Il Primo Ministro greco Lucas Papademos riceve l'approvazione del governo su tagli al bilancio che corrispondono al 7% del Pil nei prossimi tre anni e su una ristrutturazione finalizzata a ridurre di €100 mld gli oltre €200 mld di debito detenuto dai creditori privati, atteso il voto del parlamento • Standard & Poor's declassa il merito creditizio di 34 banche italiane tra cui UniCredit a BBB+ da A, Intesa Sanpaolo a BBB+ da A e Banca Monte dei Paschi di Siena a BBB da BBB+, S&P anticipa "una redditività decisamente debole per le banche italiane nei prossimi anni" • La produzione industriale italiana aumenta a dicembre +1,4% da novembre +0,3%, oltre le stime degli economisti +0,5%, anche se i dati del quarto trimestre -2,1% suggeriscono che la terza economia della zona euro è entrata nella seconda recessione dal 2009 • I Btp decennali salgono per la quinta settimana consecutiva, il periodo di recupero più lungo in oltre cinque anni, la prossima settimana il Tesoro vende €4 mld di buoni al 6% con scadenza 2014 • L'euro cala dal massimo di due mesi contro il dollaro, il mercato azionario europeo cala dal massimo di sei settimane e l'azionario Usa registra la prima settimana di perdite del 2012 dopo che i ministri delle finanze europee non hanno concesso il pacchetto di aiuto necessario a prevenire il collasso economico della Grecia

giovedì 4 settembre 2014

European Central Bank President Draghi News Conference (Text)

Following is a transcript of European Central Bank President Mario Draghi’s comments from his monthly news conference in Frankfurt today.

DRAGHI: Ladies and gentlemen, the vice president and I are very pleased to welcome you to our press conference. We will now report on the outcome of today’s meeting of the Governing Council, which was also attended by the commission vice president, Mr. Katainen.


Based on our regular economic and monetary analyses, the Governing Council decided today to lower the interest rate on the main refinancing operations by 10 basis points -- I’m sorry, on the main refinancing operations of the Eurosystem by 10 basis points to 0.05 percent and the rate on the marginal lending facility by 10 basis points to 0.30 percent. The rate on the deposit facility was lowered by 10 basis points to minus 0.20 percent.

In addition, the Governing Council decided to start purchasing non-financial private sector assets. The Eurosystem will purchase a broad portfolio of simple and transparent asset-backed securities, with underlying assets consisting of claims against the euro area non-financial private sector under an ABS purchase program. This reflects the role of the ABS market in facilitating new credit flows to the economy and follows the intensification of preparatory work on this matter, as decided by the Governing Council in June.

In parallel, the Eurosystem will also purchase a broad portfolio of euro-denominated covered bonds issued by MFIs domiciled in the euro area under a new covered bond purchase program. Interventions under these programs will start in October 2014. The detailed modalities of these programs will be announced after the Governing Council meeting on October 2, 2014.

The newly decided measures, together with the targeted long-term refinancing operations, which will be conducted in two weeks, will have a sizeable impact on our balance sheet.

These decisions will add to the range of monetary policy measures taken over recent months. In particular, they will support our forward guidance on the key ECB interest rates and reflect the fact that there are significant and increasing differences in the monetary policy cycle between major advanced economies. They will further enhance the functioning of the monetary policy transmission mechanism and support the provision of credit to the broad economy.

In our analysis, we took into account the overall subdued outlook for inflation, the weakening in the euro area’s growth momentum over the recent past, and the continued subdued monetary and credit dynamics.

Today’s decisions, together with the other measures in place, have been taken with a view to underpinning the firm anchoring of medium- to long-term inflation expectations, in line with our aim of maintaining inflation rates below, but close to, 2 percent.

As our measures work their way through to the economy, they will contribute to a return of inflation rates to levels closer to 2 percent. Should it become necessary to further address risks of too prolonged a period of low inflation, the Governing Council is unanimous in its commitment to using additional unconventional instruments within its mandate.

Let me now explain our assessment in greater detail, starting with the economic analysis. Following four quarters of moderate expansion, euro area real GDP remained unchanged in the second quarter of this year, compared with the previous quarter. While it partly reflected one-off factors, this outcome was weaker than expected. With regard to the third quarter, survey data available up to August indicate a loss in cyclical growth momentum, while remaining consistent with a modest expansion.

Domestic demand should be supported by the range of our monetary policy measures, the ongoing improvements in financial conditions, the progress made in fiscal consolidation and structural reforms, and lower energy prices supporting real disposable income. Furthermore, demand for exports should benefit from the global recovery.

At the same time, the recovery is likely to continue to be dampened by high unemployment, sizeable unutilized capacity, continued negative MFI loan growth to the private sector, and the necessary balance sheet adjustments in the public and private sectors. Looking ahead, the key factors and assumptions shaping the outlook for growth need to be monitored closely.

These elements are reflected in the September 2014 ECB staff macroeconomic projections for the euro area, which foresee annual real GDP increasing by 0.9 percent in 2014, 1.6 percent in 2015, and 1.9 percent in 2016. Compared with the June 2014 Eurosystem staff macroeconomic projections, the projections for real GDP growth for 2014 and ’15 have been revised downwards and the projection for 2016 has been revised upwards.

The Governing Council sees the risks surrounding the economic outlook for the euro area on the downside. In particular, the loss in economic momentum may dampen private investment, and heightened geopolitical risks could have a further negative impact on business and consumer confidence. Another downside risk relates to insufficient structural reforms in euro area countries.

According to Eurostat’s flash estimate, euro area annual HICP inflation was 0.3 percent in August 2014, after 0.4 percent in July. This decline reflects primarily lower energy price inflation, while the other main components remained broadly unchanged in the aggregate. Inflation rates have now remained low for a considerable period of time.

As said, today’s decisions, together with the other measures in place, have been taken to underpin the firm anchoring of medium- to long-term inflation expectations, in line with our aim of maintaining inflation rates below, but close to, 2 percent. On the basis of current information, annual HICP inflation is expected to remain at low levels over the coming months, before increasing gradually during 2015 and 2016.

The September 2014 ECB staff macroeconomic projections for the euro area foresee annual HICP inflation at 0.6 percent in 2014, 1.1 percent in 2015, 1.4 percent in 2016. In comparison with the June 2014 Eurosystem staff macroeconomic projections, the projection for inflation for 2014 has been revised downwards. The projections for 2015 and 2016 have remained unchanged.

The Governing Council, taking into account the measures decided today, will continue to closely monitor the risks to the outlook for price developments over the medium term. In this context, we will focus in particular on the possible repercussions of dampened growth dynamics, geopolitical developments, exchange rate developments, and the pass-through of our monetary policy measures.

Turning to the monetary analysis, data for July 2014 continued to point to subdued underlying growth in broad money, M3, with annual growth standing at 1.8 percent in July, compared with 1.6 percent in June. The growth of the narrow monetary aggregate M1 stood at 5.6 percent in July, up from 5.4 percent in June. The increase in the MFI net external asset position, reflecting in part the continued interest of international investors in euro area assets, remained an important factor supporting annual M3 growth.

The annual rate of change of loans to the non-financial corporations remained negative at minus 2.2 percent in July, unchanged compared with the previous month. However, net redemptions were again sizeable in July.

Lending to non-financial corporations continues to reflect the lagged relationship with the business cycle, credit risk, credit supply factors, and the ongoing adjustment of financial and non-financial sector balance sheets. The annual growth rate of loans to households was 0.5 percent in July, broadly unchanged since the beginning of 2013.

Against the background of weak credit growth, the ECB is finalizing the comprehensive assessment of banks’ balance sheets, which is of key importance to overcome credit supply constraints.

To sum up, a cross-check of the outcome of the economic analysis with the signals coming from the monetary analysis led the Governing Council to decide on measures to provide further monetary policy accommodation and to support lending to the real economy.

With regard to structural reforms, important steps have been taken in several member states, while in others such measures still need to be legislated for and implemented. These efforts now clearly need to gain momentum to achieve higher sustainable growth and employment in the euro area.

Determined structural reforms in product and labor markets, as well as action to improve the business environment, are warranted. As regards fiscal policies, comprehensive fiscal consolidation in recent years has contributed to reducing budgetary imbalances. Euro area countries should not unravel the progress made with fiscal consolidation and should proceed in line with the Stability and Growth Pact.

The pact acts as an anchor for confidence, and the existing flexibility within the rules allows the budgetary costs of major structural reforms to be addressed and demand to be supported. There is also leeway to achieve a more growth-friendly composition of fiscal policies. A full and consistent implementation of the euro area’s existing fiscal and macroeconomic surveillance framework is key to bringing down high public debt ratios, to raising potential growth, and to increasing the euro area’s resilience to shocks.

We are now at your disposal for questions. Thank you.

STAFF: Brian Blackstone, Wall Street Journal?

QUESTION: Brian Blackstone with the Wall Street Journal. My first question is, was this -- was this a unanimous decision on the interest rates and on the ABS and covered bond purchase program? And my second question is about your previous comments about for all intents and purposes being at the lower bound on interest rates. You’ve cut interest rates further. Is there a risk that this undermines a bit the reliability of your forward guidance and your communications on the policy outlook to the financial markets and to the public? Thank you.

DRAGHI: Thank you. The answer to your first question is, no, it was not unanimous. And to the second question is, no, there isn’t such a risk, because when we announced about the interest rates, they would be for all practical purposes are at the lower bound, but technical adjustments could be possible. And that’s what we did. And now we are at lower bound where technical adjustments are not going to be possible any longer. Thank you.

STAFF: Eva Taylor?

QUESTION: Eva Taylor from Reuters. Mr. Draghi, you said that the new measures and the TLTROs will have a sizable impact on your balance sheet. Could you give us more insight, how much you expect the impact to be for the new measures? And my second question is, following your speech in Jackson Hole, did you discuss QE today?

DRAGHI: Did what?

QUESTION: Did you -- did the Governing Council...

DRAGHI: Oh, discuss.

QUESTION: ... discuss...

DRAGHI: Yes. OK. On the first question, you know, this is a quite complex package of measures. You have the TLTROs, which are going to unfold over several operations over several - - two years initially, then two more years. So that’s one thing.

Then you have the ABS, which is -- in a sense, it’s a very novel program. Then we have the starting again of covered bonds purchase program. As you all know, it’s not a new thing. But the purposes of this program are very different from the previous programs.

So all this makes a precise estimate of the impact that these transactions will have on our balance sheet, very, very complicated, especially at the stage when none of these operations has yet been undertaken. So we may be more precise, especially once the TLTROs -- at least the first two TLTROs will have taken place.

The aim here is -- however, is twofold. The aim is to increase the measures that produce credit easing for the banking industry, the banking sector, which as you know represents more than 80 percent of total intermediation, credit intermediation in the euro area. And also, to stir -- the second aim is to steer, significantly steer the size of our balance sheet towards the dimensions that used to have at the beginning of 2012.

Yes, it was discussed, QE was discussed. We -- there were -- some of our -- some of our Governing Council members were in favor of doing more than I’ve just presented, and some were in favor of doing less. So our proposal strikes a -- strikes the mid-road and -- but to answer your question, yes, it was discussed. A broad asset purchase program was discussed, and some governors made clear that they would like to do more.

Thank you.

STAFF: Jack Ewing?

QUESTION: Thank you, Jack Ewing, New York Times. I wonder if maybe you could clarify for us what your definition of quantitative easing is. I gather from the answer to the last question the size of this program would not yet qualify as quantitative easing. And maybe you can clarify at what point we should start calling it quantitative easing.

And the second question is, I’ve seen various estimates of the size of the asset-backed securities market in the Eurozone. I’d be interested what your estimate is and whether that puts any kind of ceiling on what you can do with the program you’ve just spoken about. Thank you.

DRAGHI: Thank you. On the first thing, the definition of QE is not really related to its size, but rather to its modalities. So QE is an outright purchase of assets. And as such -- so rather than -- in other words, make an example -- rather than accepting these assets as collateral for lending, the ECB would purchase, would outright purchase these assets. That’s QE. And would inject money into the system. Now, QE can be private-sector-asset-based, or also sovereign-sector, public-sector-asset-based, or both. So that’s QE.

The component -- today’s measures are predominantly oriented to credit easing. There is a component -- however, it’s quite clear that this time we would buy outright ABSs, the senior tranches and the mezzanine tranches, only if there is a guarantee, in other words, very much like the -- what the Fed did a few years ago.

The -- so there is this -- also this component. Let me also add that it’s -- well, to answer your question, it’s about the size of the ABS, it’s very, very difficult. We’ve gone through several figures. Some of them even leaked out. And it’s pointless I think to discuss. We would have loved to give you a figure, obviously. For communication purposes, it’s much better to be clear. But at this stage especially, it’s very, very difficult to assess the size of this.

Let me also add one thing, because the ABS may sound more, I would say, novel than they are in the -- in the ECB policymaking. And, indeed, the modality is novel, because we will do outright purchases of ABS, but the ABS have been given as collateral for borrowing from the ECB for at least 10 years. So the ECB knows very well how to price and how to treat the ABS that’s going to be accepting, especially since we have -- and this is, in a sense, another dimension that makes any precise quantification difficult at this point in time -- we have narrowly defined to our outright purchase program to simple and transparent ABS. We’ve gone through this several times.

And that’s where, in a sense, the credit-easing component comes back into place, because we want to make sure that these ABS are being used to extend credit to the real economy.

STAFF: Claire Jones, Financial Times?

QUESTION: Claire Jones, Financial Times. For my first question, you noted that the decision today wasn’t unanimous. Could you tell us a little bit more about the scale and the nature of the dissent? And you noted just in your previous answer that the ECB already has a lot of expertise when it comes to the handling of asset-backed securities, because they’re accepted as collateral. Given that, what is the hiring of BlackRock adding to the -- to the process of devising the program?

DRAGHI: Yeah, on the scale of the dissent, I could say that there was a comfortable majority in favor of doing the program. And, now, on the -- the content of the discussion, I’ve given some hints before.

On the BlackRock, the -- one thing is to accept the ABS as collateral. Another thing is to design a program of outright purchases, and that’s what -- that’s where the BlackRock solution would actually be helpful in doing it. They’ve been, as I had announced a time ago, they’ve been hired by the ECB through a competitive tender within the existing rules.

I was trying to find exactly the legal reference. Yeah. The -- they’ve been tendered out in the form of competitive negotiated procedure without publication of a notice. This procedure is (inaudible) in the ECB rules on procurement, article 6.1, in line with the European public procurement directive. It’s common practice in E.U. member states.

So the -- their contribution would be to advise on developing a program to purchase ABS. I could go on with this - - with the tendering procedure, if you’re interested. ECB has invited a number of appropriate consulting firms to take part of the tender, et cetera, but just be assured that the rules are being followed.

Thank you.

STAFF: (inaudible)

QUESTION: (inaudible) my first question is more comprehension question on this covered bonds and ABS program to be launched. What about the sterilization of the purchase of these assets? Is it something that is in mind or is not relevant, this question? Because we are about sterilization of purchase of other kind of assets (inaudible) for example.

DRAGHI: (inaudible)

QUESTION: Yeah, of course. So it is not a question, but maybe you can clarify this.

DRAGHI: (inaudible) legitimate question, yes.

QUESTION: And the second one. After having announced a bunch of measures in July, three months ago, so you’re acting now in a surprising way -- interest rates belongs to. And so maybe the impression could be that the ECB is acting in a kind of hasting manner. So can you maybe comment on this or why this step now? And maybe the old three months ago.

DRAGHI: Well, the -- this is a very natural question to ask. And one should ask, what has changed since then? Now, what happened in August is that we’ve seen a worsening of the medium-term inflation outlook. We have seen a downward movement in all indicators of inflation expectations across all maturities.

And as I had chance to say in Jackson Hole, they are one of the most used measures, the five or five (ph) years of inflation had dropped by something like (inaudible) 18 basis points just below 2 percent. So after the speech, some of these measures backed up. Some of them went back to their original level, but most of them didn’t.

After this that -- I would say most, if not all the data that we got in August, both hard and soft, on GDP and inflation showed, as I said, in the -- in the introductory statement, that showed a -- that the recovery was losing momentum, the growth recovery was losing momentum.

So the Governing Council basically decided to a great extent strengthen the measures (inaudible) and strengthen the measures taken in June, decided in June. In this sense, the ABS outright purchases is -- could be viewed as a measure that strengthens the TLTRO.

And so that’s the reason, essentially. And, again, the change in interest rate is also -- I would say the main reason is to make sure that there are no more misunderstandings about whether we reached the lower bound. Now we are at the lower bound. So that’s, I think, the answer to your point, which is a very legitimate question, really. Thank you.

STAFF: (inaudible)

QUESTION: Thank you, Mr. President. I have two questions. The first is on the purchase programs that you announced. Do you have more details of what kind of ABS are you planning to buy, mortgage, residential mortgage, just to SMEs? And on the rate cut, could you give a bit more like on what you expect to achieve with the rate cut? It will make the TLTROs more attractive, which is what I’m thinking, but this is a question I’m asking you. Thank you very much.

DRAGHI: Thank you. The purchase of ABS will involved both newly created and existing ABS and would also involve -- would also include real estate, the RMBS, real estate and ABS, will also include a fairly wide range of ABS containing loans to the real economy.

The -- the other question is about the interest rate. The interest rate -- well, it’s a conventional standard monetary policy decision, and you -- one expects effects according to the usual -- to the usual line of thinking. But in this case, clearly, signals to the banks that are going to participate to the TLTRO that they should not expect any further lowering interest rate, so they should not hesitate in participating to the TLTRO because of this reason, because they could wait for a lower interest rate in the future.

Thank you.

STAFF: (inaudible)

QUESTION: (inaudible) very much. I have two questions. Considering the inflation expectation in your staff projections which have not moved for 2015 and 2016, so why have they not moved if you’re seeing a clear trend of lower inflation in the future? And my second question would be on your call for using the fiscal leeway we are having, and how are the response of some governments? Is that true that there was some frustration in certain governments? Or is that -- or are you misinterpreted by that?

DRAGHI: No, on the first question, the staff’s projections for C (ph), a return of inflation or an upward trend, because essentially of the recovery, of exchange rate, about the effects of our monetary policy, of better prospects for global demand. So by and large, these are the underlying assumptions.

And in some cases, I do think they’ve also foreseen an increase in the price of food. So the assumption -- the usual assumptions are behind this. So the downward trend that we are witnessing this year is viewed as a temporary deviation from a baseline which we’ll see inflation expectations going back toward 2 percent, but not at 2 percent, in 2016.

On -- yes, you are absolutely right, have been many interpretations of what I said. But, in fact, what -- I thought I was exceedingly clear in what I said in Jackson Hole. Let me just try to sort of recap, without going through -- I planned -- actually, I expected a question like that, so I thought I should read through the speech again. But I’ll save you from that.

The idea there is that there are three -- I would say three instruments for revamping growth: the structural reforms, fiscal policy, and monetary policy. During that presentation, I started with monetary policy, and I want through fiscal policy, but then I concluded that there is no fiscal or monetary stimulus that will produce any effect without ambitious and important and strong structural reforms. So, in a sense, the key point is to do structural reforms.

And on the fiscal policy, I kind of said four things. The first is that the -- and I repeated this in the introductory statement today -- the Stability and Growth Pact is our anchor of confidence, the rules should not be broken. Second, within the existing rules, there is some flexibility. But within the rules. And also, I would add that these discussions on flexibility should not be viewed or should not be such that would undermine the essence of the Stability and Growth Pact.

Within the Stability and Growth Pact, one could do things that are growth-friendly and also would contribute to budget consolidation. And I made an example of a balanced budget tax cut. Reducing taxes that are especially distortionary, where the multiplier -- the short-term multipliers could be higher, and cutting expenditure in the most unproductive parts. So mostly -- actually, not mostly -- entirely current government expenditure.

I also said -- and that’s the third part -- that we should have a discussion of the fiscal stance of the overall area, euro area. And finally, I made a point about -- which actually was - - I made reference to a program that had been launched by the new president of the commission, Mr. Juncker, about a very large public investment or private investment program in the -- in the union, and he made a figure of 300 billion euros. This is what I said.

Let me add one thing, that from a confidence-strengthening viewpoint, because I -- in many parts of the euro area, there are several reasons why growth is not coming back, but one of them is actually that there is lack of confidence. There is lack of confidence in the future, lack of confidence in the prospects and economic prospects of these -- of these countries.

From a confidence viewpoint, it would be much better if we were to have, first, a very serious discussion of the structural reforms, and then a discussion about flexibility. Now, that’s the idea, but that’s a suggestion. But that’s what I said in Jackson Hole. So there have been over- or under-interpretations. It’s not my responsibility. The message came out quite clearly.

STAFF: (inaudible)

QUESTION: I’m (inaudible) from Italy. You said several times when you talked about these ABS purchase programs in the past several months that regulation changes were needed. Now you’re going ahead with the program. Does that mean that you expect these regulation changes to be implemented quite soon? Or that you thought it was necessary to go ahead regardless of these changes?

And my other question is about your fiscal -- the fiscal part of your speech at Jackson Hole and the contacts that you had with several leaders before and after your speech. Did you get any reassurances from governments that they’re ready to do what, in a sense, you ask them to do, that these structural reforms and fiscal adjustment, which were improved when you talk about fiscal stance of the overall area, if I understand you correctly, also some action from surplus countries or countries that were (inaudible) consolidation?

DRAGHI: Thank you. On the first part, we decided to go ahead with this program. We certainly don’t want to set a calendar for regulators that are independent. If -- there need -- there is need -- some regulation has changed, by the way, already for the better, in a sense of treating ABS of a certain type better and in a less discriminatory way with -- if compared with similar instruments, like covered bonds.

But these changes are not enough. And so the -- we decided to go ahead, but certainly some of these changes will be needed to rebuild a market which could be a -- especially in Europe -- an important channel of credit intermediation. I’m saying especially in Europe, because, of course, we are completely focused on the bank-lending channel, and this would on one hand be siding the traditional credit channel. On the other, it could go back to what it was before the crisis.

You know, securitization got a very bad name, but because of what was being securitized. And there isn’t necessarily only bad securitization. It could be good securitization, depending on what people trade, what -- how much risk they retain, and so on. And that’s what we are -- what we and the Bank of England are aiming at, at rebuilding this market. But for doing that, we need not only the presence of the central banks, but also the regulatory changes that would be justified.

On the second point, the answer to that is, no, not really. No, I’m not going to talk to leaders as to reassurances about what they plan to do. That’s not exactly the institutional dialogue that is there.

The point I was trying to make in Jackson Hole is the following. There isn’t really -- one cannot really talk about a bargain, as I’ve read in some parts, grand bargain. The point from a central banker viewpoint is that it’s very difficult for us to reach the objective of an inflation rate which is below, but close to 2 percent, only based on monetary policy.

You need growth. You need to lower unemployment. For doing that, you need other things, and that’s what I said. You need fiscal policy. You need structural reforms, first and foremost. So in this sense, there isn’t any grand bargain here, just that each of us has to do their own jobs.

STAFF: (inaudible)

QUESTION: Two questions. Just firstly, on this team of the more growth-friendly measures and some leeway, you met with President Francois Hollande this week in France. Are there any indications from him that France is going to embark on more growth-friendly measures? Or what are your -- you mentioned in your introduction (inaudible) some member states have not implemented structural reforms, and France is one of them.

And, secondly, you’re due to meet the Irish finance minister next Tuesday. Ireland wants to repay its IMF -- portion of its IMF loans with the bailout early. Are the European lenders comfortable with taking on the risk, entire risk of Ireland repaying its loans?

DRAGHI: Well, we -- we take note of this. We will examine in the Governing Council and we’ll certainly monitor very, very closely what is being done with the sale of assets so that the - - what we call monetary financing concerns are being properly and significantly addressed. That’s the response to the second question.

On the first question, it’s -- you know what the main content was in -- of the meeting with President Hollande was review of the euro -- of the economic situation in the euro area. And so rom this viewpoint, it will not be -- it would be difficult for me to comment on the -- on the prospects of structural reforms in that country.

It’s quite clear to everybody that the desire to undertake these reforms is there. And we took -- we took note of that, and we welcome that.

STAFF: (inaudible)

QUESTION: (inaudible) Lithuania, and I have a question about my country. Lithuania will join the Eurozone -- Eurozone next year. And today, the economy needs (inaudible) very well. But next year, there are some risks that Lithuania could spend more than it actually can because of Russia sanctions, because of bigger budget on defense, and so on. What ways do you see for Lithuania to protect itself from spending too much and increasing the deficit?

And the second part is about inflation. People already are worried that prices are rising, and what do you see inflation will be next year in Lithuania compared with European Eurozone average?

DRAGHI: I think, first of all, let me say how much the Governing Council welcomes Lithuania in the euro area. So -- and the Governing Council and ECB are aware of the extraordinary progress achieved by the economic policy in Lithuania over the recent years. We’ve said this in all -- in all possible -- on all possible occasions, because it’s true.

It’s also true that in the years previously, previous to the entrance to -- in the last few four or five years, there have been signs of instability in prices and in economic policy. So in this sense, it’s very important that the progress that’s been achieved by Lithuania before entering the euro will be maintained.

And so Lithuania will be a part -- like all the others, will be subject to the same rules as the others. And so that’s very important, that the progress -- I think it did say this in the introductory statement -- the progress that Lithuania has achieved should not be unraveled.

Thank you.

STAFF: (inaudible)

QUESTION: (inaudible) two questions for President Draghi. The first, it’s about the structural reform that you are suggesting. Most people could say to you that they have social costs (inaudible) government (inaudible) electoral costs. So wouldn’t be suitable, maybe, to have a more European supervision on the reform part, as we do (inaudible) fiscal target, according to you?

And then I have a second question. Before meeting President Hollande, this summer, you also met with Italian prime minister. As you know, Italy is a country under deflation at this moment with difficult (inaudible) situation and the government is trying to undertake also (inaudible) important part of reform. So can I ask a little bit of the content of your meeting with Mr. Renzi, as well, and if you touch also the reform that Italy has to do in the future? Thank you.

DRAGHI: Thank you. The answer to the second question is easy. Our conversation remains confidential. And so I have nothing to add to that.

On the first point is actually an important question. Structural reforms have a cost, but -- many costs, as a matter of fact. But isn’t lack of growth a cost by itself? And that’s what we’ve been seeing now. We’re seeing high unemployment, in some countries highest in history. Low growth for many years. A level of growth and production which is in some countries distant from what it was in 2007. In some countries, the real wages of new entrants in the labor market are at levels seen at the end of the ’80s, previous century ’80s. So isn’t this a cost, too? I think that’s the first part of the answer.

The second part is, I have -- as a matter of fact, you kind of touched a chord that I touched upon in the past -- saying, would it be better to carry -- to have this area of structural reforms under the same sort of similar -- it’s very different, of course -- but in the similar sort of framework we have for the budgetary discipline? And this -- this has several -- first of all, I didn’t want to imply that countries should lose sovereignty, but should share sovereignty, very much like they did with monetary policy. Previously to have in the euro, many central banks, perhaps all of them, with the exception of one, have lost completely national sovereignty. The creation of the ECB and the euro gave a framework where all these countries could actually share sovereignty in crafting the monetary policy of the euro area.

And that’s -- in a sense, it’s very much the same thing with the process that we are discussing. So it’s not a loss in national sovereignty, which doesn’t exist to begin with, or it’s very limited now. But it’s actually a sharing together common rules. And this would have several -- in my view, would have several benefits, first of all, a political process perhaps easier than it would be if only at national level, but also, second, to have common rules would also mean to have one market which would, in a sense, increase the opportunities, for example, for workers’ mobility, to go and choose the place where to go and work, and so on.

I think one can construct many examples of why this sharing sovereignty could improve the prospects.

STAFF: (inaudible)

QUESTION: (inaudible) Market News. Mr. Draghi, two questions, if I may. Firstly, as we sit today, would you describe inflation expectations as anchored? And, secondly, could you address what appears to be an apparent contradiction in the sense that you’ve said you have unanimity amongst the Governing Council for the use of non-standard measures, and yet today you had no unanimity. Could you address that, please?

DRAGHI: Yes. The inflation expectations we’ve seen -- they are still anchored. But we’ve seen the risks -- the downside risks increasing of recent. And that explains why we have decided to strengthen the measures decided in June and complement these measures with others.

The second point is that -- well, you know, unanimity and agreement is not a blank check. I mean, no matter what we’re going -- no matter what we’re going to do, we’re going to be unanimous. We are unanimous in the intent, but when the time comes to decide exactly what measures we should undertake, there could be a difference of views.

Thank you. So I don’t think it’s contradictory, really. Thank you.

STAFF: (inaudible)

QUESTION: (inaudible) thanks. First one is on the ABS purchase program. If I understood correctly, you said that real estate ABS will be included. I wonder why is that, given the fact that loans to households for house purchases have been excluded from the targeted TLTROs. And my second question is, to be honest, I don’t understand why you call the lowering of the interest rate only a technical adjustment. I don’t think that you called a similar move in June a technical adjustment. Thanks.

DRAGHI: Thank you. The -- on the first point, you are absolutely right to raise this point. The (inaudible) contradiction here, but, in fact, it’s not the case. What we do when -- what we will do when buying our MBS, we’ll actually free space in the sellers’ balance sheets. The sellers may well not be banks only, by the way. It could be also institutional investors.

And we free space. And then it’s not a toll to be taken for granted that the seller will use this money to reinvest in real estate. The seller will use this money according to his or her business decisions at that time. That’s why there isn’t a contradiction between our decision with the TLTRO not to finance new investment in real estate, new lending in real estate, so that’s how we can explain it.

Now, on the -- I define a technical adjustment, really, it’s -- you -- the reason why I use that is -- for all practical purposes, we were already at the lower bottom. So people wouldn’t really expect any big change in interest rate, but you are right. Perhaps my definition is unduly limiting the movement that we had.

Thank you.

STAFF: (inaudible)

QUESTION: (inaudible) thank you (inaudible) questions. The first one, would the strong political action -- or is stronger political action (inaudible) you have stated at Jackson Hole and again today (inaudible) structural reforms and growth programs a sine qua non for QE?

And my second question (inaudible) record lows and LTROs not make ABS even less attractive? Thank you.

DRAGHI: I’m sorry. What’s the second question?

QUESTION: Question is, do rates at new record lows and LTROs not make ABS even less attractive? Thank you.

DRAGHI: OK. On -- on the first question, you know, the answer is -- the answer isn’t easy. First, there is no bargain here. There is no negotiation going on. This will not be institutionally correct. We do monetary policy and others do other policies.

Second, our -- is our monetary stimulus going to be effective without structural reforms? Last time, I made an example. We can provide as much monetary stimulus as we want, as much availability of credit we want, but if the person who has planned to use this credit for a new business, has to wait eight months before he or she can open this new business, and then once it does, she has to pay lots of taxes, this person will not apply for credit.

So the presence of structural reforms, the enactment of structural reforms is important for the effectiveness of monetary policy. And, by the way, and also for fiscal -- for some fiscal policies, for sure. Now, when I -- especially for tax cuts.

Third point. We have a mandate. And the mandate is to keep inflation in the medium term below, but close to 2 percent. Inflation -- headline inflation has gone from the end of -- if we look at the end of 2011, was 3 percent. Now it’s 0.3 percent. Core inflation, excluding food and energy, was 1.7 percent in July 2012. Now it’s 0.9 percent. So we have to comply with this mandate. That’s our duty.

Now, the second part -- second question is the -- certainly, the ABS program starts at a time when the business cycle is very moderate, to say the least, and rates are very low. In other words, as a founding channel, the ABS would become more and more attractive when rates are going to be higher.

On the TLTROs, not really. I don’t see the two programs cannibalizing each other, but rather complementing, because the purchase of ABS would free space for -- in the banks’ balance sheets to a greater participation to TLTROs, and in a variety of ways, I don’t see exactly the opposition that could be here and there, but, I mean, prima facie, the two things seem to go together.

Thank you.

STAFF: And the last question goes to (inaudible)

QUESTION: (inaudible) Mr. Draghi, isn’t there a risk that with the ECB emphasizing so much on the risk of low inflation that this itself could trigger a de-anchoring of expectations?

DRAGHI: Well, you see, this question is actually a question we also asked ourselves. But the answer to this question is that, would the truth be a risk? In other words, do we really think that telling people things other than the truth would affect their behavior? And the answer is no. We think that we ought to state things as they are. We don’t see deflation. We see low -- we have seen, as a matter of fact, low inflation for a long time.

As I said several times, the longer is the period of low inflation, the higher are the risks of the anchoring. There’s also another aspect here. The great part of the decline in inflation that I mentioned before from 3 percent at the end of 2011 to now, 0.3 percent, but the greatest part is due to declining energy, food prices in the first part and appreciation of the exchange rate in the second part.

Then we ask ourselves a question. Clearly, there have been several forecast errors in this. Were these forecast errors based on errors made in assessing the impact of energy prices and food prices? And the answer is, by and large, yes, for quite a period of time.

But of recent, the forecast errors depend on -- they still depend on food and energy errors, but also depend on other factors. And amongst these factors, the economic slack and unemployment is playing an increasing role, a more significant role.

So in this sense, the risks that we want to react to now do depend on factors that are not exogenous to the euro area economy. And in this sense, it’s quite important that we state things as they are. Thank you.

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