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

Mario Draghi, President of the ECB,
Vítor Constâncio, Vice-President of the ECB,
Malta, 22 October 2015

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 Bonnici 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 our meeting.

Based on our regular economic and monetary analyses, and in line with our forward guidance, the Governing Council decided to keep the key ECB interest rates unchanged. As regards non-standard monetary policy measures, the asset purchases are proceeding smoothly and continue to have a favourable impact on the cost and availability of credit for firms and households.

The Governing Council has been closely monitoring incoming information since our meeting in early September. While euro area domestic demand remains resilient, concerns over growth prospects in emerging markets and possible repercussions for the economy from developments in financial and commodity markets continue to signal downside risks to the outlook for growth and inflation. Most notably, the strength and persistence of the factors that are currently slowing the return of inflation to levels below, but close to, 2% in the medium term require thorough analysis. In this context, the degree of monetary policy accommodation will need to be re-examined at our December monetary policy meeting, when the new Eurosystem staff macroeconomic projections will be available. The Governing Council is willing and able to act by using all the instruments available within its mandate if warranted in order to maintain an appropriate degree of monetary accommodation. In particular, the Governing Council recalls that the asset purchase programme provides sufficient flexibility in terms of adjusting its size, composition and duration. In the meantime, we will continue to fully implement the monthly asset purchases of €60 billion. These purchases are intended to run until the end of September 2016, or beyond, if necessary, and, in any case, until we see a sustained adjustment in the path of inflation that is consistent with our aim of achieving inflation rates below, but close to, 2% over the medium term.

Let me now explain our assessment of the available information in greater detail, starting with the economic analysis. Euro area real GDP increased by 0.4%, quarter on quarter, in the second quarter of 2015, following a rise of 0.5% in the previous quarter. The outcome for the second quarter reflected positive contributions from both domestic demand and net exports. The most recent survey indicators point to a broadly similar pace of real GDP growth in the third quarter of the year. Overall, we expect the economic recovery to continue, albeit dampened, in particular, by weaker than expected foreign demand. Domestic demand should be further supported by our monetary policy measures and their favourable impact on financial conditions, as well as by the progress made with fiscal consolidation and structural reforms. Moreover, the decline in oil prices should provide support for households’ real disposable income and corporate profitability and, therefore, private consumption and investment. However, the recovery in domestic demand in the euro area continues to be hampered by the necessary balance sheet adjustments in a number of sectors and the sluggish pace of implementation of structural reforms.

The risks to the euro area growth outlook remain on the downside, reflecting in particular the heightened uncertainties regarding developments in emerging market economies, which have the potential to further weigh on global growth and foreign demand for euro area exports. Increased uncertainty has recently manifested itself in financial market developments, which may have negative repercussions for euro area domestic demand.

According to Eurostat, euro area annual HICP inflation was -0.1% in September 2015, down from 0.1% in August. Compared with the previous month, this mainly reflects a further decline in energy price inflation. On the basis of the information available and current oil futures prices, annual HICP inflation rates will remain very low in the near term. Annual HICP inflation is expected to rise at the turn of the year, also on account of base effects associated with the fall in oil prices in late 2014. Inflation rates are foreseen to pick up further during 2016 and 2017, supported by the expected economic recovery, the pass-through of past declines in the euro exchange rate and the assumption of somewhat higher oil prices in the years ahead as currently reflected in oil futures markets. However, there are risks stemming from the economic outlook and from financial and commodity market developments which could further slow down the gradual increase in inflation rates towards levels closer to 2%. These risks are being closely monitored by the Governing Council.

Turning to the monetary analysis, recent data confirm solid growth in broad money (M3), notwithstanding a decline in the annual growth rate of M3 to 4.8% in August 2015 from 5.3% in July. Annual growth in M3 continues to be mainly supported by its most liquid components, with the narrow monetary aggregate M1 growing at an annual rate of 11.4% in August, after 12.2% in July.

Loan dynamics continued to improve. The annual rate of change of loans to non-financial corporations (adjusted for loan sales and securitisation) increased to 0.4% in August, up from 0.3% in July, pursuing its gradual recovery since the beginning of 2014. Despite these improvements, developments in loans to enterprises continue to reflect the lagged relationship with the business cycle, credit risk, credit supply factors, and the ongoing adjustment of financial and non-financial sector balance sheets. The annual growth rate of loans to households (adjusted for loan sales and securitisation) increased to 1.0% in August 2015, compared with 0.9% in July. The euro area bank lending survey for the third quarter of 2015 confirms the increase in demand for bank loans, supported by the general level of interest rates, financing needs for investment purposes and housing market prospects. In addition, credit standards eased further on loans to enterprises, notably due to increasing competitive pressures in retail banking, while tightening somewhat on loans to households for house purchase. Overall, the monetary policy measures we have put in place since June 2014 provide clear support for improvements both in borrowing conditions for firms and households and in credit flows across the euro area.

To sum up, a cross-check of the outcome of the economic analysis with the signals coming from the monetary analysis indicates the need to firmly implement the Governing Council’s monetary policy decisions and to monitor closely all relevant incoming information as concerns their impact on the medium-term outlook for price stability.

Monetary policy is focused on maintaining price stability over the medium term and its accommodative stance supports economic activity. However, in order to reap the full benefits from our monetary policy measures, other policy areas must contribute decisively. Given continued high structural unemployment and low potential output growth in the euro area, the ongoing cyclical recovery should be supported by effective structural policies. In particular, actions to improve the business environment, including the provision of an adequate public infrastructure, are vital to increase productive investment, boost job creation and raise productivity. The swift and effective implementation of structural reforms, in an environment of accommodative monetary policy, will not only lead to higher sustainable economic growth in the euro area but will also raise expectations of permanently higher incomes and accelerate the benefits of reforms, thereby making the euro area more resilient to global shocks. Fiscal policies should support the economic recovery, while remaining in compliance with the EU’s fiscal rules. Full and consistent implementation of the Stability and Growth Pact is crucial for confidence in our fiscal framework. At the same time, all countries should strive for a growth-friendly composition of fiscal policies.

We are now at your disposal for questions.

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Question: If I could ask you to develop the last point that you made. Governor Nowotny last week said that monetary policy may be coming up to its limits and perhaps it was up to fiscal policy to loosen a little bit to provide a bit of accommodation. Could you share your thoughts on this and perhaps even touch on the Italian budget?

And if I could ask a second question that's regarding December, I'm curious, what will be the triggers? What specific measures will you be looking at in December to make your decision whether to adjust the programme?

Draghi: On the first issue, I'm really commenting only on monetary policy, and as we said in the last part of the introductory statement, monetary policy shouldn't be the only game in town, but this can be viewed in a variety of ways, one of which is the way in which our colleague actually explored in examining the situation, but there are other ways. Like, for example, as we've said several times, the structural reforms are essential. Monetary policy is focused on maintaining price stability over the medium term, and its accommodative monetary stance supports economic activity. However, in order to reap the full benefits of our monetary policy measures, other policy areas must contribute decisively.

So here we stress the high structural unemployment and the low potential output growth in the euro area as the main situations which we have to address. The ongoing cyclical recovery should be supported by effective structural policies. But there may be other points of view on this. The point is that monetary policy can support and is actually supporting a cyclical economic recovery. We have to address also the structural components of this recovery, so that we can actually move from a cyclical recovery to a structural recovery. Let's not forget that even before the financial crisis, unemployment has been traditionally very high in the euro area and many of the structural weaknesses have been there before.

On your second question, as you might have seen in the introductory statement, there was a very rich discussion about all monetary policy instruments that might be used if warranted. No specific choice has obviously been made yet. So there was a thorough assessment of the situation, which I'll elaborate further following your questions, and the conclusion was that we are ready to act if needed; we will examine all incoming information and we are open to a whole menu of monetary policy instruments. To this extent, the Governing Council has tasked the relevant committees to work on different monetary policy instruments that could potentially be used, to examine the pros and cons of different instruments. In other words, if one had to summarise what was the attitude or the stance of the Governing Council discussion today, one would say it was not "wait and see", but it was "work and assess".

Question: Just following on from your previous answer, would it be possible for you to elaborate a little on the discussion today about the options that you still think are available to beef up the monetary policy response? And you've said in the past that rates, particularly the deposit rate, are now at the zero bound. Is that a statement you'd still stand by, or are rate cuts another potential option available to the Council?

Draghi: Let me just report to you on the general lines of our discussion today. First of all, we examined the prospects for a firming up of our recovery and we concluded that the recovery is continuing, and is projected to continue at the same pace it had in the second quarter of this year. But we have to distinguish two components: the domestic part of this recovery and the external part. The domestic part has shown resilience, mostly driven by consumption, and the drivers of this recovery are the lower oil prices, our monetary policy and, to some extent, the fact that many countries have achieved some progress in fiscal consolidation. So the headwinds coming from fiscal policy would be lower than in the past.

To see how important our monetary policy is, consider that real disposable income and consumption have grown at the same pace, which implies the growth rate of savings has been flat. And this is so because interest rates are so low. So we often complain about interest rates being low for savings, but there is also a positive side to that. On the other hand, we have an external demand which has shown weakness mainly for the challenges that emerging market economies are now experiencing, and more particularly China.

On the inflation rate side, the picture is in a sense less sanguine. We see that headline inflation will stay low for a protracted period of time, although as I just said in the introductory statement, we expect some pick-up, due mostly to base effects and possibly projections of higher oil prices. Having said that, the core inflation is basically stable at 0.9%. When we look at the expectations of inflation, which of course is a very relevant variable for our monetary policy decisions, we see that since our last meeting survey-based short-term inflation expectations have declined, but medium to long-term inflation expectations, after some decline following our last meeting, have recovered and are basically unchanged since then. And we see that the latter development is both for market-based inflation expectations and survey-based inflation expectations.

However, we see some downside risk as far as this picture is concerned. And the downside risks come from a continuing high output gap, from the possible further fall in oil prices, from the fact that the nominal effective exchange rate has appreciated in the last three or four months, if I'm not mistaken, by almost 6%, and, finally, from the fact that we continue to observe a high degree of correlation between headline inflation and medium-term inflation expectations, which means a high degree of correlation between oil prices and inflation expectations. This is a risk because it could lead to a de-anchoring of inflation expectations. We are not saying that these risks are materialising, but they are present and as I observed in the course of the last meeting these risks have gone up, and we want to be vigilant, as people used to say in the old times.

On the other hand, we see that credit markets are improving, and we can expand on that in the coming questions. So the overall assessment, as I said, is not wait and see, but it's work and assess, so the Governing Council is there, ready to act if the convergence of our inflation path to 2% in the medium term is pushed back.

On the interest rate on the deposit facility, I said before – I don't know whether it was the last meeting or the meeting before that when I was asked whether it was discussed, I had said it was not discussed. This time it was discussed. Further lowering of the deposit facility rate was indeed discussed, and it's one of the instruments of monetary policy that I referred to when I said all instruments have been discussed.

Question: You talked about the inflation picture being less sanguine. Can you just explain a little bit more to the public why you think you have to fight so hard against low inflation? Especially for lower and middle-income people, spending less at the gas station, spending less at the grocery store is helping their purchasing power. You've said before, people buy more stuff when inflation is low. Why spend all this money on government bonds to fight something that a lot of people would say is a good thing for them and for their budgets?

My second question is, is there a risk that the ECB will just kind of fall into a trap of QE without end? That you keep doing it, that you keep buying government bonds? We see it from the Federal Reserve's experience, whether or not they start raising interest rates. Is there a danger that this stimulus keeps going on and on and the markets just come to expect it and that you won't be able to get out?

Draghi: Let me respond first to your second question. The projections of recovery both in output and inflation are based, are conditional on the full implementation of the QE programme as announced in January and the full implementation of all the credit-easing measures that have been announced in the course of 2014. So we have to continue on that. On the other hand, they were also based on a set of technical assumptions concerning exchange rates, oil prices, external demand, growth in output and so on. And to the extent that these conditions change and possibly worsen, we will have to adjust our QE programme or in general our monetary policy stance. That's the sense of our discussion about downside risks.

On why to fight low inflation: I've discussed this many times. Low inflation on one hand has a supporting power for real disposable income. On the other hand, it increases the real value of debt. As we've seen, low interest rates promote consumption and it's essential for the recovery of growth and economic activity. That's why we're fighting. But to fight low inflation doesn't mean that we want high inflation. We just want to be compliant with our mandate, which is to drive inflation back to below but close to 2% in the medium term. I understand the Vice-President may want to add something on the first question.

Constâncio: Yes, I would like to add something. Because it's the second or third time that you asked that question, so let me add something. First, let me remind you that some years ago in the US there was a commission headed by an economist called Boskin to examine the measurement of inflation. And the conclusion of the Boskin Commission was that the way inflation is measured, in particular the type of indexes that are used, Laspeyres indexes, tend to exaggerate the measurement of inflation, in the case of the US by 1.5 percentage points. So, if the target would be zero, very likely we would be targeting a negative inflation rate. So there is a measurement problem with inflation which justifies that the target for inflation should be above zero.

Second point is the point that the President just reminded you about debt deflation, and when there is a situation of high indebtedness, when inflation is very low, the burden of servicing the debt increases and that is very detrimental to the economy. The third point is that with very low inflation or negative inflation, the real interest rate increases, and when the nominal rate cannot go below zero it means that the interest rate in real terms may be above the equilibrium real interest rates that would equal savings to investment at the level of full employment. So that's another reason why negative inflation rates can be detrimental.

Then there are the deflation risks – real deflation, not what you implied in your question, because to have negative inflation for a few months is not a deflation situation. A deflation situation is a situation of prolonged period, meaning more than one year, of negative inflation. And in that case you have two phenomena: you have an increase in real wages, because there is rigidity in nominal wage growth to not go negative, so you will constrain supply, profits of firms, and you hit growth. And second, there is also then in such a situation a problem of consumers postponing their expenditure, if deflation lasts long enough; when we are talking about real deflation, not just a few months of negative inflation.

So there are a host of reasons why central banks fight deflation, why they spend money, as you implied – and by the way, just reminding you, there is not just one way of central banks to spend money to fight low inflation. We and other central banks purchase securities. The Swiss central bank purchases foreign exchange in order to defend the level of the exchange rate that they want, and they have a balance sheet which is higher than ours in relation to the respective GDP.

Question: First of all I would like to ask you a question on what you said on the deposit rate, that it could be lowered further. Could you explain a bit more the reasoning behind these discussions, how it could work? And also you had said that the rates were effectively at the lower bound, so how would this measure up? How would you explain this move to the market?

And a second question is, if you were to expand QE, do you feel there might be risks that you run into scarcity, that you might have to extend the pool of purchasable assets?

Draghi: On the first question, we touched lower bound but, also in this, my answer is linked to the previous question. When we are at practically zero nominal rates, the real rates are being driven by the expectation of inflation. So lower expectations of inflation imply higher real rates – and this is an answer to Brian Blackstone before, that's why we fight negative expectations of inflation. Whenever expectations of inflation become more and more negative, we have higher and higher real rates. That's one of the reasons why we consider other nonstandard monetary policy measures, one of which is the negative rate on the deposit facility. So there we've decided a year ago that that would be the lower bound, then we've seen the experience of other countries and now we are thinking about that. I should say, we've not taken any decision about that. It was an open discussion on all the monetary policies. We've discussed some other monetary policy instruments besides this one.

On the scarcity, I've been asked this question many times. We haven't seen yet this scarcity. Let me say that also the fact that the ECB, the Eurosystem now is a constant source of demand on the markets, this is helping market makers to show their bid prices and this by itself increases liquidity. Also we're not chasing bonds that we know are less available, so that's another thing. And let's not forget that the ECB is also lending bonds to the market makers and the market participants, so it's also increasing liquidity. But as I've said many times, we stand ready to adjust the design of our asset purchase programme according to the needs and when and if needed.

Question: The Governing Council today met in a Member State where the GDP growth is actually 5.2% in the second quarter, inflation is 1.6% and unemployment is 5.4%. It's an economic situation which is actually very similar to the one that we see in Germany. So you've got the biggest country and one of the smallest countries performing similarly, and all the ones in the middle ranging quite differently and struggling, despite the accommodative stance of the ECB. Is this something to do with structural change? And what insights will you be taking back to Frankfurt after Malta for your future policy deliberations?

Draghi: On this question I'd like to give the floor to Governor Bonnici, but first let me say one thing about the other countries, why we observe this difference. You're absolutely right, one of the most important differences is the degree of implementation of structural reforms in different parts of the euro area. But there are also other considerations. There are different cyclical positions; there's different exposure to external shocks. If, for example, a large export market were to experience a recession, this would reverberate in a different way according to the different countries and different exports they have to this part of the world.

What sort of economic policies different countries have undertaken to adjust to their macroeconomic imbalances that they had before the crisis, that's also one other consideration. Also, probably one of the most important differences across the euro area is, the degree of indebtedness, both in the public sector and in the private sector, of different countries. It's quite clear that a high stock of debt hampers growth, so how to get rid of this, different ways to decrease the indebtedness, also have different implications. Now I would like to give the floor to Governor Bonnici as far as the specific experience of the Maltese economy is concerned.

Bonnici: Well, as the President has said, in fact, structural change has a lot to do with the performance of an economy. And the Maltese economy has gone through quite a significant structural change over the years, which has enabled the economy to be much more resilient and dynamic, so new sectors develop as old sectors fall by the wayside. I think also that the impact of the QE, or the asset purchase programme, has on a country that has exports of goods and services of 150% of GDP on the exchange rate is also very important for a small economy. So from tourism to exports of goods, these are positively influenced. And perhaps also one needs to look at the space, the fiscal space the government has. The deficit has been coming down, the public sector debt is just above the EU average, and all these factors give you more space for an economy to be able to expand, in some ways similar to Germany too, which also has a similar scenario.

Question: You stressed that emerging market developments are a worry for the Governing Council in terms of the growth outlook. How would you judge if China slowed down to 4.5% not 6.9%, and how big of a threat is that for the inflation outlook - not for the growth outlook? And how big a threat for the inflation outlook is the resilient exchange rate of the euro? That's the first question.

The second one, in the last part of your introductory statement you mentioned the structural reforms. This is a repetitive point you are making: structural reforms are very important for countries and just yesterday Eurostat pointed out that the level of government debt in the euro area countries is growing, and that only three countries actually fulfil the Maastricht criteria. What would be your comment on that?

Draghi: The first question is quite important. There are two ways to respond. One is to look at different channels of propagation of what happens in China towards the euro area. And then there is a different way. Let me first explore this way. First of all, we look at all these channels, namely the direct trade channel or indirect trade. On the direct trade channel, the conclusion is the exposure of the euro area to the Chinese economy is not very significant. After all, the exports of the euro area to China are 6% of the total. However, there are some countries where such a figure is higher and reaches almost 10%, in the case of Germany. Still, I'd say this is not exceptional.

The second is so-called indirect channels, where you have also to account for the changes in oil prices and commodity prices that a higher recession in China would imply. The third channel is the financial channel and again we do not see a very significant exposure of the euro area towards China. But then there is another channel, which is the confidence channel. We think that so far what happens to the growth in China hasn't affected confidence in the rest of the world and more specifically in the euro area. At the latest meetings in Lima, the IMF confirmed the growth projections for this year as far as China is concerned, which are above 6%. So your perspective is not something that is on the screens now. Of course, any very large surprise in a very large economy might have the potential to affect confidence worldwide, and then we would have to see in which way and how to cope with that.

The other dimension to this is, when we say it concerns the effect of lower oil prices on our economies in general, we've been saying several times that most of the reasons why oil prices are low have to do with supply conditions and that demand conditions play only a minor role. Now, recent analysis suggests that we should be more cautious about this, because to the extent that the investment in oil production had been geared in the past on the basis of projections of demand which turned out later to be less than expected, this is also a demand-induced oil price shock, and has different consequences on inflation and inflation expectations than it would if it were a shock which was supply-determined.

Question: I also tried to ask about the channel, how strong is the channel of the exchange rate for the inflation projections, medium-term projections?

Draghi: Regardless of what happens in China. Of course, one of the downsides I mentioned before, one of the downside risks to our inflation projections comes from the exchange rate. As I've said before, the nominal effective exchange rate has been appreciating over the last few months – four, five months – to a somewhat significant level. But let me restate: the exchange rate is not a policy target for the ECB. It's never been; it's not now. However, it's significant, as I've just said, for price stability and for growth.

Question: Mr Draghi, you told us today that there is an open discussion in the Governing Council about a possible next step from the ECB and you told us that no decision has been made so far. Did you already see maybe a form of preference among the Governors, or maybe specific opposition regarding the options the ECB could use should it become necessary to bolster its policy? A form of preference or a specific opposition regarding the options the ECB could use?

And the second question, could you tell us if there was a discussion today for acting today? You said that a new rate cut was discussed today: I'd be interested to know if you could elaborate a bit more on the argument raised for postponing an action to the next meeting.

Draghi: Well, the answer to the first question is no. There was no explicit preference towards one instrument or another instrument. All of them were considered. Let me add one thing about the possible changes, possible cuts in the rate on the deposit facility: the issue there is how come we announced a year ago that that was practically the zero lower bound and now we're thinking of going into further negative territory? Well, let me state quite clearly that the credibility of a central bank is measured by its ability to comply with its mandate and to this extent any instrument could be potentially used.

Given the conditions prevailing a year ago, that was the statement. Today things have changed, but this doesn't necessarily imply that we are going to use this instrument. The discussion was wide-open. So let me cope with this credibility argument immediately.

Second, I would say there were a few members of the Governing Council who hinted at the possibility of acting today, but I wouldn't say it was a prevailing theme of our discussion today.

Question: Allow me to touch again on the issue of structural reforms. Unfortunately, not all countries take it as seriously to act in this manner like the country we're in at the moment. Would you go so far to say that if structural reforms are not taken more seriously and more stridently by the relevant governments, QE won't be able to fulfil its total amount, will not be able to be so successful as you would like it to be?

And if this is so, my second question, does it make any sense then to adjust QE or even to expand it?

Draghi: No, I never said that QE would not yield its benefits if there were no structural reforms. I would say that structural reforms will transform what is a cyclical recovery produced, amongst other factors, by our monetary policy into a structural recovery later on. It's quite apparent that the monetary policy measures that we've been undertaking over the last year and a half, two years, especially, but even before, have significantly improved the financial markets, the credit markets and the money markets. And now it's time we see these improvements being translated into a recovery which is resilient, especially in its domestic component.

So no doubts whatsoever about the effectiveness of our monetary policy, regardless of whether structural reforms have been implemented or not. Let me also add that we shouldn't have a too negative picture of how structural reforms have been implemented, because there has been some progress in several of our countries about that. It's not that countries didn't do anything. So more can be done, there's room for improvement, but quite a few reforms have been undertaken in several of our euro area countries.

Question: Is there concern in the Governing Council that the asset purchase programme could be insufficient to create conditions that support growth and avoid the threat of deflation?

Draghi: Our judgement today is that the monetary stance that has been designed with the monetary policy measures announced in January, with the credit-easing measures announced in the course of 2014, is essential for producing recovery in output and convergence of inflation towards the objective of being below but close to 2% over the medium term. These objectives are predicated on the full implementation of this monetary policy. That's the current assessment. However, if we were to see that the technical assumptions underlying these projections have worsened, or the downside risks are increasing and further on materialising, we may well change the size, the composition, the design of all our monetary policy instruments as needed.

Question: Could you comment on the possible political uncertainty in Spain and Portugal and if that could derail the process of reform that you've alluded to so many times today? And is it a worry for the ECB, the fact that some of the parties that may be called to form a government, especially in Portugal, reject the euro?

Draghi: Well, the answer is no, I can't comment. But a more gentle way of saying no would be the following: uncertainty, for economics, is bad. It's bad for consumption; it's bad for investment. Political uncertainty, however, is part of democracy.

Question: I have two questions. The Chinese President, Xi Jinping, is currently paying a state visit to the United Kingdom. What are the positive effects that this visit will bring to the trade between China and Europe and what's your expectation on the further development of economic relationships between China and Europe in the future?

Draghi: I just can't comment on this. These are political statements.

Question: What are the positive effects that you think that China and Europe, in economic relationships, what further developments do you expect?

Draghi: I think China is a very significant partner of the euro area and will remain so. And if anything, will become a stronger and stronger economic partner of the euro area in the future.

Question: How do you assess the economic impact from the emissions scandal of Volkswagen to the eurozone economy?

Draghi: My answer is going to be very short: it's very, very early to say. There will be a time when we'll have full visibility on the economic impact, but it's very, very early to say now.

Question: I wanted to see if the Governing Council had any discussion or views on the migrant crisis and what potential impact that would have, depending on the decisions made on potential resettlement in Europe.

Draghi: There was a brief discussion on the migrants. It was very brief, because it's very, very early to say what the impact could be on the eurozone’s economy. We are at the time when we can only make inferences, really, from standard economic thinking. It's clearly a very significant increase in labour supply; however, there's also probably a need of significant investments in this labour supply, and also to see how these public investments in knowledge, education and so on are going to be financed is also going to make a big difference. So I would say, as I said before on the occasion of a different question, it's very early to have full visibility on the economic consequences of this phenomenon, and even more so to know what impact this might have on our monetary policy decisions. The key important thing, however, is that we should be able to cope successfully with this humanitarian crisis of unprecedented size.

Question: Earlier we heard Governor Bonnici's take on how Malta is doing. I would like to ask for your opinion as President about how Malta's doing financially and economically, and the way it's implementing its policies and how Malta's following the advice and the guidelines brought forward by the ECB.

Draghi: I'm sorry to say, but I'll revert again to Governor Bonnici for an answer to this question. But I'm saying this not because I want to avoid the answer, but because I think he's the most fully qualified for answering this question.

Bonnici: . Well, Malta's following the asset purchase programme. It's right on target. And also when you read the press release that we've issued about structural change and the need to have growth-friendly fiscal policy, I think it's on the right track. There is the type of fiscal policy that is reducing the debt; it's forecasted next year to be 1.1% of GDP lower, and I think that is pretty good. At the same time the debt burden is going down, and the expenditure is going into areas, from education to other areas that essentially improve the quality of the labour supply. So, in general I think Malta's performing reasonably well for its own future. It's a good performance.

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