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Speeches published in 2015

14/12/2015
Mario Draghi:  Monetary policy and structural reforms in the euro area
Speech by Mario Draghi, President of the ECB,   Prometeia40,   Bologna, 14 December 2015
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Summary

Monetary Policy and Structural Reforms in the euro area

Intervention by Mario Draghi, President of the European Central Bank, at Prometeia40, Bologna, 14 December 2015

The tools we have deployed since June 2014 are producing the intended effects, said Mario Draghi in a speech in Bologna today. Following the recalibration of our instruments decided by the Governing Council earlier this month, the ECB expects inflation to return to its objective without undue delay. The President also said that if the ECB had to intensify the use of its instruments to ensure that it achieves its price stability mandate, it would.

However, while monetary policy can deliver price stability, that alone does not guarantee lasting prosperity. To have a structural recovery we need to raise not just current growth but potential growth as well. The key to this is higher investment. Investment has been held back in the euro area by three things: weak demand dynamics, the still-high private debt overhang and fragile private sector confidence.

The euro area today needs to take additional steps, alongside supporting demand, to address the debt overhang and fragile confidence. Structural reforms are key to this end. It is clear that, in some countries, the large stock of non-performing loans (NPLs) is still preventing a stronger recovery in credit. All this explains why facilitating a work-out of NPLs has to be part of the package of policy actions to restore productive investment. The ongoing work towards a Capital Market Union (CMU) is an opportunity to accelerate progress also on this front. If we are to truly underpin confidence, it is important that, even while dealing with more pressing priorities, we do not lose sight of the need to complete our monetary union.

11/12/2015
Peter Praet:  The transmission of recent non-standard measures
Speech by Peter Praet, Member of the Executive Board of the ECB, Joint BoE, ECB, CEPR and CFM Conference on Credit Dynamics and the Macroeconomy; London, 11 December 2015
09/12/2015
Sabine Lautenschläger:  Single Supervisory Mechanism - Achievements after one year
Presentation by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the Single Supervisory Mechanism, at the Eleventh High-level Meeting for the Middle East & North Africa Region: Global Banking Standards and Regulatory and Supervisory Priorities, Abu Dhabi, 9 December 2015
04/12/2015
Mario Draghi:  Global and domestic inflation
Speech by Mario Draghi, President of the ECB, Economic Club of New York, 4 December 2015
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03/12/2015
Yves Mersch:  Auf neuen Wegen zum alten Ziel
Rede von Yves Mersch, Mitglied des Direktoriums der EZB, Ludwig-Maximilians-Universität, München, den 03. Dezember 2015
23/11/2015
Sabine Lautenschläger:  Stormy times – how is the ECB handling them?
Speech by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the Single Supervisory at the 2015 - General Assembly of the Bavarian Economic Advisory Committee, Munich, 23 November 2015
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21/11/2015
Benoît Cœuré:  Paradigm lost: Rethinking international adjustments
Speech by Benoît Cœuré, Member of the Executive Board of the ECB, Egon and Joan von Kashnitz Lecture, Clausen Center for International Business and Policy, Berkeley, 21 November 2015

Summary

Paradigm lost: Rethinking international adjustments

Speech by Benoît Cœuré, Member of the Executive Board of the ECB, Clausen Center for International Business and Policy, Berkeley, 21 November 2015

Central banks today operate in a highly interconnected world. They need a profound understanding of the international macroeconomics adjustment process. The research community can help policy makers answering their fundamental questions about globalization and shaping their response in terms of governance and regulation.

During the past two decades, policy discussion in fora such as the IMF, G7 or G20 have been predicated on three key assumptions about that process: reallocation of aggregate demand across economies would sustain an appropriate pace of global growth; freely floating exchange rates would support such demand and act as shock absorbers; and cross border capital flows make international adjustment smoother and improve the global allocation of capital.

But recent theoretical and empirical research has started deconstructing these three assumptions. First, the capacity of the global economy to generate growth is under question. In a global zero lower bound environment, surplus countries hold world output down. Second, global interconnectedness seems to have altered the shock absorbing role of floating exchange rates. And finally, academics have questioned the resource allocation and risk-sharing benefits of cross-border capital flows, while capital controls, or as recently dubbed capital flow management measures, are once again part of the policy discussion.

In light of these discussions, is there a case for rethinking international macro adjustments and the functioning of the International Monetary System? And can we shape financial regulation in a way to reap the benefits of a global financial integration? The way academics and policy makers address those open issues in international economics will condition the resilience of the global economic system, i.e. its capacity to return to equilibrium without policy intervention. This is of key importance to central bankers. If we ignore those issues, there is a risk that monetary policies may become ineffective, overburdened, and/or collectively trapped in a suboptimal equilibrium.

20/11/2015
Mario Draghi:  Monetary Policy: Past, Present and Future
Speech by Mario Draghi, President of the ECB, at the Frankfurt European Banking Congress, 20 November 2015
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Summary

Monetary Policy: Past, Present and Future

Speech by Mario Draghi, President of the European Central Bank, at the 25th Frankfurt European Banking Congress on 20 November 2015

The ECB’s monetary policy measures have clearly worked, in fact they are probably the dominant force spurring the recovery. They have been instrumental in arresting and reversing the deflationary pressures that hit the euro a year ago. Yet growth momentum remains weak and inflation remains well below our objective of below but close to 2%.

Composite lending rates for non-financial companies declined more than 70 basis points for the euro area as a whole between June 2014 and today, and by between 110 and 120 basis points in stressed economies. That is a formidable pass-through. Small businesses also report improvements in access to external sources of finance.

To highlight three risks: global growth this year will be the weakest since 2009; this is the weakest euro area rebound since 1998; and the recovery remains very protracted in historical perspective.

We cannot say with confidence that the process of economic repair in the euro area is complete. At the December Governing Council meeting we will thoroughly assess the strength and persistence of the factors that are slowing the return of inflation towards 2%. If we conclude that the balance of risks to our medium-term price stability objective is skewed to the downside, we will act by using all the instruments available within our mandate. We consider the asset purchase programme to be a powerful and flexible instrument, as it can be adjusted in terms of size, composition or duration to achieve a more expansionary stance. The level of the deposit facility rate can also empower the transmission of APP, not least by increasing the velocity of circulation of bank reserves. If we decide that the current trajectory of our policy is not sufficient to achieve our objective, we will do what we must to raise inflation as quickly as possible. That is what our price stability mandate requires of us.

19/11/2015
Peter Praet:  Monetary policy under uncertainty
Speech by Peter Praet, Member of the Executive Board of the ECB, at the FAROS Institutional Investors Forum during the 18th Euro Finance Week 2015, Frankfurt, 19 November 2015
18/11/2015
Sabine Lautenschläger:  The SSM after one year
Keynote speech by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the Single Supervisory Mechanism, at the IIF Colloquium on European Banking Union, Frankfurt, 18 November 2015
18/11/2015
Yves Mersch:  Keynote speech Euro Finance Week
Keynote speech by Yves Mersch, Member of the Executive Board of the ECB, Frankfurt, 18 November 2015
17/11/2015
Sabine Lautenschläger:  Qualitative and quantitative banking supervision
Speech by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the Single Supervisory Mechanism, at the conference “Banking Supervision, Resolution and Risk Management” during the 18th Euro Finance Week 2015, Frankfurt, 17 November 2015
16/11/2015
Yves Mersch:  “A currency beyond the nation state: 
The euro and its institutional challenges ahead”
Dinner speech by Yves Mersch, Member of the Executive Board of the ECB, at Société d’Economie Politique, Paris, 16 November 2015
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16/11/2015
Vítor Constâncio:  “Monetary policy and the euro area problem”
Speech by Vítor Constâncio, Vice-President of the ECB, at the 18th Euro Finance Week, Frankfurt, 16 November 2015

Summary

“Monetary policy and the euro area problem”

Speech by Vítor Constâncio, Vice President of the European Central Bank, at the 18th Euro Finance Week in Frankfurt on 16 November 2015

The speech points that the euro area problem is part of a predicament shared by other advanced economies: decades of declining economic and productivity growth rates, prolonged periods of low inflation and an untamed financial sector fuelling asset price booms. Policies adopted by the ECB are thus responding to the present situation of low inflation and tepid recovery.

Namely, the low level of policy rates is associated with the declining real rate of equilibrium. The worsening of the international economic situation and the low inflation will lead the ECB to reassess its policy stance in December. To face the challenges confronting the euro area, it is recognised that monetary policy cannot address all the problems and that structural reforms and fiscal policy should help to overcome them.

12/11/2015
Mario Draghi:  Hearing at the European Parliament’s Economic and Monetary Affairs Committee
Introductory statement by Mario Draghi, President of the ECB, Brussels, 12 November 2015
12/11/2015
Yves Mersch:  Three challenges for the banking sector
Speech by Yves Mersch, Member of the Executive Board of the ECB, at the European Financial Forum dinner, 2015 Cumberland Lodge Financial Services Summit, Cumberland Lodge, 12 November 2015
11/11/2015
Mario Draghi:  Cross-border markets and common governance
Luncheon speech by Mario Draghi, President of the ECB, Bank of England Open Forum, London, 11 November 2015

Summary

Cross-border markets and common governance

Luncheon speech by Mario Draghi, President of the ECB, Bank of England Open Forum, London, 11 November 2015

Cross-border markets and common governance

Markets have never been more integrated than they are today. In the case of Europe, we benefit from open markets because we need to be able to invest abroad part of the savings that will finance our pensions. The European Union embodies the principle of an open market economy in its Treaties.

But to reap the benefits of openness markets need appropriate governance. For example, people need confidence that contracts entered into will be enforced. Fair rules on competition, property rights and the rule of law are essential. For financial markets this is especially important given their inherent fragility.

Regulations need to be sufficiently sound to preserve the integrity of the market but not so taxing as to suffocate it. To be true sources of opportunity, markets need policing. This makes the market a political construct. In a true market, one that is both open and free, there exists at the level of the whole market the three branches of government: legislative, judiciary and executive.

It is well understood by all that a genuine single market in Europe has to be buttressed by appropriate and credible institutions. But political sovereignty and the market do not perfectly overlap so the question in Europe is which institutions are most appropriate to uphold as much freedom of the market as possible for different members.

The single currency increases the benefits of a single market but also heightens the degree of mutual vulnerability to which member countries are exposed. National policymakers cannot fully protect their citizens from financial instability without pooling more sovereignty over decision-making. Countries that share a single market and a single currency need deeper institutional integration.

The single supervisory mechanism is an example of this. A single supervisor, applying homogenous methodologies, internalises mutual trust. The case is clear that completing banking union is a priority, with a fully equipped single resolution mechanism and uniform deposit insurance scheme.

Cross border markets create a community of interest from which each member stands to benefit. But they also heighten shared exposure to the potential detriment of all, so they need governance. This is true at the global level and the European level. It is even more true for countries sharing the single currency. For them, it is even more important to complete economic and monetary union in all its aspects.

11/11/2015
Yves Mersch:  Elemente des Entwurfs des Aktionsplans zur Schaffung einer Kapitalmarktunion
Stichpunkte des Redebeitrags von Yves Mersch, Mitglied des Direktoriums der EZB, anlässlich einer Mittagsveranstaltung bei der Commerzbank, Berlin am 11. November 2015
06/11/2015
Peter Praet:  Monetary policy as information processing (slides from the presentation)
Speech by Peter Praet, Member of the Executive Board of the ECB, 3rd Frankfurt Conference on financial market policy – Digitizing finance, organised by SAFE Policy Center, Frankfurt am Main, 6 November 2015
06/11/2015
Yves Mersch:  View of a Central Banker on the Future of Banking
Speech by Yves Mersch, Member of the Executive Board of the ECB, at Slovenian Banking Day, Brdo, 6 November 2015
05/11/2015
Mario Draghi:  Speech to mark the opening of the academic year at the Università Cattolica del Sacro Cuore
Speech by Mario Draghi, President of the ECB, Università Cattolica del Sacro Cuore, Milan, 5 November 2015
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05/11/2015
Vítor Constâncio:  Understanding Inflation Dynamics and Monetary Policy in a Low Inflation Environment
Remarks by Vítor Constâncio, Vice-President of the European Central Bank at the ECB Conference on “Challenges for Macroeconomic Policy in a Low Inflation Environment”, Frankfurt, 5 November 2015
04/11/2015
Sabine Lautenschläger:  Looking ahead - Closing Remarks at the ECB Forum on Banking Supervision
Closing remarks by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the Single Supervisory Mechanism, at the SSM Banking Supervision Forum, 4 November 2015
04/11/2015
Mario Draghi:  One year of ECB Banking Supervision
Speech by Mario Draghi, President of the ECB, at the ECB Forum on Banking Supervision, 4 November 2015, Frankfurt
03/11/2015
Mario Draghi:  Reception for the Opening of the European Cultural Days
Welcome address by Mario Draghi, President of the ECB, Frankfurt, 3 November 2015
02/11/2015
Sabine Lautenschläger:  One year of SSM
Speech by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the Single Supervisory Mechanism, at an international conference on "One year of SSM effective and efficient supervision in a volatile world?" organised by the Institute of Law and Finance, Frankfurt, Germany, 2 November 2015
02/11/2015
Benoît Cœuré:  The international regulatory agenda on CCP links
Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at the ESRB workshop on CCP interoperability arrangements, 2 November 2015
29/10/2015
Vítor Constâncio:  The role of stress testing in supervision and macroprudential policy
Keynote address by Vítor Constâncio, Vice-President of the ECB, at the London School of Economics Conference on “Stress Testing and Macroprudential Regulation: a Trans-Atlantic Assessment”, London 29 October 2015

Summary

The generalised use of system-wide stress testing was boosted by the financial crisis. However, thus far, system-wide stress tests have been focusing on banks and their solvency and have been used for microprudential purposes.

The macroprudential policy function has added a new dimension to stress testing going well beyond the examination of individual bank results. Enhancements in the macro stress testing framework are underway to integrate more realistic dynamic features in the model-framework, allow for banks’ reactions, add a proper liquidity stress test component, integrate contagion effects as well as a two-way interaction with the real economy. Furthermore, efforts are being made in the direction of going beyond banks and integrating, to the extent possible, the shadow banking sector in the broader framework. These steps are necessary to provide the macro dimension to stress testing exercises and make them fit for macroprudential policy use. This entails accounting for macroeconomic impacts along the horizons of stress testing exercises, as well as alerting for the need for pre-emptive action and assessing the impact of macroprudential policy tools.

The objective is very challenging but is being actively pursued: a new framework  for stress testing must serve both the micro- and the macroprudential policy functions in a complementary way.

28/10/2015
Vítor Constâncio:  Macroprudential policy in Europe: ensuring financial stability in a banking union
Keynote speech by Vítor Constâncio, Vice-President of the ECB, at the Financial Stability Conference, Berlin, 28 October 2015

Summary

When the business cycle and the financial cycles are disconnected, monetary policy must remain anchored to its goal of ensuring price stability in the markets of goods and services. It cannot address instability in asset markets or broader financial stability risks. This is the task of macroprudential policy. Its objective is to contain systemic risk in the financial system. The role of macroprudential policy is all the more relevant in a monetary union, where economic and financial conditions may significantly differ across member states. With its granular and targeted instruments, macroprudential policy provides the most appropriate tool for staving off financial stability risks in the specific areas where they arise, being it at the level of a country, a sector or a financial institution. An effective conduct of macroprudential policy can therefore help monetary policy to remain focussed on fulfilling its price stability mandate.

The last two years have shown that macroprudential policy in Europe is already active. The implemented national macroprudential policies since the start of the CRR/CRD IV are especially focussed on structurally strengthening the banking system. In addition, the adoption of borrower-based instruments, such as loan-to-value (LTV), loan-to-income (LTI) or debt service-to-income (DSTI) by national authorities indicates that they are useful instruments in the European environment to curtail excessive credit and house price growth by acting directly on borrower’s conditions.

Going forward, we need to complete the macroprudential toolkit in the hands of European authorities to enhance consistency and policy co-ordination and to enable them to address financial stability risks emerging outside the banking system. This will be a key step to accompany further European market integration and the creation of a true Capital Markets Union.

27/10/2015
Benoît Cœuré:  The monetary policy of the ECB (slides from the presentation)
Presentation by Benoît Cœuré, Member of the Executive Board of the ECB, at Instituto Tecnológico Autónomo de México (ITAM) in Mexico City, 27 October 2015
26/10/2015
Yves Mersch:  Challenges of retail payments innovation
Speech by Yves Mersch, Member of the Executive Board of the ECB, at Belgian Financial Forum organised by the National Bank of Belgium, Brussels, 26 October 2015
20/10/2015
Sabine Lautenschläger:  Highlights of European Statistics by the ESCB – present and future
Speech by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the Single Supervisory Mechanism, at World Statistics Day 2015, 20 October 2015
16/10/2015
Benoît Cœuré:  Towards a political convergence process in the euro area
Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at the Interparliamentary Conference “Towards a Progressive Europe”, Berlin, 16 October 2015
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Summary

The effectiveness of the ECB’s action rests on the "M" in the EMU being kept free from political interference. But for this to be secured in a lasting way, we need to further develop the "E", i.e. the economic union.

In the past decade, intermediate solutions to save the euro area were found, but left the EMU still vulnerable to future crises. Therefore, we need to define a new convergence process, involving converging economic structures and more integrated markets. This should be complemented by fully legitimate institutions with the right instruments to intervene if the consensus is not respected.

This new convergence process will lead to higher resilience against economic shocks on a national level and European level, via internal and euro-wide adjustment mechanisms. And it is a prerequisite before discussing a layer of fiscal stabilisation at the European level, which would protect monetary policy from bearing too much of the stabilisation burden.

But such a new convergence process cannot be a technical exercise. For convergence to be lasting and to secure the buy-in of citizens and Member States, such a process needs to be political in nature. This requires a revived political narrative for euro area integration, and a coherent European social contract that brings out the best in each national social contract.

15/10/2015
Vítor Constâncio:  Divergent monetary policies and the world economy
Keynote address by Vítor Constâncio, Vice-President of the ECB, at the conference organised by FED/ECB/FED Dallas/HKMA in Hong Kong, 15 October 2015

Summary

Divergent monetary policies and the world economy

Keynote address by Vítor Constâncio, Vice-President of the ECB,
at the conference organised by FED/ECB/FED Dallas/HKMA in Hong Kong, 15 October 2015

We live in an increasingly globalised world. The responsiveness of financial markets to monetary policy announcements is prima facie evidence that the exit from the zero lower bound may have potent spillovers on other countries in the short run. The medium-term impact of monetary policy spillovers is however much less clear-cut than frequently assumed in policy debates. Looking forward, central banks play an important role in preserving price and financial stability in their own constituencies, but also in stabilising the global financial system. However, it would be a misconception to believe that central bank actions alone are enough. Central banks have to respond to their own economies’ fundamentals but “putting their house in order” is not enough to ensure a suitable global economic environment. Global challenges require domestic and global responses to make the financial system more resilient.

14/10/2015
Yves Mersch:  The future of Europe’s financial market infrastructure: the Eurosystem’s Vision 2020
Speech by Yves Mersch, Member of the Executive Board of the ECB, Singapore, 14 October 2015
13/10/2015
Yves Mersch:  Speech at MNI Connect event
Speech by Yves Mersch, Member of the Executive Board of the ECB, Singapore, 13 October 2015
11/10/2015
Sabine Lautenschläger:  Fostering global growth
Speech by Sabine Lautenschläger, Member of the Executive Board of the ECB, at the panel during the G30 International Banking Seminar, Lima, Peru, 11 October 2015
09/10/2015
Mario Draghi:  Euro area economic outlook, the ECB’s monetary policy and current policy challenges
Statement by Mario Draghi, President of the ECB, at the thirty-second meeting of the International Monetary and Financial Committee, Lima, 9 October 2015
08/10/2015
Peter Praet:  EMU – disappointed expectations and how to move forward
Remarks by Peter Praet, Member of the Executive Board of the ECB, at the 5th SEEK Conference on “Overcoming the Crisis: How to Foster Innovation and Entrepreneurship in a Diverging European Economy?”, Mannheim, 8 October 2015
06/10/2015
Mario Draghi:  Welcome address at the art inauguration at the ECB
Welcome address by Mario Draghi, President of the ECB, “Art on site” inauguration, Frankfurt am Main, 6 October 2015
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02/10/2015
Benoît Cœuré:  The international role of the euro: concepts, empirics and prospects
Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at Saint Joseph University, Beirut, 2 October 2015
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01/10/2015
Mario Draghi:  Atlantic Council Remarks
Speech by Mario Draghi, President of the ECB, at the 2015 Atlantic Council Global Citizen Award, New York, 1 October 2015
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01/10/2015
Peter Praet:  Presentation at the Asset Management Conference organised by the Bundesverband Investment and Asset Management
Peter Praet, Member of the Executive Board of the ECB, Frankfurt am Main, 1 October 2015
29/09/2015
Yves Mersch:  Means of payments and SMEs: where are we heading?
Speech by Yves Mersch at the dinner debate organised by the Think tank Etienne Marcel, at the restaurant du Sénat, Palais du Luxembourg, Paris, 29 September 2015
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28/09/2015
Sabine Lautenschläger:  Reintegrating the banking sector into society: earning and re-establishing trust
Speech by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the Single Supervisory Mechanism, at the 7th International Banking Conference “Tomorrow’s bank business model – How far are we from the new equilibrium” organised by Bocconi University in Milan, 28 September 2015
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24/09/2015
Peter Praet:  Monetary policy lessons from the financial crisis: some remarks
Dinner speech by Peter Praet, Member of the Executive Board of the ECB, at the SNB Research Conference organised by the Swiss National Bank, Zurich, 24 September 2015
23/09/2015
Mario Draghi:  President’s introductory remarks at the regular ECON hearing
Introductory statement by Mario Draghi, President of the ECB, Brussels, 23 September 2015
23/09/2015
Peter Praet:  Remarks at the FIBI Annual Lunch
Speech by Peter Praet, Member of the Executive Board of the ECB, at the Federation of International Banks in Ireland (FIBI), Dublin, 23 September 2015
21/09/2015
Peter Praet:  Current issues on economic policy: The low interest rate environment in the euro area (slides from the presentation)
Public lecture by Peter Praet, Member of the Executive Board of the ECB on “Current issues on economic policy” organised by International Center for Monetary and Banking Studies in Geneva, 21 September 2015
10/09/2015
Yves Mersch:  Medium to long-term priorities of Capital Markets Union (CMU) for the ECB/Eurosystem
Panel remarks by Yves Mersch, Member of the Executive Board of the ECB, at the Eurofi conference in Luxembourg, 10 September 2015
10/09/2015
Peter Praet:  The low interest rate environment in the euro area
Keynote speech by Peter Praet, Member of the Executive Board of the ECB, at a Pension Funds Conference organised by De Nederlandsche Bank in Bussum, The Netherlands, 10 September 2015
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10/09/2015
Benoît Cœuré:  Addressing global data availability challenges
Panel remarks by Benoît Cœuré, Member of the Executive Board of the ECB, at the Eurofi Financial Forum 2015, Luxembourg, 10 September 2015
09/09/2015
Peter Praet:  The ECB’s asset purchase programme: the impact so far
Speech by Peter Praet, Member of the Executive Board of the ECB, at the Eurofi conference in Luxembourg, 9 September 2015
29/08/2015
Vítor Constâncio:  Understanding Inflation Dynamics and Monetary Policy
Panel remarks by Vítor Constâncio, Vice-President of the ECB at the Jackson Hole Economic Policy Symposium, Federal Reserve Bank of Kansas City, 29 August 2015

Summary

Understanding Inflation Dynamics and Monetary Policy

Panel remarks by Vítor Constâncio, Vice-President of the ECB at the Jackson Hole Economic Policy Symposium,
Federal Reserve Bank of Kansas City, 29 August 2015

At the 2015 Jackson Hole Economic Policy Symposium, ECB Vice-President Vítor Constâncio discusses main challenges in understanding inflation dynamics. He reviews recent developments in euro area inflation and related implications for monetary policy.

Understanding inflation dynamics has become particularly important in present times, in view of the prolonged low inflation phase. The traditional relationship between slack in the economy and inflation seems to have weakened significantly in some countries. This requires a careful examination since that relationship – the Phillips curve – is the traditional cornerstone of the transmission mechanism giving central banks control of inflation. Inflation dynamics since the Great Recession have shown signs of instability that have led to a sequence of systematic forecast errors. The two puzzles of “missing disinflation” in 2009-11 followed by “excessive disinflation” after 2012 triggered a surge of new research around the Phillips curve and its possible demise.

After reviewing a number of unsettled issues pertaining to the Phillips curve in the economic literature, such as those related to the measurement of economic slack and inflation expectations, the discussion note argues that the two puzzles can be explained, and that the Philips curve for the euro area is alive and well. This is comforting since the opposite result would raise serious questions about the central bank’s capacity to control inflation.

The current phase of low inflation is significantly driven by negative demand shocks at the global and domestic level, besides commodity price developments. This is certainly the case for the euro area where the low inflation can largely be explained by domestic demand weakness, possibly leading to a larger degree of economic slack than indicated by the usual methods. The link between inflation and real economic activity appears however to have strengthened in the euro area as of late (steepening of the Phillips curve). We should thus be able to bring the inflation rate closer to target in the medium term, provided that our policies are successful in significantly reducing the economic slack.

27/08/2015
Benoît Cœuré:  Drawing lessons from the crisis for the future of the euro area
Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at “Ambassadors Week”, Paris, 27 August 2015
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25/08/2015
Vítor Constâncio:  Assessing the new phase of unconventional monetary policy at the ECB
Panel remarks prepared by Vítor Constâncio, Vice-President of the ECB, at the Annual Congress of the European Economic Association, University of Mannheim, 25 August 2015
14/07/2015
Yves Mersch:  Ways towards more dynamic growth
Speech by Yves Mersch, Member of the Executive Board of the ECB, at the DZ BANK Kapitalmarktkonferenz 2015, Frankfurt, 14 July 2015
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03/07/2015
Vítor Constâncio:  Strengthening macroprudential policy in Europe
Speech by Vítor Constâncio, Vice-President of the ECB, at the Conference on “The macroprudential toolkit in Europe and credit flow restrictions”, organised by Lietuvos Bankas, Vilnius, 3 July 2015

Summary

Strengthening macroprudential policy in Europe

Speech by Vítor Constâncio, Vice-President of the ECB,
at the Conference on “The macroprudential toolkit in Europe and credit flow restrictions”, organised by Lietuvos Bankas,
Vilnius, 3 July 2015

The current euro area environment, with policy rates required to stay low for a prolonged period of time and an apparent disconnect between the business and financial cycle, clearly points to a situation where monetary policy cannot deviate from price stability objectives to influence the financial cycle. This is the task of macroprudential policy. While acknowledged in principle, this fact has not yet been fully reflected in our policy frameworks.

Two major moves are required. First, macroprudential policy must place greater emphasis on preventing large fluctuations in the financial cycle, rather than simply increasing resilience to shocks when they occur. In addition to the bank-side capital based measures enhancing banks’ resilience, borrower-based instruments (such as LTVs or DSTIs), which have proved to be more effective in curtailing excessive credit growth, and are also applicable in a time-varying fashion, should gain more prominence. In particular, borrower-based measures should be properly embedded in European legislation, which is not the case at present. Second, a broader macroprudential toolkit is needed to address risks stemming from the shadow banking sector due to its increasing role in credit intermediation. This could involve measures such as redemption gates and loading fees to provide additional safeguards. Guided stress tests can provide comparable assessments of the health of individual institutions and of the resilience of the financial system as a whole. Appropriate policy responses to mitigate growing risks need however to be calibrated, in order to ensure a contained impact on credit supply to the real economy.

02/07/2015
Mario Draghi:  Opening remarks at the T2S launch celebration
Mario Draghi, President of the ECB, Milan, 2 July 2015
02/07/2015
Yves Mersch:  Translating a shared vision into a winning story
Closing Remarks at the T2S launch celebration by Yves Mersch, Member of the Executive Board of the ECB, Milan, 2 July 2015
30/06/2015
Peter Praet:  The APP impact on the economy and bond markets
Intervention by Peter Praet, Member of the Executive Board of the ECB, at the annual dinner of the ECB’s Bond Market Contact Group, Frankfurt am Main, 30 June 2015
25/06/2015
Yves Mersch:  On European Unity: Economic and Institutional Challenges Facing Europe
Speech by Yves Mersch, Member of the Executive Board of the ECB, Discussant Prof. Hannah Scobie, Chairman, European Economics & Financial Centre, European Economics & Financial Centre, London, 25 June 2015
24/06/2015
Vítor Constâncio:  Remarks at the Symposium on Debt - Economic, Political and Moral Consequences
Remarks prepared by Vítor Constâncio, Vice-President of the ECB, at the 37th Symposium on Debt - Economic, Political and Moral Consequences in honour of Benjamin M. Friedman, organised by the Institut für bankhistorische Forschung e.V. jointly with the Deutsche Bundesbank and Goethe University/ Research Center SAFE, Frankfurt am Main, 24 June 2015
16/06/2015
Yves Mersch:  Introductory statement on TARGET2-Securities (T2S) before the Committee on Economic and Monetary Affairs (ECON)
Speech by Yves Mersch, Member of the Executive Board of the ECB, at the Public Hearing on TARGET2-Securities (T2S) before the Committee on Economic and Monetary Affairs (ECON) of the European Parliament Brussels, 16 June 2015
15/06/2015
Mario Draghi:  Hearing at the European Parliament’s Economic and Monetary Affairs Committee
Introductory statement by Mario Draghi, President of the ECB, Brussels, 15 June 2015
15/06/2015
Peter Praet:  Structural reforms and long-run growth in the euro area
Intervention by Peter Praet, Member of the Executive Board of the ECB, on panel “Long-run growth, monetary policy and financing of the economy” at 43rd Economics Conference of Oesterreichische Nationalbank Vienna, 15 June 2015

Summary

Structural reforms and long-run growth in the euro area

Intervention by Peter Praet, Member of the Executive Board of the ECB,
on panel “Long-run growth, monetary policy and financing of the economy” at 43rd Economics Conference of Oesterreichische Nationalbank
Vienna, 15 June 2015

As the ECB’s accommodative monetary policy is playing its part in the euro area recovery, structural reforms are the domain where there is more still to do to create the conditions for sustainable long-run growth, which is critical to the integrity of our monetary union. There is however no “one size fits all” model for how countries should go about tackling structural challenges. While there are principles that apply across countries, each economy is different and reforms have to be tailored to national conditions. As a central bank, our interest is not in how countries implement reforms, but whether they succeed in doing so.

There are two main channels through which structural reforms can support long-run growth in the euro area, namely through increasing the adjustment capacity of the economy and through raising its potential growth rate. Put differently, reforms can raise both the trend of long-run growth and reduce the fluctuations around that trend. Both aspects are particularly important in a monetary union, which makes structural reforms commensurately more pressing. The environment for introducing structural reforms is better today than for several years: all the conditions are in place for governments in the euro area, individually and collectively, to begin addressing their long-term challenges.

11/06/2015
Yves Mersch:  Capital Markets Union: Optimising investment and financing conditions, increasing resilience
Speech by Yves Mersch, Member of the Executive Board of the ECB, at the Morgan Stanley Global Investment Seminar, Terre Blanche, Provence 11 June 2015
04/06/2015
Yves Mersch:  Getting the balance right: innovation, trust and regulation in retail payments
Introductory speech by Yves Mersch, Member of the Executive Board, European Central Bank at the joint European Central Bank/Suomen Pankki Conference, Helsinki, 4 June 2015
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30/05/2015
Vítor Constâncio:  Monetary Policy and the European recovery
Speech by Vítor Constâncio, Vice-President of the ECB, at the XXXI Reunión Círculo de Economía, Barcelona 30 May 2015
22/05/2015
Mario Draghi:  Structural reforms, inflation and monetary policy
Introductory speech by Mario Draghi, President of the ECB, ECB Forum on Central Banking Sintra, 22 May 2015
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Summary

Structural Reforms, Inflation and Monetary Policy

Introductory Speech by Mario Draghi, President of the ECB,
at the ECB Forum on Central Banking,
Sintra, 22 May 2015

Structural and cyclical policies – including monetary policy – are heavily interdependent. Structural reforms increase both potential output and the resilience of the economy to shocks. This makes structural reforms relevant for any central bank, but especially in a monetary union.
For members of monetary union resilience is crucial to avoid that shocks lead to consistently higher unemployment, and over time, permanent economic divergence. It therefore has direct implications for price stability, and is no less relevant for the integrity of the euro area. This is why the ECB has frequently called for stronger common governance of structural reforms that would make resilience part of our common DNA.

Structural reforms are equally important for their effect on growth. Potential growth is today estimated to be below 1% in the euro area and is projected to remain well below pre-crisis growth rates. This would mean that a significant share of the economic losses in the crisis would become permanent, with structural unemployment staying above 10% and youth unemployment elevated. It would also make it harder to work through the debt overhang still present in some countries. Finally, low potential growth can have a direct impact on the tools available to monetary policy, as it increases the likelihood that the central bank runs into the lower bound and has to resort recurrently to unconventional policies to meet its mandate.

The euro area’s weak long-term performance also provides an opportunity. Since many economies are distant from the frontier of best practice, the gains from structural reforms are easier to achieve and the potential magnitude of those gains is greater. There is a large untapped potential in the euro area for substantially higher output, employment and welfare. And the fact that monetary policy is today at the lower bound, and the recovery still fragile, is not, as some argue, a reason for reforms to be delayed.

This is because the short-term costs and benefits of reforms depend critically on how they are implemented. If structural reforms are credible, their positive effects can be felt quickly even in a weak demand environment. The same is true if the type of reforms is carefully chosen. And our accommodative monetary policy means that the benefits of reforms will materialise faster, creating the ideal conditions for them to succeed. It is the combination of these demand and supply policies that will deliver lasting stability and prosperity.

Strukturreformen, Inflation und Geldpolitik

Eröffnungsrede von Mario Draghi, Präsident der EZB,
anlässlich des ECB Forum on Central Banking,
Sintra, 22. Mai 2015

Struktur- und konjunkturpolitische Maßnahmen – darunter auch die Geldpolitik – stehen in einer engen Wechselbeziehung zueinander. Strukturreformen erhöhen sowohl das Produktionspotenzial als auch die Widerstandsfähigkeit der Wirtschaft gegenüber Schocks. Deshalb sind Strukturreformen stets relevant für Zentralbanken, besonders aber in einer Währungsunion.

Widerstandsfähigkeit ist für Mitglieder einer Währungsunion von entscheidender Bedeutung, damit Schocks nicht zu einer beständig höheren Arbeitslosigkeit und im Zeitverlauf zu dauerhaften wirtschaftlichen Divergenzen führen. Sie hat also unmittelbare Folgen für die Preisstabilität und ist nicht minder relevant für die Integrität des Euro-Währungsgebiets. Die EZB hat daher wiederholt zu einer stärkeren gemeinsamen Steuerung von Strukturreformen aufgerufen, um die Widerstandsfähigkeit zu einem Bestandteil unserer gemeinsamen DNA zu machen.

Strukturreformen sind auch wegen ihrer Auswirkungen auf das Wachstum wichtig. Das Potenzialwachstum im Euroraum beläuft sich laut Schätzungen derzeit auf weniger als 1 % und wird den Projektionen zufolge deutlich hinter den Wachstumsraten zurückbleiben, die vor der Krise verzeichnet wurden. Ein beträchtlicher Teil der in der Krise verbuchten wirtschaftlichen Verluste würde also dauerhaft bestehen bleiben – mit der Folge einer strukturellen Arbeitslosigkeit von mehr als 10 % und einer erhöhten Jugendarbeitslosigkeit. Dies würde auch den Abbau des in einigen Ländern nach wie vor bestehenden Schuldenüberhangs erschweren. Und schließlich kann sich ein niedriges Potenzialwachstum unmittelbar auf die verfügbaren geldpolitischen Instrumente auswirken, da die Zentralbank mit einer größeren Wahrscheinlichkeit an die Nullzinsgrenze stößt und zur Erfüllung ihres Mandats wiederholt auf unkonventionelle Maßnahmen zurückgreifen muss.

Die langfristig schwache Entwicklung im Eurogebiet eröffnet jedoch auch Möglichkeiten. Da viele Volkswirtschaften weit von der Best Practice entfernt sind, lassen sich mit Strukturreformen schneller Erfolge erzielen, und der positive Effekt kann größer ausfallen. Der Euroraum verfügt über ein erhebliches unausgeschöpftes Potenzial für einen deutlichen Produktions-, Beschäftigungs- und Wohlstandszuwachs. Die derzeitige Geldpolitik an der Nullzinsgrenze und die immer noch schwache Konjunkturerholung sind trotz gegenteiliger Behauptungen kein Grund für Verzögerungen bei den Reformanstrengungen.

Denn die kurzfristigen Kosten und der Nutzen von Reformen hängen entscheidend davon ab, wie diese umgesetzt werden. Wenn Strukturreformen glaubwürdig sind, haben sie rasch positive Auswirkungen, selbst bei einer schwachen Nachfrage. Das Gleiche gilt für die sorgfältige Auswahl der Art von Reform. Und dank unserer akkommodierenden Geldpolitik wird der Nutzen der Reformen schneller zum Tragen kommen, denn sie schafft ideale Bedingungen hierfür. Gemeinsam werden diese angebots- und nachfrageseitigen Maßnahmen dauerhaft zu Stabilität und Wohlstand führen.

Reformas estructurales, inflación y política monetaria

Discurso inaugural de Mario Draghi, presidente del BCE,
en el Foro del BCE sobre Banca Central
Sintra, 22 de mayo de 2015

Las políticas estructurales y cíclicas, incluida la política monetaria, muestran un elevado grado de interdependencia. Las reformas estructurales aumentan tanto el producto potencial como la fortaleza de la economía frente a las perturbaciones. Por ello son relevantes para cualquier banco central, especialmente en una unión monetaria.

Para los miembros de una unión monetaria, la capacidad de resistencia de la economía es fundamental para que las perturbaciones no se traduzcan en niveles de desempleo sistemáticamente más elevados y den lugar, con el tiempo, a divergencias económicas permanentes. Por tanto, tiene implicaciones directas para la estabilidad de precios y no es menos importante para la integridad de la zona del euro. Ese es el motivo por el que el BCE ha reclamado frecuentemente un refuerzo de la gobernanza común de las reformas estructurales, que integre esa capacidad de resistencia en nuestro ADN común.

Las reformas estructurales son igualmente importantes por sus efectos sobre el crecimiento. Actualmente, se estima que el crecimiento potencial es inferior al 1 % en la zona del euro y se prevé que se mantenga muy por debajo de las tasas de crecimiento registradas antes de la crisis. Esto significaría que una parte considerable de las pérdidas económicas que se produjeron durante la crisis se convertirían en permanentes, y que el desempleo estructural se situaría por encima del 10 % y el paro juvenil en niveles elevados. También haría más difícil superar el sobreendeudamiento que sigue existiendo en algunos países. Por último, un bajo crecimiento potencial puede afectar directamente a los instrumentos de política monetaria disponibles, ya que la probabilidad de que el banco central alcance el límite inferior, y tenga que recurrir repetidamente a políticas no convencionales para cumplir su mandato, es mayor.

Pero el débil comportamiento de la zona del euro a largo plazo también representa una oportunidad. Dado que muchas economías están muy lejos de aplicar las mejores prácticas, los beneficios de las reformas estructurales son más fáciles de alcanzar y su magnitud potencial es mayor. En la zona del euro hay sin utilizar un gran potencial para un crecimiento, un empleo y un bienestar considerablemente mayores. Y el hecho de que la política monetaria se encuentre en el límite inferior y de que la recuperación sea aún frágil, no es, como algunos sostienen, motivo para retrasar las reformas.

En realidad, los costes y los beneficios a corto plazo de las reformas dependen de forma crucial de cómo se apliquen. Si las reformas estructurales son creíbles, sus efectos positivos pueden apreciarse rápidamente, incluso en un entorno de contención de la demanda. Lo mismo ocurre si las reformas se eligen cuidadosamente. Y nuestra política monetaria acomodaticia significa que los beneficios de las reformas se materializarán con mayor rapidez, creando las condiciones ideales para su éxito. Es la combinación de estas políticas de oferta y demanda lo que dará como resultado una estabilidad y una prosperidad duraderas.

Réformes structurelles, inflation et politique monétaire

Discours d'ouverture de M. Mario Draghi, président de la BCE,
à l'occasion du Forum de la BCE consacré à l'activité de banque centrale
Sintra, le 22 mai 2015

Les politiques structurelles et conjoncturelles, y compris la politique monétaire, sont largement interdépendantes. Les réformes structurelles renforcent tant la croissance potentielle que la capacité de résistance de l'économie aux chocs. Elles sont donc importantes pour toute banque centrale, mais davantage encore dans une union monétaire.

Pour les différents participants à l'union monétaire, la capacité de résistance est cruciale pour éviter que les chocs n'entraînent un chômage durablement plus élevé et, avec le temps, des divergences économiques permanentes. Elle pèse donc directement sur la stabilité des prix et est tout aussi importante pour l'intégrité de la zone euro. C'est pourquoi la BCE appelle régulièrement à une gouvernance commune resserrée des réformes structurelles qui placerait la capacité de résistance au cœur de nos préoccupations communes.

Les réformes structurelles sont tout aussi cruciales s'agissant de leurs retombées en termes de croissance. La croissance potentielle au sein de la zone euro est estimée actuellement à moins de 1 % et devrait rester nettement en deçà des taux de croissance d'avant la crise. Il en résulterait qu'une part importante des pertes économiques subies pendant la crise deviendraient permanentes, le chômage structurel demeurant supérieur à 10 % et le chômage des jeunes élevé. La réduction du surendettement encore observé dans certains pays s'en trouverait elle aussi entravée. Enfin, une faible croissance potentielle peut avoir une influence directe sur les instruments de politique monétaire disponibles, car la probabilité est plus grande que la banque centrale atteigne le niveau plancher des taux d'intérêt et doive recourir de façon répétée à des politiques non conventionnelles pour remplir son mandat.

Mais les faibles performances économiques de long terme de la zone euro peuvent aussi offrir une chance à cet égard. De nombreuses économies étant assez éloignées des meilleures pratiques, il est plus facile d'obtenir des bienfaits - qui plus est plus importants - des réformes structurelles. La zone euro se caractérise par un grand potentiel inexploité en vue d'une croissance, d'un niveau d'emploi et d'un bien-être significativement supérieurs. Et ce n'est pas parce que la politique monétaire a atteint un niveau plancher de taux d'intérêt et parce que la reprise reste fragile que l'on peut, comme le souhaitent certains, reporter les réformes.

En effet, les coûts et les bienfaits à court terme des réformes dépendent fondamentalement de la manière dont elles sont mises en œuvre. Les retombées positives de réformes structurelles crédibles peuvent se faire sentir rapidement, même dans un contexte de demande atone. Il en va de même des réformes soigneusement sélectionnées. En outre, grâce au caractère accommodant de notre politique monétaire, les bienfaits des réformes se concrétiseront plus vite, créant les conditions idéales de leur succès. C'est la combinaison de ces politiques d'offre et de demande qui permettra d'obtenir une stabilité et une prospérité durables.

Riforme strutturali, inflazione e politica monetaria

Intervento introduttivo di Mario Draghi, Presidente della BCE,
in occasione dell'ECB Forum on Central Banking,
Sintra, 22 maggio 2015

Le politiche strutturali e cicliche, compresa la politica monetaria, sono fortemente interdipendenti. Le riforme strutturali accrescono sia il prodotto potenziale sia la tenuta dell'economia agli shock e pertanto assumono rilevanza per ogni banca centrale, soprattutto in un'unione monetaria.

Per i paesi dell'unione monetaria la capacità di tenuta è cruciale per evitare che gli shock generino una disoccupazione durevolmente maggiore e, nel tempo, una divergenza economica permanente. La capacità di tenuta ha quindi ricadute dirette per la stabilità dei prezzi e non è meno importante per l'integrità dell'area dell'euro. Per questa ragione la BCE ha spesso invocato un rafforzamento della governance comune delle riforme strutturali che renderebbe la capacità di tenuta parte del nostro DNA.

Le riforme strutturali sono altrettanto rilevanti per il loro effetto sulla crescita. Secondo le stime, la crescita potenziale dell'area dell'euro si colloca oggi al di sotto dell'1% e dovrebbe mantenersi su livelli ben inferiori a quelli pre-crisi. Ne consegue che una parte significativa delle perdite economiche riconducibili alla crisi diverrebbe permanente, con una disoccupazione strutturale al di sopra del 10% e un'elevata disoccupazione giovanile. Sarebbe inoltre più difficile abbattere il debito eccessivo tuttora presente in alcuni paesi. Infine, una crescita potenziale contenuta può avere un impatto diretto sugli strumenti disponibili per la politica monetaria, poiché aumenta la probabilità che la banca centrale porti i tassi di interesse al limite inferiore e debba spesso ricorrere a misure non convenzionali per assolvere il proprio mandato.

La debolezza degli andamenti di lungo periodo dell'area dell'euro offre anche un'opportunità. Essendo molte economie lontane dalla frontiera delle migliori prassi, i benefici delle riforme strutturali sono più facilmente raggiungibili e l'entità potenziale dei benefici stessi è maggiore. Vi è un grande potenziale inutilizzato nell'area dell'euro per conseguire livelli considerevolmente più elevati di prodotto, occupazione e benessere. Il fatto che la politica monetaria si trovi oggi sul limite inferiore e che la ripresa sia ancora fragile non giustifica, come vorrebbero alcuni, un ritardo nel processo di riforma.

E questo perché i costi e i benefici a breve termine delle riforme dipendono in modo cruciale dalle modalità di attuazione. Se le riforme strutturali sono credibili, gli effetti positivi possono essere rapidamente avvertiti persino in un contesto di debolezza della domanda. Lo stesso accade se la tipologia delle riforme è scelta con attenzione. La nostra politica monetaria accomodante implica che i benefici delle riforme si manifesteranno più celermente, creando le condizioni ideali per la loro riuscita. È la combinazione di queste politiche di domanda e offerta che assicurerà stabilità e prosperità durature.

Structurele hervormingen, inflatie en monetair beleid

Inleidende toespraak door Mario Draghi President van de ECB,
op het ECB Forum on Central Banking, Sintra,
22 mei 2015

Structureel beleid en conjunctuurbeleid - met inbegrip van het monetair beleid - zijn zeer nauw met elkaar verbonden Structurele hervormingen verhogen zowel de potentiële productie als de schokbestendigheid van de economie. Hierdoor zijn structurele hervormingen van belang voor elke centrale bank, maar met name voor een centrale bank binnen een monetaire unie.

Voor de leden van een monetaire unie is schokbestendigheid van cruciaal belang om te voorkomen dat schokken leiden tot langdurig hogere werkloosheid en na verloop van tijd tot permanente economische divergentie. Schokbestendigheid heeft daarom directe implicaties voor de prijsstabiliteit, en is niet minder belangrijk voor de integriteit van het eurogebied. Daarom heeft de ECB regelmatig opgeroepen tot een steviger gemeenschappelijk beheer van structurele hervormingen die schokbestendigheid zouden opnemen in ons gemeenschappelijke DNA.

Structurele hervormingen zijn van even groot belang door hun effect op de groei. De potentiële groei in het eurogebied ligt momenteel naar schatting onder 1% en zal, zo wordt voorzien, ruim onder het groeicijfer van vóór de crisis blijven. Dit zou betekenen dat een aanzienlijk deel van de economische verliezen die zich tijdens de crisis hebben voorgedaan, permanent zouden worden, waarbij de structurele werkloosheid boven de 10% en de jeugdwerkloosheid hoog zou blijven . Dit zou het tevens lastiger maken een uitweg te vinden uit de in enkele landen nog steeds aanwezige grote schulden. Lage potentiële groei, ten slotte, kan van directe invloed zijn op de instrumenten die het monetair beleid ter beschikking staan, aangezien het de waarschijnlijkheid vergroot dat de centrale bank tegen de ondergrens aanstoot en daardoor herhaaldelijk zal moeten terugvallen op onconventioneel beleid om aan haar mandaat te voldoen.
De zwakke langetermijnprestaties van het eurogebied bieden overigens ook kansen. Aangezien veel economieën nog lang de grens van "best practice" niet zijn genaderd, zijn de winsten van structurele hervormingen gemakkelijker te verwezenlijken en is de potentiële omvang van deze winsten groter. Er is een groot nog ongebruikt potentieel in het eurogebied voor aanzienlijk hogere productie, werkgelegenheid en voorspoed. En het feit dat het monetair beleid zich thans aan de ondergrens bevindt en het herstel nog steeds broos is, is geen reden, zoals enkelen bepleiten, om hervormingen uit te stellen.
Dit is omdat de kortetermijnkosten en voordelen van hervormingen in cruciale mate afhangen van hoe zij ten uitvoer worden gelegd. Als structurele hervormingen geloofwaardig zijn, zijn hun positieve effecten snel merkbaar, zelfs in een klimaat van zwakke vraag. Hetzelfde geldt als het soort hervormingen nauwkeurig wordt gekozen. En ons accommoderende monetair beleid betekent dat de voordelen van hervormingen zich sneller zullen concretiseren, en aldus de ideale voorwaarden zullen creëren voor het welslagen van deze hervormingen. Het is de combinatie van deze vraag- en aanbodbeleidslijnen die zal leiden tot blijvende stabiliteit en voorspoed.

19/05/2015
Benoît Cœuré:  How binding is the zero lower bound?
Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at the conference “Removing the zero lower bound on interest rates”, organised by Imperial College Business School / Brevan Howard Centre for Financial Analysis, CEPR and the Swiss National Bank, London, 18 May 2015

Summary

How binding is the zero lower bound?

Speech by Benoît Cœuré, Member of the Executive Board of the ECB,
at the conference “Removing the zero lower bound on interest rates”, organised by Imperial College Business School / Brevan Howard Centre for Financial Analysis, CEPR and the Swiss National Bank,
London, 18 May 2015

The notion of an effective lower bound on policy interest rates that is lower than zero has become a concrete concern for monetary policy. While the effective lower bound for short-term rates exists, it does not impose a binding constraint on the effectiveness of monetary policy. There are tools for dealing with the lower bound constraint, which at the ECB go under the name of “non-standard monetary policy measures”. We saw that the short-term interest rate going below zero does not pose difficulties for monetary policy.
While removing the effective lower bound by abolishing cash can be envisaged, such a step should be the outcome of changing technologies and social perceptions, not of policy prescriptions. Also political capital could be better spent on structural reforms of euro area economies, which would raise the natural real rate of interest and thereby make the lower bound less of a constraint.

18/05/2015
Yves Mersch:  Swedbank Economic Outlook Seminar
Speech by Yves Mersch, Member of the Executive Board of the ECB, Stockholm, 18 May 2015
14/05/2015
Mario Draghi:  The ECB’s recent monetary policy measures: Effectiveness and challenges
Camdessus lecture by Mario Draghi, President of the ECB, IMF, Washington, DC, 14 May 2015
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13/05/2015
Benoît Cœuré:  Consolidating the euro area’s economic recovery
Introductory remarks by Benoît Cœuré, Member of the Executive Board of the ECB, prior to an informal exchange of views with the European Affairs Committee and the Finance Committee of the National Assembly, Paris, 13 May 2015
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13/05/2015
Benoît Cœuré:  Domestic and cross-border spillovers 
of unconventional monetary policies
Remarks by Benoît Cœuré, Member of the Executive Board of the ECB, at the at the SNB-IMF Conference "Monetary Policy Challenges in a Changing World", Zurich, 12 May 2015

Summary

Domestic and cross-border spillovers of unconventional monetary policies

Speech by Benoît Cœuré, Member of the Executive Board of the ECB,
at the at the SNB-IMF Conference "Monetary Policy Challenges in a Changing World",
Zurich, 12 May 201

Discussion has recently emerged on the global financial market implications of diverging monetary policy cycles. Central banks in large advanced economies can free themselves from the global financial cycle and regain monetary independence, provided that they show clarity in purpose and resolve in implementation. The global exchange rate adjustments should be therefore seen as a natural by-product of such move towards monetary policy independence and divergence. Monetary policy always has unintended consequences, no matter where it is pursued. At the ECB we take our decisions with a view to attaining our primary objective of price stability. But without prejudice to this objective, we take financial stability risk seriously and monitor closely whether severe imbalances are emerging in the financial sector.

08/05/2015
Vítor Constâncio:  Reinforcing financial stability in the euro area
Speech by Vítor Constâncio, Vice-President of the ECB, at the OMFIF City Lecture, London, 8 May 2015
27/04/2015
Vítor Constâncio:  Financial integration and macro-prudential policy
Speech by Vítor Constâncio, Vice-President of the ECB, at the joint conference organised by the European Commission and the European Central Bank “European Financial Integration and Stability”, 27 April 2015
24/04/2015
Yves Mersch:  Dinner speech at EUI-NOMICS
Speech by Yves Mersch, Member of the Executive Board of the ECB, at EUI-NOMICS, Florence, 24 April 2015
23/04/2015
Peter Praet:  Lifting potential growth in the euro area
Speech by Peter Praet, Member of the Executive Board of the ECB, at the Welt-Währungskonferenz, Berlin, 23 April 2015
21/04/2015
Sabine Lautenschläger:  Monitoring, regulation and self-regulation in the European banking sector
Speech by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the Single Supervisory Mechanism, at the evening reception at the Deutsche Aktieninstitut in Frankfurt am Main, 21 April 2015.
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20/04/2015
Vítor Constâncio:  Presentation of the ECB Annual Report 2014 to the Committee on Economic and Monetary Affairs of the European Parliament
Introductory remarks by Vítor Constâncio, Vice-President of the ECB, Brussels, 20 April 2015
17/04/2015
Mario Draghi:  Euro area economic outlook, the ECB’s monetary policy and current policy challenges
Statement by Mario Draghi, President of the ECB, prepared for the thirty-first meeting of the International Monetary and Financial Committee, Washington DC, 17 April 2015
16/04/2015
Peter Praet:  Price stability: a sinking will-o'-the-wisp?
Intervention by Peter Praet, Member of the Executive Board of the ECB, during a panel on “The elusive pursuit of inflation” at the IMF Spring Meetings Seminar, Washington, 16 April 2015
16/04/2015
Vítor Constâncio:  Financial regulation and the global recovery
Speech by Vítor Constâncio, Vice-President of the ECB, at the 24th Annual Hyman P. Minsky Conference “Is financial reregulation holding back finance for the global recovery?”, Washington, 16 April 2015
11/04/2015
Benoît Cœuré:  Ensuring an adequate loss-absorbing capacity of central counterparties
Special invited lecture by Benoît Cœuré, Member of the Executive Board of the ECB, at the Federal Reserve Bank of Chicago 2015 Symposium on Central Clearing, Chicago, 10 April 2015
31/03/2015
Mario Draghi:  Accounts and accountability
Speech by Mario Draghi, President of the ECB, at the Euro50 Group Roundtable on “Monetary Policy in Times of Turbulence”, Frankfurt am Main, 31 March 2015
30/03/2015
Benoît Cœuré:  Rencontres économiques lycéennes (Transparents de la présentation)
Benoît Cœuré, membre du directoire de la BCE, 20ème édition des Rencontres économiques de Pontault-Combault 30 mars 2015
26/03/2015
Mario Draghi:  Introductory statement at the Italian Parliament
Speech by Mario Draghi, President of the ECB, at the Italian Parliament, Rome, 26 March 2015
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23/03/2015
Mario Draghi:  Hearing at the European Parliament’s Economic and Monetary Affairs Committee (introductory remarks and Q&A)
Speech by Mario Draghi, President of the ECB, Brussels, 23 March 2015
23/03/2015
Benoît Cœuré:  Introductory remarks
Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at the press conference on the closing of the EU-funded technical cooperation programme with the Central Bank of Montenegro, in Podgorica, Montenegro on 23 March 2015
18/03/2015
Mario Draghi:  Speech at the inauguration of the New ECB Premises
Speech by Mario Draghi, President of the ECB, Frankfurt am Main, 18 March 2015

Summary

Speech by the President at the inauguration of the New ECB Premises

Speech by Mario Draghi, President of the ECB, Frankfurt am Main, 18 March 2015

The new ECB headquarters are a symbol of the best of what Europe can achieve together. But it also reminds us of why we can never again risk to split apart.

The crisis is testing European unity. Some, like many of the protesters today, believe the problem is that Europe is doing too little while others, like the populist parties emerging across Europe, believe Europe is doing too much.

The answer is not to unwind integration, nor to hold out an unattainable vision of where integration should lead. We need ambition in our ends and pragmatism in our means. We need to reconcile the economics of integration, which is about efficiency, with the politics of integration, which is about equity. Education and training need to be as much a part of the reform agenda as creating more flexible markets and reducing red tape.

And the more decision-making over economic issues moves to the European level, the more democracy needs to move with it. We therefore need to strengthen the channels for genuine European democratic legitimacy, like the European Parliament. By giving up some formal sovereignty, people will gain in effective sovereignty. They will empower institutions with euro area-wide responsibility able to tackle the pressing problems of jobs and growth. And so their votes may make more of a difference to their lives than they do today.

18/03/2015
Benoît Cœuré:  What is the goal of the Capital Markets Union?
Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at a conference "The European Capital Markets Union, a viable concept and a real goal?" organised by the Institute for Law and Finance in Frankfurt on 18 March 2015
16/03/2015
Sabine Lautenschläger:  How can prudential regulation foster growth?
Speech by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the Single Supervisory Mechanism, at Frankfurt Finance Summit, Frankfurt am Main, 16 March 2015

Summary

How can prudential regulation foster growth?

Speech by Sabine Lautenschläger, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the Single Supervisory Mechanism, Frankfurt am Main, 16 March 2015

Supervisors can contribute to sustainable economic growth by ensuring that supervised entities are resilient to plausible shocks, properly managed, adequately capitalised and subject to an efficient risk management and the right incentives. The European Single Supervisory Mechanism takes a medium to long-term perspective on this, resisting those who argue for short-term relief. The SSM ensures that banks can deliver in their tasks in all phases of the economic cycle and thus are able to provide the economy with the financial services that corporations, smaller firms and citizens need.

16/03/2015
Mario Draghi:  Speech by the President at SZ Finance Day 2015
Speech by Mario Draghi, President of the ECB, Frankfurt am Main, 16 March 2015

Summary

Speech by the President at SZ Finance Day 2015

Speech by Mario Draghi, President of the ECB, Frankfurt am Main, 16 March 2015

Europe needs to accelerate on its way to economic and institutional convergence. Due to falling oil prices, accommodative monetary policy and successful structural reforms, we can be optimistic about the economic outlook. The nascent recovery should be used as a window of opportunity to go ahead with reforms that make the euro area less fragile and vulnerable to shocks. Economic convergence should be reached through structural reforms that lead to an alignment of productivity levels. On the institutional side, we need to move from a system of rules and guidelines for national economic policy making to a system of further sovereignty sharing within common institutions. As part of this process, we need to strengthen the democratic accountability of Europe towards its citizens.

12/03/2015
Benoît Cœuré:  La politique monétaire dans la zone euro
Intervention de Benoît Cœuré, membre du directoire de la BCE, à la conférence organisée par l’Association des Journalistes Économiques e Financiers (AJEF), Paris, le 12 mars 2015
11/03/2015
Mario Draghi:  The ECB and its Watchers XVI Conference
Speech by Mario Draghi, President of the ECB, Frankfurt am Main, 11 March 2015

Summary

The ECB and its Watchers XVI Conference

Speech by Mario Draghi, President of the ECB,
Frankfurt am Main, 11 March 2015

In January, the ECB decided to expand its asset purchase programme to include government bonds after it became clear that there was a need for more monetary stimulus. Asset purchases are unconventional, but not unorthodox, and they have been part of the ECB’s toolkit from the start. By deploying this tool, the ECB underlined its ability and determination to stabilise euro area inflation in line with its objective.

The impact of the programme and the ECB’s previous monetary policy measures is visible: Bank lending rates to companies started to decline in the third quarter of last year, market-based measures of inflation expectations have reacted positively to the ECB’s balance sheet expansion over recent months, and euro area long-term sovereign yields have fallen – in spite of the renewed crisis in Greece. This suggests that the asset purchase programme may be shielding other euro area countries from contagion, which also helps the ECB achieve its monetary policy goals across the euro area.

The euro area economy grew more than expected in the fourth quarter and unemployment fell to its lowest level since August 2012 in January. While this cannot exclusively be attributed to the ECB’s monetary policy, it certainly supports the recovery. Even though inflation is expected to remain very low or negative in the months ahead mainly due to the sharp drop in oil prices, it is expected to move closer the ECB’s policy target over the coming years to reach 1.8 per cent in 2017 - conditional on the full implementation of all policy measures.

The beneficial impact of the ECB’s asset purchases on financing conditions will increase the benefits of governments’ structural reforms, rather than reducing incentives for reforms. Firms will be encouraged to increase investment, bringing forward the economic recovery.

11/03/2015
Peter Praet:  Public sector security purchases and monetary dominance in a monetary union without a fiscal union
Speech by Peter Praet, Member of the Executive Board of the ECB, at the Conference The ECB and Its Watchers XVI, Contribution to the Panel on Low-interest-rate Policy and Non-standard Monetary Policy Measures: Effectiveness and Challenges, Frankfurt am Main, 11 March 2015

Summary

Public sector security purchases and monetary dominance in a monetary union without a fiscal union

Speech by Peter Praet, Member of the Executive Board of the ECB,
Frankfurt am Main, 11 March 2015

The Governing Council decision to start purchases of public sector securities has demonstrated its ability to meet the mandate of price stability and bring inflation rates back to levels below but close to 2 percent. With this policy, it makes full use of all legal and effective monetary policy instruments. The design of such purchases has taken into account the specificities of the institutional set-up, notably the fact that the euro area is a monetary union that is not a fiscal union. This is an assertion of monetary dominance, in compliance with the principles enshrined in the Maastricht Treaty.

Nevertheless the overall success of the euro area depends on all stakeholders doing their job.

10/03/2015
Benoît Cœuré:  Embarking on public sector asset purchases
Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at the Second International Conference on Sovereign Bond Markets, Frankfurt, 10 March 2015

Summary

Embarking on public sector asset purchases

Speech by Benoît Cœuré, Member of the Executive Board of the ECB,
at the Second International Conference on Sovereign Bond Markets,
Frankfurt, 10 March 2015

On 9 March the Eurosystem launched its public sector purchase programme (PSPP). On that day the ECB and the national central banks of the euro area purchased €3.2 billon of public sector bonds, putting the programme on track to reach a total of €60 billion in March. Monetary policy is implemented in normal times in money markets. Stepping into bond markets creates challenges and might have unintended consequences. One key principle underlying the implementation of the PSPP is the minimisation of unintended consequences, which can be ensured by obeying the concept of market neutrality. We do want to affect market prices but we will not suppress the price discovery mechanism. The Eurosystem will ensure a high degree of transparency around its interventions and will closely monitor their impact on market liquidity and collateral availability. Some market reports have suggested that we may not be able to buy the intended amounts of government bonds. While the effective supply of eligible securities is undoubtedly lower than the total amount outstanding, it will still be substantially higher than the amounts we intend to purchase. If this is the case, there will be a price at which we can buy the quantities needed to meet our monthly targets. In other words, we may face a scarcity of bonds, but we won't face a shortage. And there are good reasons to expect that scarcity will materialise first and foremost in those market segments with a higher duration, potentially helping to maximise the economic impact of our operations.

10/03/2015
Yves Mersch:  The Future of Banking – a Central Banker’s view
Speech by Yves Mersch, Member of the Executive Board of the ECB, at the Economist Future of Banking Summit in Paris, 10 March 2015
27/02/2015
Vítor Constâncio:  Central banks with large balance sheets (slides from the presentation)
Presentation by Vítor Constâncio, Vice-President of the ECB, for the panel discussion “Central banks with large balance sheets” at the U.S. Monetary Forum in New York City, 27 February 2015
25/02/2015
Mario Draghi:  Introductory statement to the plenary debate of the European Parliament on the ECB’s Annual Report 2013
Mario Draghi, President of the ECB, Brussels, 25 February 2015
24/02/2015
Mario Draghi:  Unveiling of the new €20 banknote
Speech by Mario Draghi, President of the European Central Bank, European Central Bank Frankfurt, 24 February 2015
13/02/2015
Vítor Constâncio:  Financial stability risks, monetary policy and the need for macro-prudential policy
Speech by Vítor Constâncio, Vice-President of the ECB, Warwick Economics Summit, 13 February 2015

Summary

Financial stability risks, monetary policy and the need for macro-prudential policy

Speech by Vítor Constâncio, Vice-President of the ECB,
Warwick Economics Summit,
13 February 2015

The financial crisis has shown that price stability is not sufficient to guarantee financial stability. The financial cycle and the business cycle are not synchronised, implying that risks can emerge especially in the periods of “disconnect” between the two cycles. In the run-up to the financial crisis, imbalances were building-up while inflation was low and stable. At present, the search for yield phenomenon continues against the very low inflation, subdued growth and low interest rate environment.

Monetary policy aims at ensuring price stability in the market for goods and services. It should not be used to address pockets of instability in asset markets. This falls under the remit of macro-prudential policy, aimed at safeguarding stability of the financial system and containing systemic risk. At present, in advance economies, monetary policy needs to stabilise prices and to continue supporting real activity, while macro-prudential policy needs to tame the financial sector in asset market segments showing signs of exuberance or where imbalances could be forming.

Financial stability objectives can only be achieved with an effective macro-prudential policy. This requires policy interventions in a timely and bold manner, significantly affecting the normal behaviour of financial markets or financial institutions. This poses great challenges. First, measures would need to be admittedly intrusive, going well beyond the new capital and liquidity regulatory framework. Secondly, the macro-prudential tool-kit that has been legislated – including the one entrusted to the ECB/SSM – is not complete, it is centred on banks. Instruments would need to address other financial activities and institutions, notably pertaining to the steadily growing “shadow banking” sector. Advanced economies will only be able to ensure financial stability with effective macro-prudential policy interventions.

12/02/2015
Peter Praet:  Economic Developments in the Euro Area
Speech by Peter Praet, Member of the Executive Board of the ECB, at the FT Debt Capital Markets Outlook Conference in London, 12 February 2015

Summary

Economic Developments in the Euro Area

Speech by Peter Praet, Member of the Executive Board of the ECB,
at the FT Debt Capital Markets Outlook Conference in London,
12 February 2015

Given the “gap” between inflation projections and our policy objective, we decided to launch an expanded asset purchase programme. We had to act because the inflation outlook had deteriorated, while our previous measures had not worked as effectively as we expected. In this environment our decision was fully consistent with our reaction function, which we had communicated last year, and it was only natural for markets to anticipate our move. Indeed faced with an increasing risk of a too prolonged period of low inflation, we intensified our stimulus to a degree necessary to bring inflation closer to 2%. We did it in line with our mandate and price stability objective. And I have no doubt that the measures we took will bring the intended effects.

02/02/2015
Benoît Cœuré:  Lamfalussy was right: independence and interdependence in a monetary union
Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at Lamfalussy Lecture Conference organised by Magyar Nemzeti Bank in Budapest, 2 February 2015

Summary

Lamfalussy was right: independence and interdependence in a monetary union

Speech by Benoît Cœuré, Member of the Executive Board of the ECB,
at Lamfalussy Lecture Conference organised by Magyar Nemzeti Bank in Budapest,
2 February 2015

Decision-makers in different policy areas act independently and are at the same time interdependent. Managing interdependence requires strong framework: “monetary dominance” is the framework in the euro area in which the central bank acts in independence and fiscal policies are constrained in the SGP.

The crisis in Europe has shown that policy interactions can be more subtle and involve also financial and structural policies. Monetary policy becomes more effective in impacting the real economy if other policies act in support. If not, it has less impact and expansionary policy has to last longer.

An example for interdependence between monetary and financial policies (micro level) is if supervisors show too much forbearance to undercapitalized banks, central bank funding may end up being used to fill the gap. Fiscal policies can also become overburdened if they need to smoothen the economic cycle and at the same time stabilize the banking sector. Banking union has been there one answer to the crisis. European supervision helps align the governance of the financial sector with the aims of monetary policy. And the resolution leg creates rules that limit the link between fiscal policies and the banking sector; bail-in replaces bail-out by governments and taxpayers.

The interaction between structural reforms and fiscal policies is clear: if product and labour markets are resilient and flexible, there is less need for fiscal intervention. Constantly refining fiscal rules while leaving structural policies at the national level makes little sense. If fiscal policies are to be freed from structural dominance, strong framework for both is needed. Today structural reforms are their own reward. Tomorrow sovereignty over structural reforms should be shared between countries, allowing for symmetric risk sharing.

31/01/2015
Vítor Constâncio:  Monetary policy challenges in the euro area
Speech by Vítor Constâncio, Vice-President of the ECB, at the Annual Conference of the Marshall Society, on “The power of policy: solving problems and shaping the future”, Cambridge, 31 January 2015

Summary

Monetary policy challenges in the euro area

Speech by Vítor Constâncio, Vice-President of the ECB,
at the Annual Conference of the Marshall Society,
on “The power of policy: solving problems and shaping the future”,
Cambridge, 31 January 2015

The monetary policy experience of the past seven years is reviewed. In pursuit of its objectives, the ECB has been very flexible in adjusting and expanding its toolkit.

In a first phase, from 2008 to 2013, monetary policy measures aimed at easing financial constraints arising from malfunctioning money and funding markets. Non-standard monetary policy was conducted in a context of well-anchored inflation expectations. It was not aimed at, but unavoidably resulted in, the expansion of the ECB's balance sheet.

The second phase, since 2013, is characterised by a more active use of the ECB’s balance sheet, as inflation started to fall significantly below 2%, accompanied by declines in various measures of long-term inflation expectations. Non-standard measures, introduced as from July 2013, included a policy of forward guidance, asset purchase programmes of private debt, a programme to provide targeted long-term funding to banks and an enlargement of the asset purchase programme to include sovereign bonds.

A number of concerns have been voiced regarding the adoption of a large scale asset purchase programme (APP) in the euro area. It is argued that these concerns are unfounded since: the transmission channels of the APP go well beyond the direct effect on the price and yield of the purchased assets; government fiscal discipline should not be achieved at the expense of central bank independence; central banks have instruments to absorb the effects of an expanded monetary base should inflation become a risk in the future; and finally, exuberance in specific asset markets should be addressed with macro-prudential policy tools, at national level, since price stability relevant for monetary policy refers to the market of goods and services, not to asset markets at large.

At the moment, the euro area is suffering mostly from weak aggregate demand. Supply-side policies are necessary to increase the medium-term growth potential. Monetary policy, aiming at price stability by stimulating demand and supporting investment, should reduce employment and output gaps, thereby positively affecting medium-term growth.

25/01/2015
Yves Mersch:  Advancing Monetary Union
Speech by Yves Mersch, Member of the Executive Board of the ECB, Euro Exhibition Osnabrück, 25 January 2015
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