Jean-Claude Trichet over renteverlagingen en het effect op de economie (en)

Speaking to MEPs in the Economics Committee a few days after the ECB i cut interest rates by three quarters of a percentage point, ECB President Jean-Claude Trichet i said a gradual recovery was expected, but that there was "exceptionally high uncertainty." MEPs asked if he should have gone further, and how to ensure the easing in monetary policy had a full impact on the real economy.

In his opening statement, Mr Trichet said inflation was expected to be "in line with price stability" in the time ahead, but that for 2009, the euro area was expected to have growth of between -1 and 0 per cent, with risks on the downside.  Nevertheless, he expected that "a recovery should gradually take place, supported by the fall in commodity prices and assuming that the external environment improves and financial tensions weaken."

Official interest rates and interbank rates

Gay Mitchell (EPP-ED, IE) asked whether the ECB should not go further in cutting interest rates, given that eurozone rates were higher than in the US or UK.  Mr Trichet said "each central banks does what is appropriate, taking all into account, for its economy."  On interbank lending rates (which remain well above official interest rates), he told Mr Mitchell that "the rates spreads are too high on both sides of the Atlantic and on both sides of the Channel. Our aim is to return to a more normal situation, and we are doing all we can to achieve that." 

Liquidity and collateral requirements

José Manuel Garcia-Margallo (EPP-ED, ES) and John Purvis (EPP-ED, UK) both asked about the ECB's policy on the collateral it accepted in return for providing liquidity to commercial banks.  Mr Trichet said the ECB needed both to allow banks to refinance themselves appropriately, and to stick to cautious risk management as regarded its own lending. He assured the MEPs that the ECB had a "systematic methodology to assess values" of collateral and the size of "haircut" (reduction compared to face value) to apply.

Impact on employment and the real economy

Donata Gottardi (PES, IT) and Elisa Ferreira (PES, PT) both asked about the impact of the financial market crisis on employment and the real economy, and how to ensure the measures taken to ease the situation were passed on.  The ECB President said "all we have been doing and continue to do - and also the action taken by governments - aims at permitting the banking sector not just to avoid a dramatic situation, but to function as normally as possible, financing the market economy."  He added, though, that we could not simultaneously criticise banks for failing to look at the risks they were running in the past and ask them to ignore risk now: "we are aiming for a normal attitude," he said.

Fiscal stimulus plans

Wolf Klinz (ALDE, DE) asked about the fiscal stimulus proposed by various Member States. Mr Trichet said his view was that Member States should respect the Stability and Growth Pact, and do what was appropriate for their own circumstances: "If you don't do that, you can find your there are higher costs for financing [government borrowing] and you are not in a better position."  Some countries had more room for manoeuvre, some less, and some no room at all.

Non-EU states and the euro?

Alain Lipietz (FR) for the Greens/EFA group asked about the question of non-EU states like Iceland who wished to join the euro.  Mr Trichet said that, for the ECB, is was clear that the only way to join the euro was according to the Treaty. 

Avoiding asset price bubbles

Guntars Krasts (UEN, LV) wanted to know if the seeds of future crises were being sown: should the ECB be monitoring asset prices for future bubbles?  Mr Trichet said that there were many reasons why central banks did not target asset prices, but the ECB's use of monetary as well as economic analysis, tracking credit growth, for example, was a way to identify risks to price stability which would also have an impact on assets. "This does allow us to lean against the wind in some respect," he said.

In the chair : Pervenche BERÈS (PES, FR)