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Introductory statement to the press conference (with Q&A)

Mario Draghi, President of the ECB,
Vítor Constâncio, Vice-President of the ECB,
Paris, 2 October 2013

Jump to the transcript of the questions and answers

Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference. I would like to thank Governor Noyer for his kind hospitality and express our special gratitude to his staff for the excellent organisation of today’s meeting of the Governing Council. We will now report on the outcome of today’s meeting, which was also attended by the Commission Vice-President, Mr Rehn.

Based on our regular economic and monetary analyses, we decided to keep the key ECB interest rates unchanged. Incoming information and analysis have further underpinned our previous assessment. Underlying price pressures in the euro area are expected to remain subdued over the medium term. In keeping with this picture, monetary and, in particular, credit dynamics remain subdued. Inflation expectations for the euro area continue to be firmly anchored in line with our aim of maintaining inflation rates below, but close to, 2% over the medium term. At the same time, real GDP growth in the second quarter was positive, after six quarters of negative output growth, and confidence indicators up to September confirm the expected gradual improvement in economic activity from low levels. Our monetary policy stance continues to be geared towards maintaining the degree of monetary accommodation warranted by the outlook for price stability and promoting stable money market conditions. It thereby provides support to a gradual recovery in economic activity. Looking ahead, our monetary policy stance will remain accommodative for as long as necessary, in line with the forward guidance provided in July. The Governing Council confirms that it expects the key ECB interest rates to remain at present or lower levels for an extended period of time. This expectation continues to be based on an unchanged overall subdued outlook for inflation extending into the medium term, given the broad-based weakness in the economy and subdued monetary dynamics. In the period ahead, we will monitor all incoming information on economic and monetary developments and assess any impact on the medium-term outlook for price stability. With regard to money market conditions, we will remain particularly attentive to developments which may have implications for the stance of monetary policy and are ready to consider all available instruments.

Let me now explain our assessment in greater detail, starting with the economic analysis. Following six quarters of negative output growth, euro area real GDP rose, quarter on quarter, by 0.3% in the second quarter of 2013, also supported by temporary factors related to unusually adverse weather conditions in some euro area countries earlier this year. Developments in industrial production data point to somewhat weaker growth at the beginning of the third quarter, while survey-based confidence indicators up to September have improved further from low levels, overall confirming our previous expectations of a gradual recovery in economic activity. Looking ahead, output is expected to recover at a slow pace, in particular owing to a gradual improvement in domestic demand supported by the accommodative monetary policy stance. Euro area economic activity should, in addition, benefit from a gradual strengthening of external demand for exports. Furthermore, the overall improvements in financial markets seen since last summer appear to be gradually working their way through to the real economy, as should the progress made in fiscal consolidation. In addition, real incomes have benefited recently from generally lower inflation. This being said, unemployment in the euro area remains high, and the necessary balance sheet adjustments in the public and private sectors will continue to weigh on economic activity.

The risks surrounding the economic outlook for the euro area continue to be on the downside. Developments in global money and financial market conditions and related uncertainties may have the potential to negatively affect economic conditions. Other downside risks include higher commodity prices in the context of renewed geopolitical tensions, weaker than expected global demand and slow or insufficient implementation of structural reforms in euro area countries.

According to Eurostat’s flash estimate, and broadly in line with expectations, euro area annual HICP inflation decreased in September 2013 to 1.1%, from 1.3% in August. On the basis of current futures prices for energy, annual inflation rates are expected to remain at such low levels in the coming months. Taking the appropriate medium-term perspective, underlying price pressures are expected to remain subdued, reflecting the broad-based weakness in aggregate demand and the modest pace of the recovery. Medium to long-term inflation expectations continue to be firmly anchored in line with price stability.

The risks to the outlook for price developments are expected to be still broadly balanced over the medium term, with upside risks relating in particular to higher commodity prices as well as stronger than expected increases in administered prices and indirect taxes, and downside risks stemming from weaker than expected economic activity.

Turning to the monetary analysis, data for August indicate that the underlying growth of broad money (M3) and, in particular, credit remained subdued. Annual growth in M3 continued to be broadly stable at 2.3% in August, compared with 2.2% in July. Annual growth in M1 remained strong but decreased to 6.8% in August, from 7.1% in July. Net capital inflows into the euro area continued to be the main factor supporting annual M3 growth, while the annual rate of change of loans to the private sector remained weak. The annual growth rate of loans to households (adjusted for loan sales and securitisation) stood at 0.4% in August, broadly unchanged since the turn of the year. The annual rate of change of loans to non-financial corporations (adjusted for loan sales and securitisation) was -2.9% in August, compared with -2.8% in July. Weak loan dynamics for non-financial corporations continue to reflect primarily their lagged relationship with the business cycle, credit risk and the ongoing adjustment of financial and non-financial sector balance sheets.

Since the summer of 2012 substantial progress has been made in improving the funding situation of banks and, in particular, in strengthening the domestic deposit base in a number of stressed countries. In order to ensure an adequate transmission of monetary policy to the financing conditions in euro area countries, it is essential that the fragmentation of euro area credit markets declines further and that the resilience of banks is strengthened where needed. Further decisive steps to establish a banking union will help to accomplish this objective.

To sum up, the economic analysis indicates that price developments should remain in line with price stability over the medium term. A cross-check with the signals from the monetary analysis confirms this picture.

As regards fiscal policies, euro area countries should not unravel their efforts to reduce deficits and put high government debt ratios on a downward path. The draft budgetary plans that countries will now deliver for the first time under the “two-pack” regulations need to provide for sufficiently far-reaching measures to achieve the fiscal targets for 2014. Governments must also decisively strengthen efforts to implement the needed structural reforms in product and labour markets. These reforms are required not only to help countries to regain competitiveness and to rebalance within the euro area, but also to create more flexible and dynamic economies that generate sustainable economic growth and employment.

We are now at your disposal for questions.

* * *

of the questions asked and the answers given by 
Mario Draghi, President of the ECB, 
Vítor Constancio, Vice-President of the ECB 
Christian Noyer, Governor of the Banque de France

Question: The euro exchange rate is as high relative to the dollar or on the trade-weighted basis as it was in February when you warned that the strong euro could lead to downside risks to the recovery. I was wondering why there was no warning this time and what you think of the current exchange rate.

Draghi: As you know, the exchange rate is not a policy target for the ECB. The target for the ECB is medium-term price stability. However, the exchange rate is important for growth and for price stability and we certainly pay close attention to these developments.

Question: You said in your introductory statement that in terms of money markets you were prepared to use all available instruments. Why not then narrow the corridor between the refinancing rate and the deposit rate as, I think, Mr Praet suggested in an interview with Les Echos on 16 September? And the second, separate question is about the Single Supervisory Mechanism. You have said in the past that you are confident that there will be backstops in place before the ECB formally takes over. It strikes me that we are not quite there yet. Can you outline how that is actually going to happen by next October?

Draghi: You are asking in an indirect way whether we discussed an interest rate cut which would narrow the corridor. There was a discussion and, as last time, some governors observed that improvements in the economy would not justify this discussion but other governors believed that the discussion was warranted. But in the end we decided to leave interest rates at the present level. Having said that, on the broader developments in liquidity let me repeat what I said in the European Parliament, because it is quite telling. I cannot find the precise quote, but basically I said that we are ready to use all available instruments, including a LTRO (longer-term refinancing operation), to ensure that developments in short-term money market rates are in line with our medium-term assessment of price stability. We have a vast array of instruments to this end and we do not rule out any options in order to do what is needed in the most appropriate way. On the backstops, another thing that quite astonishes me is the doubts that have been expressed about whether national backstops will be in place by the time we start the SSM. In fact, there is an explicit assurance about this in the conclusions of the last European Council, where there is an explicit reference to national backstops. But let me add something that is a more recent development where I can quote the Vice-President of the European Commission on this point. It was basically said that since capital injections would normally be regarded as one-off measures, they would normally not count against the Member State in the context of the excessive deficit procedure. I think this is quite relevant because it shows the general determination to have the backstops in place by the time the SSM takes charge.

Question: I just want to ask you a little bit more about inflation: so, the inflation rate now is 1.1%; your own staff forecast is for 1.3% next year. How is this consistent with any definition of price stability for the ECB and are you at risk of under-delivering on your target? And another question on interest rates: you have had this easing bias in place since July and you seem to be talking about interest rate cuts monthly. What would it take to move the ball forward and actually deliver an interest rate cut, which would seem to be justified at least on inflation grounds?

Draghi: On your first question, the inflation path is developing as was expected. Our baseline scenario is confirmed, we see inflation as remaining subdued on the very low side of 2%, and we see this as extending into the medium term. We have viewed this as a combination of several factors: energy prices, the indirect tax increases, which aren’t there at least for the time being, food prices, but also certainly the appreciation of the exchange rate and the general economic conditions. So, we will be monitoring these developments closely and we will have to look to the medium term in order to assess the outlook and – here I answer the second question as well – decide about further action on the front of interest rates or, as I said before, on any other instrument that is available.

Question: You said substantial progress has been made in improving the funding situation of banks. How should euro area banks treat sovereign bonds in their next balance sheet test? Some governors of central banks in the euro area may be opposed to writing down the value of these bonds to reflect their risks.

Draghi: A precise communication on the asset quality review will be given in the second half of October. Current opinions about the different riskiness of government bonds are what they are, namely personal opinions which address a clear issue, the different riskiness of government bonds. But let me also say that no action is being envisaged and no policy has ever been discussed by the Governing Council to this extent.

Question: Mr Draghi, to what extent could the harmonisation of definitions and provisioning for non-performing loans as part of the asset quality review increase fragmentation and which countries might be particularly affected as a result of that? What are the chances that credit could actually recover and pick up before the conclusion of the stress test and the asset quality review, which might be well into next year, and what does that mean for the recovery?

Draghi: Let me say immediately on the second question that we have, frankly, strong hopes that credit will recover before the end of the asset quality review. We would be in a very bad shape if credit were not to recover by then. The asset quality review and the stress tests are foreseen to be concluded before the ECB takes over the SSM – which means by almost the end of next year – and we all, I, the Governing Council, collectively strongly hope that credit will have recovered by then.

On the first point, you are right, there are many definitions of non-performing loans and we will have to harmonise these definitions and be rigorous. The whole exercise of the asset quality review, the balance sheet assessment and the stress test only makes sense if they are credible. To be credible they have to be transparent and rigorous, otherwise they are useless. And I can only confirm that the will of the Governing Council and of the supervisors is to decide policies and to take decisions in the coming months along these guidelines, namely to be transparent and rigorous.

Question: (inaudible interjection)

Draghi: I do not think so. To shed light on the banking system does not increase fragmentation by itself. It is fear and uncertainty that has produced fragmentation. So I think it will have just the opposite effect. I do not expect major disasters, but it is quite important that full light be shed and that there is full transparency. That would certainly decrease fragmentation rather than increase it.

Question: I’d like to elaborate on the exchange rates. Many economists, including IMF economist (not understandable) and many more, think that at its current level, the euro is overvalued for most of the euro area economy. Your usual answer to that is that it is close to its long-term average, but that is a totally different question. By saying that, you imply that markets always get it right, whereas we all know that they sometimes get it wrong. Now, according to Article 219 of the Treaty, the ECB can make a recommendation to the European Council about this issue, while respecting the objective of price stability. So my question is: why don’t you? For some countries in the euro area, it looks like you pick the articles you want to apply, and the articles that you don’t want to apply.

Constancio: I am just going to correct you a little bit. The article talks about changes in the regime, not in the levels of exchange rates. And the regime has been approved – the euro is a floating currency, and there has been no discussion whatsoever, or willingness of anyone to change that regime. And that is what the Treaty says. It does not say anything about the current discussion of levels of exchange rates, which could, by definition, not be achieved per se in a regime of floating currencies.. We respect the Treaty in all respects.

Question: First question: On a more global level, what impact could the shutdown of the US Government and the looming debt ceiling have on the global economy and the European economy? And a second question on excess liquidity. You have recently signalled that once excess liquidity goes down to €200 billion, or lower, it might be a problem. Does that limit still hold and, if not, is there any limit, or something close to a limit, at which you would be concerned about excess liquidity becoming too low?

Draghi: Well, the US budget shutdown is a risk, if it is protracted. At the present time, the impression one has is that it would not be so. If it were to be protracted, it would certainly pose a risk for the recovery in the United States and the world. And this is clearly on our minds. On liquidity, I have had many opportunities to discuss and explain that figure. The figure of €200 billion was given in a different context. There is no stable relationship between this figure and the behaviour of short-term money market rates. The excess liquidity depends on several factors, one of which is the state of fragmentation. The greater the fragmentation, the higher the excess liquidity will be. And so, you can easily accept a lower figure without expecting any reaction on the money market rates if fragmentation decreases. In the, I would say, extreme case where you have a fully and perfectly functioning interbank market, you have no excess liquidity. I would thus urge you not to make too much about two issues, about the relationship between excess liquidity and short-term money market rates and about the speed of the repayment of the LTROs by the banking system.

Question: I wonder whether you can give us any more specific guidance on whether there will be another LTRO and what its timing would be. And, secondly, there was the question of the budget shutdown, but I wonder what the effect of a US default would be on the European economy?

Draghi: No, the answer to your second question is that I don’t see any prospect of that happening. But on the first question, I have my famous quote: “We are ready to use any instrument, including another LTRO if needed, to maintain the short-term money market rates at a level which is warranted by our assessment of inflation in the medium term.” This is about what I have said before – so, I do still remember things. It means in essence that we do not exclude any option and that we are ready to act accordingly and as needed. So, having said that, it is just one of our instruments, but let me add just one thing, namely that the fixed rate, full allotment policy will be in place until at least July 2014. It is the intention of the Governing Council to provide liquidity insurance for banks and the banking system in Europe. If I were to summarise the views of the Governing Council on liquidity, I would say that nobody wants to have a liquidity accident occurring between now and the recovery. And secondly, liquidity ought to be provided to the banking system as needed, but it should not be a substitute for a lack of capital.

Question: You mentioned the Banking Union, and apparently the single resolution mechanism is not so easy to put in place because especially Germany is a bit reluctant and President Hollande apparently yesterday told you to hurry up a bit. Can you tell us if there is any chance of putting this resolution in place before the next elections of the European Parliament in March?

Draghi: Well, I definitely expect that. The draft proposal by the Commission contains the three elements which we have always believed to be important, namely a single mechanism, a single authority and a single fund financed by the industry − by the banking industry. From this viewpoint, substantial progress has been made. We also believe that 114 (of the Treaty of the Functioning of the European Union) provides a sufficient basis for the creation of the single resolution mechanism (SRM). Where we may differ from the Commission’s proposal is that we view the two phases, namely that of assessing the non-viability of a certain bank in question and that of deciding which action should be undertaken as clearly separate tasks . The SSM would take care of the first phase and the SRM would take care of the second. Also the draft proposal on this very same topic gives the ECB the status of a voting member. The ECB believes that it should only be an observer, just to make sure that two phases are completely separate.

Question: With inflation at 1.1%, we have got to be very close to the lower bound of the ECB’s target for maintaining price stability. Can you tell us what the lower bound is; is there a number, which when we see it in the market, we are going to know that action is forthcoming? That’s the first question. The second question is if there is another provision of LTRO, would there be measures included to make sure that the money ends up in the real economy as opposed to just being parked by banks with the ECB?

Draghi: On the second question, I should say that – as I said before – we have a whole array of instruments available and we will be using it to respond to needs as most appropriate. As I have said, an LTRO is just one of them and when the time comes, we will decide what will be the best shape that it could have. I have actually already commented on the first question. We view current inflation as the result of a mixture of several factors. One set of factors relates to prices: energy prices, food prices, several countries’ lack of action on the indirect taxation front, after protracted action in the previous months, and the exchange rate. Also, there is another set of factors that has to do with the present state of health of the economy We view the recovery − and I said this last time and I continue to have basically the same view − as weak, as fragile, as uneven, and that certainly also contributes to the outlook for price stability.

Question: Mr President, I know that sometimes you don’t answer questions on specific countries, like Italy, but maybe you have a message to send to the markets about what is needed to avoid the destabilising risks to growth and to recovery?

Draghi: Well, let me say that I can comment on this in quite general terms. All in all, when you look at periods of instability − and we have seen them in Greece, and in Portugal and we are seeing them in Italy now − you see that, while instability may be hampering the hopes for a recovery in these countries, it does not really hurt the euro area, the foundations of the euro area, as it used to do a few years ago. In other words, the euro area and the euro are more resilient today than they were a few years ago and there are three reasons for this. One is that substantial progress has indeed been achieved by governments on the front of fiscal credibility and, to some extent, also on the front of structural reforms. The second factor is the ECB’s response with OMT (Outright Monetary Transactions) last year. And the third factor is that, by and large, the euro governance has progressed significantly in the course of 2012.

Question: President Draghi, you had a meeting yesterday with President François Hollande, it is the first day for you in Paris as President of the ECB. How do you regard the reforms in France and the budgetary objective, directions? You said it is too slow in the eurozone – is that also your point of view for France? And a small second question: some members of the Executive Board of the ECB spoke this summer about publishing the deliberations of the Governing Council. What’s your position on that and when will it be possible?

Draghi: Thank you. Incidentally, it is not my first time as President of the ECB in Paris, because I went to the Assemblée Nationale.

Question:with the whole Governing Council…

Draghi: Yes, if you mean with the whole Governing Council, then you’re right. During the meeting we basically surveyed the economic situation of the euro area, the situation of France, the state of progress of the banking union – specifically the asset quality review, the balance sheet assessment, the stress test and the state of preparation of the SSM. The assessment is the following: I would say there is a common line both as far as budgetary policies and structural reforms are concerned: i.e. that significant progress has taken place and more needs to be done. The effort of fiscal consolidation has been significant, but still the budgetary figures are above the excessive deficit procedure. So, more needs to be done on that front. And the same message holds for the structural reforms. Very significant action has been taken, but more needs to be done on several fronts.

As regards the minutes, you rightly called them “deliberations” and did not use the word “minutes”, and that was quite appropriate. I did say on another occasion that the Executive Board would present to the Governing Council a proposal in the fall on this point. We are still working on it, and soon we will begin discussions on this.

Question Mr Draghi, I have a question on what happened to the asset-backed security programme. Is there any progress there? And my second question would be: if you consider changing the risk assessment of certain securities for banks, to hand in to the ECB as collateral, do you envision a scarcity of collateral sometime in the future? Thank you.

Draghi: We are talking about different asset-backed securities (ABS), of course. You have the SME-based ABS or you have the credit card ABS. The credit card ABS are only a small component of our ABS sector and this affects the eligibility of about 2.4 billion euros of collateral, which is about 0.3% of the overall eligible Eurosystem collateral basis. Our recent decision sends two messages. First, relatively simple ABS with a good track record, such as credit cards, will continue to be recognised and appreciated by the Eurosystem collateral policy. And, second, that our collateral policy adapts to market developments. We are certainly also ready to consider accepting the mezzanine tranche of ABS as collateral, and the Commission and the EIB are working jointly on trying to support the use of ABS so as to foster credit developments in the euro area.

Question: The credit is still very low in the Eurozone. Some analysts speak now about growth without credit. Do you think that is what is awaiting the eurozone? Growth without credit?

Draghi: Credit flows are still weak – I would say even very weak. Even though we see significant improvements in terms of fragmentation on the funding side for banks, the improvements in terms of fragmentation on the lending side are just marginal. We see a reduction in the dispersion of the lending course, in the lending rates, but these are really marginal developments. The reasons why lending flows – credit flows – are still weak are complex, and they concern both demand and supply. Clearly, demand factors are important. And to this extent credit flows are a lagged indicator of renewed growth. So demand factors are important. Heightened risk aversion is another factor which is very important. And I think the more we proceed, the more the recovery will gradually develop. The more our accommodative monetary policy stance will find its way through the economy, the more we will see these two factors really playing the greatest role, with the funding side playing less and less of a role. Especially since, as I have said before, the ECB will continue providing liquidity as needed.

Question: I have a question again on political instability mentioned for a few countries. Now Germany has also been without a fully functioning government for some time. Do you expect that it may delay the prospect of banking union, in particular the regulation regarding the SSM, or do you think that it will still be feasible to have that in place by the beginning of November, which I think was the plan? And also on the resolution mechanism, do you think there will be any delay on that because of political uncertainty in a number of countries? The other question is a follow-up to a previous question with regard to the fact that inflation seems to be going away from your target; noting the direction of your target, how do you reconcile that with your statement that monetary policy is accommodative? Maybe it is not accommodative enough?

Draghi: On the first point, I certainly wish that everything goes according to schedule and I do not expect political developments in several euro area countries to delay the developments on the SRM. I do not have enough visibility on these developments anyway to be able to judge on this point. On the inflation side, I have explained this. We have to look at the medium-term assessment of inflation. So far, our baseline scenario is being confirmed and is being underpinned by all the incoming data. So the present inflation rates are not unexpected, and I have explained the reasons there might be. Having said that, we certainly look at these developments with great attention and I have mentioned the factors that affect this inflation.

Question: I know that you do not comment on particular countries, but again a more general question on Italy. We had a major government crisis but the interest rates hardly moved. Is this actually a good thing? And have we in a way abolished all the national sovereign risk or do you not want at least to a certain extent to keep some sort of reform pressure on governments coming from the financial markets?

Draghi: First, I would not make too much of short-term movements of interest rates, but if you had followed markets, it is not entirely correct to say that interest rates hardly moved. They actually did move. Second, I think that the messages that markets are sending – and not only markets, I think all of you would send the same messages – to the countries that we mentioned are very simple: stability and reforms. I think these are the messages that markets – if we want to use this sort of abstract definition – are sending, but I am sure that all of us would send the same messages: stability and reforms.

Finally, market pressure to reform is simply one of the many pressures that should urge these countries to reform themselves, but the greatest pressure should come from inside. These reforms should be made for their own sake, they do not need to be pressed by markets.

Question: Knowing that you are reluctant to comment on countries, especially on Italy, I wanted you to recall that two years ago you sent a letter to Rome with Mr Trichet, so are you worried? Because you mentioned stability and reforms at that very moment and two minutes ago? So, are you worried?

Draghi: As I said on other occasions and on other countries, as far as other countries are concerned, I think that significant progress has been achieved, especially on the front of budget consolidation. This is probably one of the reasons why the instability has produced some movements, but not dramatic movements. Also, political crises have their own timing: you would expect market reactions to bet on an outcome even before knowing how the political crisis would evolve and markets rightly want to analyse the situation before making their bets. So progress has been achieved and we should not focus only on one individual country. Progress has taken place all across the board and this has strengthened the euro area, as I was saying before.

Question: Mr President I would like to touch on a question asked by my French and Italian colleagues. We can indeed see quite significant improvement in some of the smaller countries, which were the core of the euro crisis at the beginning, but, on the other hand, we see quite some severe economic problems, for example in this country, as Mr Noyer has touched on in former statements, but also in Italy. Some people now argue that we currently have a kind of transformation, a kind of shift of the pattern of the crisis away from the smaller countries towards the bigger central countries of the Union. Do you share this thesis and, if so, would you say that those countries are aware of the responsibility that they have not to accelerate, not to stir up the crisis again?

Draghi: No, I don’t see a shift of the crisis from small to large countries. As I said before, what I see is a recovery that is weak, that is uneven, that is fragile and -well, I did not say this before --that is starting from very low levels. For example, unemployment is now stabilising, but at very high levels, and the same applies for youth unemployment. We are talking about a stabilisation of something like 5,000 units out of millions. That is what I see.

The second point you have made is also quite valid. Are these countries aware of their responsibilities and of the fact that their own policy actions reverberate on other countries. I believe they are aware, and this awareness often needs to be translated into actual action. I think this is happening. Of course, people who live in institutions like ours would like to see everything happening very fast, but often the speed that non-elected institutions have in mind is not the same as the actual political speed in different countries, which doesn’t mean that we shouldn’t continue to urge them to react.

Question: About the political instability of the countries. We have the same problems in the Netherlands: at this moment there is an impasse in addressing deficit targets. Is this something to worry about or are you confident – as confident as the financial markets are at this moment?

Draghi: I think that the Netherlands has, in the past, shown a capacity to overcome political crisis. I am confident that this will be overcome, as the country has done in the past.

Question: Mr Draghi, I have a question regarding the next elections in March of the European Parliament. Do you think that this is going to be a big stress test for Europe, with the developments of populist votes in several countries. And the other question regarding reforms: France has been said to make reforms “à la française”, meaning superficially. Could you comment on that?

Draghi: Well, we are getting very political here friends. I really do not have any comment to make about the next elections in the European Parliament. I can only have a narrow minded viewpoint here. The set of actions that have to be undertaken in order to foster recovery, and especially to create jobs and decrease all unemployment, and especially youth unemployment in some parts of the euro area, are by now pretty clear. As our American friends would say, there is only one way to skin a cat. And that is unfortunately what it is. In a sense, any action, any political conclusion will be judged under this viewpoint. On the second question, reform “à la française” I would ask Christian to respond.

Noyer: I have not much to add to what you have said already. I will repeat it if I may in my own words. I think a lot has been done, as in all countries of the euro area, but a lot remains to be done. I have no particular comment on specific reforms except to repeat that more needs to be done, especially on structural reforms, to continue the efforts that have already been made. We need to increase the growth potential. This is not unique to France. This is a comment I could make in general, and the President has made it many times for the euro area in general. We need to put more emphasis on expenditure reduction or control. Increasing taxes is the easy part of fiscal consolidation, but the reduction of expenditure is certainly the most important in the medium to long term to enhance the growth potential and the reactivity of an economy. I will stick to that.

Question:Do you think additional measures will be necessary for Spanish banks when the current programme ends?

Draghi: Well, the programme in Spain is judged to be on track. The actions that have been undertaken have been considered adequate. The recapitalisation plans have been undertaken. The assets have been transferred and are in the process of being sold. Provisions have been quite significant. So, everything seems to suggest that Spain will approach this exercise well-equipped, but of course it’s very difficult to guess at this point in time what can happen at individual banks.

Question: My question is about the asset quality review. You say it will be transparent and rigorous, but the past exercises by the EBA were also supposed to be rigorous and transparent. What are you going to do differently to restore confidence?

Draghi: We will give detailed communication about the design of the asset quality review in the second half of October. For the moment it is premature to just put forward one element or another. What I can tell you is that people learn, and the general – I would say the unanimous – stance with respect to this exercise by all supervisors and governing council members is to be transparent and rigorous. It’s quite clear to everybody – in part because of the lesson we learnt – that in order to be useful, they have to be credible. In order to be credible, they have to be transparent and rigorous. In this order, exactly. So, the process has to be absolutely transparent and I think we are doing much in this regard. Consider, also, the difference with respect to the previous exercise as far as the plurality of actors is concerned. At this point in time, we will have the ECB, we will have the national competent authorities, we will have other countries’ competent authorities participating in the exercise – so there will be peer pressure – and we will have third-party private sector independent assessors. So, there are some differences in the design.

Question: In the last two weeks, we saw two very important elections: one in Austria and one in Germany. And in both elections, in very stable countries, we saw “anti-Euro” parties growing very quickly, Also in Germany. I mean even if the Alternative für Deutschland didn’t reach the 5% hurdle, it’s on 4.7% and it’s a very, very important result. Are you worried about the “anti-Euro” growing everywhere in Europe now and what to be done against this?

Draghi: I think we should certainly be alert to these expressions of the popular will. I think there is one common denominator in what we should do. We should move forward on the three pillars of our policies, first, with the ultimate objective of fostering the recovery, creating jobs in a situation of price stability. And the three pillars are: national economic policies should continue their reform actions, the ECB should continue to keep price stability and the economic governance at the euro area level should continue to make progress.

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