finally accepted.
So I do not want to go further because we will have a number of occasions to be in contact with Parliament. I have, of course, noted what Mrs Goulard said in terms of very hard work of Parliament, together with the Council and the Commission, to work out what will finally be the position of Europe. But again, our message is very clear on that.
Now let me turn for just one minute to the issue of communication. We have, of course, to permanently improve our communication. We try to do that. Let me only say that as regards our own communication, we are giving the clear definition of price stability which permits everybody to judge what we are doing permanently in real time.
I would also like to say that we were the first big major central bank to introduce press conferences immediately after the Governing Council. We were the first to publish an introductory statement which is our diagnosis of the situation. So we try to be as accountable in terms of communication as possible.
The only thing that we do not do is to publish the individual position of the various members of the Governing Council. We trust that it is very important that for the institution which is issuing a currency for 16 states that are united in Europe, but are still sovereign states, it is better that it is the Governing Council as a whole which appears to be the pertinent entity in terms of our decision.
I will respond simultaneously to the Members of Parliament because a number of your questions converged.
Now there were a number of very important questions. Let me only mention the remark that we are responsible for the ‘M’, but to the extent that the ‘E’ is in the hands of the governments and of the Commission, we have in this domain, of course, to take into account the ‘E’, as always, as any independent central bank does: if the fiscal policy is sound and reasonable, the burden on the monetary policy to deliver price stability is light. If we have a bad fiscal policy, then we are overburdening the decisions that have to be taken by the central bank.
I would say it is the same for us in terms of interaction with the governments, but we are fiercely independent and the fact that we have had to embark on a number of non-standard measures, as I have explained, was to allow us to transmit our monetary policy impulses as well as possible in circumstances where markets were not functioning correctly and therefore, the decisions that we were taking on interest rates were not transmitted correctly to the economy as a whole.
This is the essence of the non-standard measures, to help restore a more normal functioning of the monetary policy transmission channels and we very clearly made the distinction – I repeated that in a recent colloquy we had in which Ben Bernanke participated – between the standard measures that are really what counts in terms of monetary policy stance, and the non-standard measures designed to help the transmission of monetary policy.
Now let me only say that I also noted the important question ...
With regard to Mr Gauzès’s question on communication, which I believe others have repeated, there is a tendency, in some communication channels, to consider Europe as some sort of scapegoat. If things go wrong, it is Europe’s fault. We know that this is not true, and the European Parliament, of course, knows it better than anyone.
There is also a tendency to say that if things do not go well, it is the Commission’s fault or it is the fault of the European Central Bank or, better still, it is the euro’s fault. This is the classic scapegoat phenomenon. The euro is the currency that has maintained its internal and external stability remarkably well. Moreover, I have not yet said that it is more remarkable than anything a central bank has ever done, within the founding countries of the euro, over the last 50 years – I saved that for last, if I may say so. I believe that we have here a currency that is, in fact, solid, and solid in historical terms, too. Therefore, let us beware of the scapegoat phenomenon.
I have to say that we all need to work very hard in terms of communication, but I also address that message to the European Central Bank and to the euro system as a whole; in other words, to all the national central banks that belong to the euro area. Moreover, I would say that this is also undoubtedly a problem faced by the 27, and hence a problem for the European Union as a whole.
First of all, I would like to restate: we are responsible for the ‘M’ of EMU, the monetary union. We have a sentiment on the ‘E’, economic union, but we are responsible for the ‘M’ and what we have been instructed to do by the people of Europe, by the parliaments that voted the Maastricht Treaty, is to deliver price stability. This is our mandate. We are independent to deliver price stability to 330 million fellow citizens.
As I explained a moment ago, we have delivered price stability in line with our definition, which was in the continuity of the best definition in the world, and let me say that our definition of price stability now appears to be the global benchmark. We have delivered price stability over the nearly 12 years of the euro and we are credible for the next ten years according to all the information we have.
So I want that to be very clear, because – as Olli Rehn said – many of the questions I have are questions that deal with the economic union, which is, of course, part of EMU, but we are not responsible ourselves for economic union. We have our ideas; we have our recommendations; we have our diagnosis and analysis and I will come back to that of course.
My second major remark: we are experiencing the worst crisis since World War II at a global level. Had we – both the central banks, including the ECB, and governments – not reacted rapidly and boldly, we would have experienced the worst crisis not since World War II, but since World War I, because we would have had a great depression and this fact – that we have avoided the great depression at global level – has called for immense action by governments and parliaments.
In our own analysis, the taxpayer risk that has been mobilised to help avoid a dramatic depression is approximately the same on both sides of the Atlantic in terms of GDP, approximately 27% of GDP. It was not, of course, utilised in terms of spending, it was even less utilised in terms of losses, if I may say, but nevertheless, it is an immense effort that has been made. Otherwise we would have had a dramatic crisis. Of course, this means that the global finance and the global economy is extremely fragile and we have to find ways at a global level to avoid this fragility.
But this is not a European crisis. It is the repercussion on Europe, on European governance, of a global crisis, and there is exactly the same kind of meditation and reflection on what to do in the US or in Japan, to mention only two other major advanced economies. They also have problems of the first magnitude and I would like us not to transform what is a legitimate reflection on how to run major advanced economies better into a criticism of the euro which, as I said, has delivered exactly in line with what was expected.
Let me also say that when I look at the finance and fiscal position, the fiscal position of the major advanced economies, I can say that Europe as a whole and the EU area in particular is in a better situation – Mr Goebbels said this – than Japan or the US in terms of public financial deficit. Perhaps something like around 6%, even a little bit less, as a consolidated fiscal position next year, when it is of the order of magnitude of ten or more in the two other major advanced economies."@en1
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