Willem F. Duisenberg, President of the European Central Bank, Christian Noyer, Vice-President of the European Central Bank, Maastricht, 7 February 2002.
With the transcript of the questions and answers
Ladies and gentlemen, as the Treaty on European Union was signed in Maastricht exactly ten years ago today, it was decided that it would be fitting to hold the fifth meeting of the Governing Council of the ECB outside Frankfurt here in this city in order to mark the tenth anniversary of what has become known as the "Maastricht Treaty". Indeed, the Governing Council today met in the same rooms in which the Heads of State and Government successfully concluded the Treaty negotiations. I should like to thank Governor Wellink, the Queen's Commissioner in the Province of Limburg, the staff of de Nederlandsche Bank and the city of Maastricht for their hospitality and for the outstanding way in which the meeting has been organised.
When the Maastricht Treaty was signed, many doubted whether Economic and Monetary Union (EMU) would ever amount to more than the solemn words of a Treaty or a laudable objective to be reached at some point in the distant future. However, during the 1990s, policy-makers, governments, central bankers and other political and economic agents showed great resolve and determination to ensure that the single currency would become a reality. Today, we can look back on a period of more than three years in which the ECB has successfully pursued a stability-oriented single monetary policy serving more than 300 million citizens. And we all have the tangible proof of Monetary Union in our pockets, following a highly successful cash changeover process which represents another historic milestone in the process of European monetary integration. Indeed, already now the level of cash payments in euro is close to 100% in all the countries of the euro area. This means that the cash changeover can be considered as good as complete, i.e. well before 28 February, after which date the legacy currencies of the euro will no longer be legal tender in any euro area country.
Together with the Treaties founding the European Communities, the Maastricht Treaty is one of the most important and visionary legal texts in the history of the European integration process. With the euro, the Treaty offered tangible proof of what the vision of European Union is about, namely bringing the people of Europe closer together and ultimately facilitating their lives. Having been instrumental in laying the foundations for the euro, the Maastricht Treaty will remain vital and indispensable for the successful functioning of EMU. The medium-term macroeconomic policy framework laid down in the Maastricht Treaty has contributed to a stable macroeconomic environment, and will continue to do so. In addition, the Treaty provides for a clear allocation of responsibilities between EU institutions and Member States, as well as clear mandates for all involved. The maintenance of price stability – the ECB's primary objective –, the independence of the Eurosystem and the provisions safeguarding fiscal discipline, in particular as enshrined in the Stability and Growth Pact, are among the hallmarks of this framework. Furthermore, the path towards participation in the euro area mapped out in the Maastricht Treaty, focusing on sustainable economic convergence as a prerequisite for adoption of the euro, will also serve to guide prospective Member States. The name Maastricht will therefore always be connected with the euro and will forever have a prominent place in the history of Europe.
Let me now turn to our regular examination of recent monetary, financial and economic developments. The Governing Council concluded today that there was no reason to change its previous assessment. Accordingly, the key ECB interest rates were kept unchanged at a level which remains appropriate for the maintenance of price stability over the medium term.
Starting with the analysis under the first pillar of our monetary policy strategy, the three-month average of the annual growth rates of M3 rose to 7.8% in the period from October to December 2001, from 7.4% in the period from September to November. The Governing Council considers that monetary developments thus far do not indicate risks to price stability. The build-up in liquidity reflected in these data occurred in an economic and financial environment characterised by exceptionally high uncertainty worldwide and should therefore be only temporary. This assessment of low inflationary risks is also supported by the declining trend in the growth rate of loans to the private sector. However, a continuation of strong M3 growth could call for a reassessment of monetary developments, especially if there is further evidence of a recovery in the euro area economy.
Regarding the second pillar, while actual euro area production growth in the fourth quarter of last year and in the early part of this year is still expected to be subdued, new data confirm our expectation of a gradual improvement in economic activity in the course of the year. Uncertainty as regards the global environment seems to be gradually decreasing. In the euro area, the economic fundamentals remain sound and financing conditions favourable. Together with higher growth in real income, stemming from the past and future declines in inflation, these factors should support overall demand. This assessment appears to be reflected both in recent improvements in survey data and in financial market developments. Although the timing and strength of the upturn remain uncertain, the overall evidence points to a resumption of economic growth.
We also continue to expect no medium-term upward pressures on inflation. However, as already indicated on several occasions, annual inflation rates at the beginning of this year will be somewhat erratic. Preliminary HICP data for January 2002 confirm this expectation but should not give rise to concerns as regards the medium term. The recent increase in inflation was to a large extent due to exceptional and short-lived factors – such as particularly adverse weather conditions in some parts of the euro area, which led to increases in food prices – as well as to the anticipated influences of indirect taxes and base effects resulting from developments in energy prices. Taking these factors into account, there is no evidence so far of a significant impact on the price level as a result of the euro cash changeover. Nor do we expect substantial effects in the months to come. There is reason to assume that the physical introduction of the euro banknotes and coins will strengthen competition, thereby supporting the maintenance of price stability.
Beyond the short term, the outlook for inflation remains favourable. One important concern, however, relates to forthcoming wage negotiations. If wage moderation is maintained, as we currently expect and in any case consider warranted in order to foster employment growth, and assuming that other determining factors also develop favourably, annual inflation rates should fall safely below 2% this year. They should also remain at levels consistent with price stability.
Finally, let me underline the importance which the Governing Council attaches to the Stability and Growth Pact and its strengthening through diligent implementation of the appropriate procedures. The responsibility for these procedures lies with the European Commission and the ministers of finance. The Governing Council fully supports all steps to avoid the occurrence of excessive deficits and all efforts to reduce the public debt and bring the fiscal stance into line with the stability programmes in individual member countries in order to ensure the credibility of the commitments made under the Stability and Growth Pact. In the same vein, we very much support the continued initiatives to foster structural reform. We welcome the focus placed on these issues in the context of the forthcoming Barcelona summit and we are looking forward to swift and determined delivery of essential structural reforms in the goods, services and labour markets to promote the euro area's growth potential.
We are now at your disposal for questions.
Transcript of the questions asked and the answers given by Dr. Willem F. Duisenberg, President of the ECB, and Christian Noyer, Vice-President of the ECB and Nout Wellink, President of De Nederlandsche Bank
Question: President, with regard to the debate on the Stability Pact, two questions, if I may. Do you think it is appropriate to give an early warning even if you don't have any measures to suggest? And the second question, what do you think is the appropriate way for governments to react to such an early warning?
Duisenberg: I know that this is very much under discussion. The early warning has been issued by the European Commission. An early warning, that is the procedure, has to be accompanied by a recommendation. The recommendation can be: "Please, government, stick to your policies and see to it that an excessive deficit is not reached". But no additional measures need to be included in the recommendation. Then, after a few months, or even half a year, a new recommendation can be required. That is the procedure. If the situation in the meantime deteriorates or even does not improve, then that second recommendation should contain specific suggestions for measures to be taken. But we are not at that stage yet, as I just explained. So, in sum, the Governing Council of the ECB, i.e. the Eurosystem as such, strongly supports the initiatives taken by the European Commission, the European Commission being the guardian of both the European Union Treaty and the Stability and Growth Pact. As for the second question, how could governments react to that, well, I would say: "Thank you very much and we will do our utmost".
Question: Mr. Duisenberg, could you please elaborate a little bit on the reasons why you want to resign in the summer of 2003, and could you please give us your professional opinion on Mr. Trichet? Thank you.
Duisenberg: I intend to resign on 9 July 2003 because, for purely personal reasons, I hope to be 68 on that day. And, I am inclined to say, enough is enough. I think it is a respectable age at which to resign. It is fully in line with my intentions, which I publicly stated when I accepted this assignment. And, I hope you will excuse me, but I will not give any judgement on any particular person and certainly not on one of my most outstanding colleagues, whom you just mentioned.
Question: Mr. Duisenberg, all EU countries are involved in the Stability Pact. When it comes to a vote next week on a warning from the Commission, do you think that the non-euro countries should abstain or, on the other hand, do you think they should really make their votes known and take a clear-cut position because they are, so to speak, involved in the Stability Pact?
Duisenberg: Well, all the Heads of State and Government signed the Stability and Growth Pact in Dublin a few years ago. And I think it is up to them to decide how to vote or how to behave. But I understand also that in the procedures abstention will be counted as a negative vote.
Question: Mr. Duisenberg, you have named a day for your retirement, but is it remotely conceivable that you might be persuaded to go earlier if that would ease the path of your presumed successor, Jean-Claude Trichet? And secondly, on the issue of the Stability and Growth Pact in Germany, it does look likely that the finance ministers will arrive at some kind of compromise next Tuesday rather than put up with issuing an early warning to Germany. Now, if that is the case, does this in your view put a serious hole in the stability architecture of Europe?
Duisenberg: In my letter to Prime Minister Aznar of Spain, I stated that I wanted to resign on 9 July 2003 but that I would be willing to stay on somewhat longer if that, in the judgement of the Heads of State and Government, were in the interests of a smooth transition of the Presidency of the European Central Bank. This explicitly and implicitly excludes an earlier retirement than now envisaged.
On the Stability and Growth Pact, what the Governing Council is most of all interested in is to uphold the procedures which are incorporated in the Pact, and their implications. Now, the early-warning system – just as giving an opinion, just as applying sanctions if things get really out of hand – is an essential element of the Stability and Growth Pact, its procedures as well as its content. It is of the utmost importance in the opinion of the Governing Council that both procedures and substance remain intact. And I do not know what will happen in the forthcoming days, I am not talking in terms of a compromise, but if there are ways to extract certain definitive and well-defined commitments from the governments concerned, that might replace the early warning. And then the early warning has fulfilled its purpose.
Question: Mr. President, if I can put a slightly different question? It concerns Sweden and the fact that the Swedish government has requested the central bank to pay an extra SEK 20 billion into this year's budget? I wonder if you can comment on the consequences of that, since the central bank in Sweden will reach the lower limit of its capital base? I wonder if you could also make some general comments on the surplus from central banks being paid to governments?
Duisenberg: Well, I can answer that only in very general terms. If Sweden ever – and I hope it will be sooner rather than later – applies for membership of Monetary Union, it will have to comply with the convergence criteria as formulated in the Maastricht Treaty. One of the criteria is central bank independence, and one of the elements of central bank independence is financial independence. For that reason, Sveriges Riksbank has to have adequate capital and reserves to absorb all shocks that any central bank might face. Any action in this respect in Sweden will be judged in that light, also by the ECB Governing Council.
Question: Mr. President, first of all, why did you decide to make the resignation announcement exactly at this moment? And secondly, I would like to know exactly when did you make the decision, where were you physically, who did you tell first and when did you inform the three bodies you mentioned in your press release?
Duisenberg: Why is for personal reasons – I have of course been thinking about it for a very long time. When did I finally make up my mind? That was the weekend before last. Where was I? In Amsterdam. Who did I consult? Only one person, my wife. Who did I inform? I then informed the President of ECOFIN, Mr. Rato, who informed the President of the European Council, Mr. Aznar. I also informed the Prime Minister and the Finance Minister of the Netherlands and, of course, I informed my colleagues on the Executive Board. That was in the course of last week and at the beginning of this week.
There were two reasons why I went public. I admit that it is rather early to announce this intention. First of all, I went public in the interests of transparency and, admittedly, I was somewhat worried about the intensifying wave of speculative statements and articles in the markets and the media about the date of my departure, and also about a possible link – which there is not – between my departure and the appointment of the successor to my right-hand neighbour, Mr. Noyer, which has to be dealt with shortly. I judged – and my colleagues concurred – that this wave of uncertainty surrounding the ECB and the euro was detrimental to the image and the credibility of the ECB and the euro. We live in a world of uncertainty and by taking away one of the uncertainties, which I have now done, I think I have made a contribution to a climate of greater quietness concerning these two important institutions, the ECB and the euro.
Question: Mr. President, do you not think there is going to be a new round of speculation over who will be your successor? How long do you think we will have to wait before we know who that is going to be? And will this topic be on ECOFIN's agenda next week? And then a second question on Allied Irish Banks, which we read about in the newspapers this morning. We seem not to have learned a lot from what Mr. Leeson did at Barings. Would you say this is an additional argument for a greater role for the ECB in European supervision? What would you have done differently if you had had such a big role in supervising AIB?
Duisenberg: My succession will not be on the ECOFIN agenda next week. There is ample time for deliberations about my succession. Of course, there will be speculations in the future about who my successor will be and when my succession will be arranged. That is unavoidable. But at least one uncertainty has been removed and that is about the date of my departure. So nobody can doubt that any longer. On Allied Irish Banks: it concerns a subsidiary in the United States, but that is all I am going to say about it. The ECB is not in charge of banking supervision. And these events will not change the ECB's attitude towards banking supervision, which is, as its mandate says, to contribute to a smooth conduct of supervisory practices. And for the rest, banking supervision is in the hands, and will remain in the hands, of national supervisory authorities, be they central banks, be they independent authorities, be they mixtures of those two. Nothing there is required to change.
Question: Again, another question about your retirement. As a non-European reporter I do not feel I fully understand the situation here without hearing in your voice why you have to leave now. And the underlying, long lasting question there is: whose decision is it, or was it in 1998, that you cannot complete a full term and have to leave in the middle? Just as a non-European I do not have the common sense of Europe, so can you please explain that again to the layman.
Duisenberg: It is a well known fact, and you can look this up in the records, that already when I was appointed I did not regard it as likely – and I made this public – that I would serve my full eight-year term. And I regard 68 as a respectable age to retire, after having helped and having been instrumental in building up a new institution like the European Central Bank. By that time I will have done the job for more than five years, and I think I can say we have achieved what we wanted to achieve and we are ready for the future. And, please, give me then some time to spend with more intimate circles than this job allows me to do at the present time.
Question (translation): Mr. Duisenberg, two questions. First of all, in December you wrote a letter to the Spanish presidency mentioning the successor for the Vice-President, Mr. Christian Noyer. Have you received any reply so far to that letter? Second question. You are going on from here to the G7 meeting in Ottawa. That meeting normally formulates an exchange rate declaration, a very general one. What verbal declaration will you take into that conference or, in other words, what are you going to say on the euro exchange rate? How are you going to present it to the outside world in the interests of the global economy and the euro area?
Duisenberg: The letter to Secretary General Solana which was written in December last year was a purely administrative and, may I say, usual affair. Whenever a vacancy becomes imminent in an institution, that institution writes a letter to the Secretary General of the European Council to warn the Council and to enable it to start in time the procedure to ensure the vacancy will be adequately filled. So that was purely administrative. Have I received an answer from Mr. Solana? The answer is "yes". He came to see me and in passing he said to me "Oh, yes, I received your letter. Thank you very much." In Ottawa, on the exchange rate of the euro: I do not regard it as very likely that the exchange rate of the euro will be mentioned in the communiqué that will be issued after the G7 meeting.
Question:Mr. Duisenberg, you have now told us what you are going to do at 68, but in the past you once told us that you will become a "Bruggenwachter"?
Duisenberg: They won't ask me.
Question:But if they do ask you?
Duisenberg: I do not know the answer.
Question: Mr. President, a question on the economy. Do early signs of recovery in the U.S., along with the Federal Reserve's decision last week to leave interest rates unchanged in any way brighten the euro zone's own prospects for growth this year? In other words, do you think that a recovery might come sooner and perhaps be stronger than you thought a month or two ago?
Duisenberg: We still think that the recovery will get under way in the course of this year. I personally happen to think that in Europe we will see more definite signs already in the first half of this year, maybe towards the end of the first half of this year, but in any other respect, we have not changed our assessment for a gradual recovery which might take – and now I am talking for Europe only – the growth rate in the last part of this year up to the potential growth rate at an annualised rate. So that is up to 2-2½% – annualised – towards the end of this year.
Question: Mr. Duisenberg, two questions. Don't you think 67 is a respectable age as well? Wouldn't this summer have been a perfect time to step down considering it is half way through your term and the euro introduction is almost finished, as you said already? Second question, can you say something about your plans after July 2003 if they don't involve going to Friesland, as a colleague already suggested to you?
Duisenberg: 67 is respectable, but my job here is not over yet. And my job does not end with the cash changeover and the introduction of the banknotes and coins. So I am perfectly happy to resign after serving slightly more than five years in order to see the entire process through and to have the European Central Bank and the euro firmly established in the minds of the European people.
Regarding my plans for after 9 July 2003, except in the case that the Council were to ask me to stay on a little bit longer: I have no plans whatsoever, except to enjoy life a little bit more intensively than was possible up until now, with my wife and in the midst of my family, possibly partly away from the Netherlands, in France.
Question: Mr. Duisenberg, some analysts say that the cost of announcing your resignation today is that you become a lame duck on the Board for the remaining 1½ years. What do you say to these critics?
Duisenberg: I find that pure nonsense. I have various arguments for that. First of all, both as a Governing Council but also as an Executive Board we are a collegiate decision-making body which is different from, for example, a system where you have one president who decides everything, and which makes continuity imperative in the decision-making. And then I want to remind you that all members of the Executive Board have a fixed term. In the future, all members of the Executive Board will have a fixed term of eight years. Is it imaginable that all those members, who have a fixed term of appointment, not renewable, would suddenly become lame ducks in their last year? Then one addition: I must say, in my daily work, I experience Mr. Noyer as anything but a lame duck.
Question: Mr. Duisenberg, I am trying to eliminate one last bit of uncertainty. You said that the European Council could request you to stay longer if that is necessary. But when would you like to know at the latest if that is necessary?
Duisenberg: I don't care when I hear that – as long as it does not interfere with my holiday plans after 9 July 2003.
Question (translation): Mr. President, you said that there is enough time to decide on your successor, but don't you think it would be better to decide this as quickly as possible? I think Mr. Reynders said earlier that it would be necessary to decide before the end of the Spanish presidency of the European Union. What do you think? And a small question for Mr. Noyer as well: Mr. Duisenberg said that he could, if necessary, stay on longer. Do you think that this might be a possibility for you as well? Legally and personally?
Duisenberg (translation): What Mr. Reynders said today was that he thought it would be desirable to nominate the Vice-President and the President at the same time. I think that is Utopian. I think that is all I want to say.
Noyer (translation): On your second question concerning myself, well, there the situation is totally different. Mr. Duisenberg has a mandate of eight years and he has now said that he intends to retire before that mandate is up. Legally speaking, if he wanted to he could continue of course. My mandate was a four-year mandate and that ends on 31 May at midnight. And therefore, the situation is totally different.