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 6 novembre 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’ll now report on the outcome of today’s meeting of the Governing Council, which was also attended by the commission vice president, Mr. Dombrovskis.

Based on our regular economic and monetary analyses, and in line with our forward guidance, we decided to keep the key ECB interest rates unchanged. Following up on the decisions of October 2, 2014, we last month started purchasing covered bonds under our new program. We will also soon start to purchase asset-backed securities. The programs will last for at least two years. Together with the series of targeted longer-term refinancing operations to be conducted until June 2016, these asset purchases will have a sizeable impact on our balance sheet, which is expected to move towards the dimensions it had at the beginning of 2012.

Our measures will enhance the functioning of the monetary policy transmission mechanism, support financing conditions in the euro area, facilitate credit provision to the real economy, and generate positive spillovers to other markets. They will thereby further ease the monetary policy stance more broadly, support our forward guidance on the key ECB interest rates, and reinforce the fact that there are significant and increasing differences in the monetary policy cycle between major advanced economies.

With the measures that have been put in place, monetary policy has responded to the outlook for low inflation, a weakening growth momentum, and continued subdued monetary and credit dynamics. Our accommodative monetary policy stance will underpin the firm anchoring of medium- to long-term inflation expectations, in line with our aim of achieving inflation rates below, but close to, 2 percent. As they work their way through to the economy, our monetary policy measures will together contribute to a return of inflation rates to levels closer to our aim.

However, looking ahead, and taking into account new information and analysis, the Governing Council will closely monitor and continuously assess the appropriateness of its monetary policy stance. 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. The Governing Council has tasked ECB staff and the relevant Eurosystem committees with ensuring the timely preparation of further measures to be implemented, if needed.

Let me now explain our assessment in greater detail, starting with the economic analysis. Euro area real GDP increased by 0.1 percent, quarter on quarter, in the second quarter of this year, revised up as compared with the earlier estimate. Since the summer months, incoming data and survey evidence have overall indicated a weakening in the euro area’s growth momentum.

This information has now been incorporated into the most recent forecasts by private and public institutions, which indicate a downward revision of real GDP growth over the projection horizon up to 2016, with the outlook for a modest economic recovery remaining in place. This picture is broadly in line with the Governing Council’s current assessment.

On the one hand, domestic demand should be supported by 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.

On the other hand, the recovery is likely to continue to be dampened by high unemployment, sizeable unutilized capacity, and the necessary balance sheet adjustments in the public and private sectors.

The risks surrounding the economic outlook for the euro area continue to be on the downside. In particular, the weakening in the euro area’s growth momentum, alongside heightened geopolitical risks, could dampen confidence and, in particular, private investment. In addition, insufficient progress in structural reforms in euro area countries constitutes a key downward risk in the economic outlook.

According to Eurostat’s flash estimate, euro area annual HICP inflation was 0.4 percent in October 2014, after 0.3 percent in September. Compared with the previous month, this mainly reflects a somewhat less negative contribution from energy prices and slightly stronger annual increases in food prices. A fall in industrial goods prices was partly compensated for by an increase in services price inflation.

On the basis of current information and prevailing futures prices for energy, annual HICP inflation is expected to remain at around current low levels for the coming months, before increasing gradually through 2015 and 2016. This is also the picture portrayed by the most recent forecasts, which now incorporate the recent sharp fall in oil prices.

The Governing Council 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 and energy price developments, and the pass-through of our monetary policy measures.

Turning to the monetary analysis, data for September 2014 continued to point to subdued underlying growth in broad money, M3, with the annual growth rate increasing moderately to 2.5 percent in September, after 2.1 percent in August. Annual growth in M3 continues to be supported by its most liquid components, with the narrow monetary aggregate M1 growing at an annual rate of 6.2 percent in September.

The annual rate of change of loans to non-financial corporations remained negative at minus 1.8 percent in September, after minus 2.0 percent in August and minus 2.2 percent in July. On average, over recent months, net redemptions have moderated from the historically high levels recorded a year ago.

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 0.6 percent in September, after 0.5 percent in August. In line with some stabilization in credit flows, the October bank lending survey for the euro area reported a net easing of credit standards on loans to enterprises and households.

At the same time, it has to be kept in mind that the level of credit standards is still tight from a historical perspective. Following the completion of the ECB’s comprehensive assessment, a further strengthening of banks’ balance sheets can be expected to contribute to reducing credit supply constraints and facilitating more lending.

To sum up, a cross-check of the outcome of the economic analysis with the signals coming from the monetary analysis confirms the recent decisions taken by the Governing Council to provide further monetary policy accommodation and to support lending to the real economy.

Monetary policy is focused on maintaining price stability over the medium term, and its accommodative stance contributes to supporting economic activity. However, in order to strengthen investment ability -- investment activity, boost job creation, and raise productivity growth, other policy areas need to contribute decisively. In particular, the legislation and implementation of product and labor market reforms, as well as actions to improve the business environment for firms need to gain momentum in several countries.

The effective implementation of structural reforms will raise expectations of higher incomes and encourage firms to increase investment today and bring forward the economic recovery. As regards fiscal policies, countries with remaining fiscal imbalances should not unravel the progress already made and should proceed in line with the rules of the Stability and Growth Pact. Throughout the procedural steps under the agreed framework, the pact should remain the anchor for confidence in sustainable public finances.

The existing flexibility within the rules should allow governments to address the budgetary costs of major structural reforms, to support demand, and 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 resilience of the euro area economy to shocks.

And now we are at your disposal for questions.

QUESTION: Thank you very much, Mr. Draghi. You have changed the introductory statement which was signed off by the entire Governing Council to include a reference value to the balance sheet. Does that mean that you now have an official balance sheet target?

My second question is, we all know that the ECB generally prefers to take decisions with a strong consensus, but it would only seem natural that the more you venture into uncharted territory, the harder it would get to secure such a consensus. So I’m wondering whether you personally see any major obstacles of taking decisions, for example, on government bond buying with a simple majority? Thank you very much.

DRAGHI: Yeah, I’ll answer both questions, really reading the statement, because the answers are contained there. To the first question, where we have now a balance sheet target, I’ll read it: “Together with the series of targeted longer-term refinancing operations to be conducted until June 2016, these asset purchases will have a sizeable impact on our balance sheet, which is expected to move towards the dimensions -- which is expected to move towards the dimensions it had at the beginning of 2012.”

Now, also you correctly pointed out that this introductory statement has been signed by all the Governing Council unanimously.

To your second question, go through the introductory statement to the fourth paragraph.

QUESTION: We don’t have (OFF-MIKE)

DRAGHI: Oh. I am sorry. But I can -- I can actually go - - go to the fourth paragraph. And you asked the question whether -- you really asked the question whether we are going to find increasing obstacles in taking the necessary measures...


DRAGHI: ... in our consensus, so...


DRAGHI: Yeah, let me just read through. It says, first of all, the first part, it says we’ve done several -- we’ve taken several measures. These measures are expected to take to have a sizable impact, which we expect to be around -- to move the balance sheet towards this. And then we say what -- all the good things that these measures will actually achieve.

But then we say, however, looking ahead, and taking into account new information and analysis in the Governing Council, we closely monitor and continuously assess the appropriateness of its monetary policy stance. Should it become necessary -- now, why should it become necessary? There are two contingencies we look at. The first contingency is that our current measures aren’t enough. And the second contingency is if our medium-term outlook for price -- for inflation expectations were to worsen, in these cases, we certainly -- the Governing Council is unanimous in its commitment to using additional unconventional instruments within its mandate.

And here you have a new sentence here that says, today the Governing Council has tasked ECB staff and the relevant Eurosystem committees with ensuring the timely preparation of further measures to be implemented, if needed. And this has been signed by the whole Governing Council.

QUESTION: Can you just explain a bit more that sentence you added about tasking the ECB staff and the relevant committees? Is this something where they’re being tasked to look at something with the expectation that they’re actually going to have to do it? Because, otherwise, presumably, they’ve been thinking about these things for quite a long time. This isn’t a new issue. So this is preparation happening with the expectation for actually taking action?

And I want to go back to the balance sheet, as well, because you seem to have changed your tune on the balance sheet in the last couple of months. You started off saying steer it towards early 2012 levels. Then last month you said don’t focus too much on the balance sheet, per se. Now you’re back to getting back towards levels of early 2012. Can you explain a bit why there’s this evolution in the way you’re describing your balance sheet goals? Thank you.

DRAGHI: Thank you. Well, on the second point, I can only say that here there is an explicit statement which adds a little more to what you used to read before, where there was the -- it’s clearly restated that the Governing Council is unanimous and then also makes a step further. Let’s look at all these measures.

And these measures will certainly affect both the size and the composition of our balance sheet. And that’s why they need close attention. And if you’ll notice, it’s not only ECB staff, but also the relevant Eurosystem committees to respond to the hint about the kitchen cabinet and all this. So there’s going to be a variety of people involved in this -- in this analysis.

Incidentally, some say that -- quite kind of surprised by the reference to the kitchen cabinet -- saying I thought yours was more a restaurant cabinet. So it’s really plenty of people all that’s been involved in the preparation of these measures. But here this time we want to make sure that this actually came out clearly.

Now, I, frankly, didn’t move much about the balance sheet size. And all this said, the balance sheet size is -- balance sheet size, let me say -- and composition, we always (inaudible) forget that, and composition, because depending on its composition, each injection of liquidity will have a different effect, as we’ve seen in other experiments.

And it does matter -- it does matter, for -- for example, in our case, especially, it does matter for credit easing, given the state of our fragmented banking system. That’s why composition in our case is especially important.

Other countries have shown other channels why the balance sheet size matters with its spillovers into other markets, and especially the Japanese experience is quite telling with its consequence on various markets. So all this -- all this is actually quite important. It does matter.

But basically, another point one would have to look at is the correlation that exists between the balance sheet size and inflation expectations. So there are -- there are several reasons why it matters. And I don’t know, I might have given the wrong impression about my tracking, but I don’t think -- or kind of -- but I don’t think I ever -- oh, here I have -- what I said -- yeah, what I said in European Parliament, I said is expected to move towards the dimension the size it had at the beginning of 2012. So this was in European Parliament in last European hearing.

So, basically -- now, what was your next question?

QUESTION: (OFF-MIKE) preparation to actually do something maybe next month (OFF-MIKE)

DRAGHI: Well, let’s ask them now. First, we decided to ask them, they will meet, and they will work on it, and the -- I think our -- we have, I guess, much credibility in delivering what -- our committees and our staff has good credibility in delivering what has been asked -- what are being asked to do. It’s thus a timely preparation for further measures to be implemented if needed. So you also asked about the expectation.

QUESTION: Hi, Mr. President. First question, in the past week or so, we’ve seen the Fed end quantitative easing, and we’ve also seen the Bank of Japan ramp up its asset purchases. It’d be good to get a sense from you on what -- how that affects your thinking on QE, either in terms of how you act, whether there’s any lessons to be drawn by the experiences of either of those two central banks.

Second question, the -- I’ve been...

DRAGHI: Sorry, so you’re asking, what lessons do we draw from other central banks?

QUESTION: Yeah, if there’s any at all, or how the Bank of Japan ramping up its purchases influences your thinking, if at all. Second, there’s been some reports that there’s discord among some members of the Governing Council regarding your management style, specifically that you’ve made remarks without them necessarily knowing that you were going to make them beforehand. Could you comment on those reports and perhaps how they impact the ability to build a consensus for quantitative easing?

DRAGHI: Yeah. On the first question, certainly all lessons are important all over the world, but in -- when -- when we -- when one looks at other central banks, other jurisdictions, one should take into account the -- say, the profound diversity of situations of initial conditions. We had -- by the way, we’ve discussed today quite extensively the experience of other central banks, and we’ve discussed extensively the size of the balance sheet. So these were part of the discussions together with the weakness of the current outlook, both as far as GDP is concerned and as far as inflation is concerned.

We shouldn’t be aware that the effects of QE are different depending on the initial conditions. In the case, for example, of U.S. and U.K., you would observe many difference. One, for example, is size-wise. They have tripled or quadrupled their balance sheet. Second, the structure of their capital markets. Third, we tend to forget that all three countries -- U.S., U.K. and Japan -- had fiscal deficits which were -- I don’t know -- several times what the fiscal deficit is in Europe. Fourth, the composition of these interventions was different across different jurisdictions.

And as far as U.K. and U.S. especially are concerned, the time when these interventions had taken place were different when the spreads and interest rates were much higher. So you see that there is matter for the committees and ECB staff to reflect on all this, on which would be the conditions and the transmission channels whereby additional measures, if needed, were to be effective.

So the lessons from other countries and other jurisdictions are very important in the sense that make us think about how to make -- how to -- I would say -- make the most effective -- how to make the most of the measures we may be taking, if needed.

On these reports -- well, on these reports, let me say, first of all, it’s fairly normal to disagree about things. It happens everywhere. Just read recent statements about when to raise interest rates in the United States by members of the FOMC. So it happens in the U.K. It happens in Japan. So this is part of normal diversity.

But I think the best answer to this is given by the fact that the -- the introductory statement that I just read to you, which contains some, I would say, rather important news with respect to the past, has been approved and unwritten unanimously.

QUESTION: Thank you, Mr. President...

DRAGHI: Just -- I’m sorry. I think it’s important to add another thing. When we differ in our views and in our policies, there is no -- that’s another obsession of some of you -- there is no drawing line between north and south. There is no coalition, not at all. I would -- I would love to give you plenty of examples. Unfortunately, I don’t think I can.

When, in fact, you have -- you have differences of views across borders, across north and south borders, because -- and that’s the good thing about our Governing Council -- people are there in their personal capacity, and they are independent. Thank you.

QUESTION: Thank you -- thank you, Mr. President. I would like to go back to the issue of the balance sheet expansion that you have mentioned. If you could give us some details on how you expect to achieve this expansion, I mean, in the mix of the current policies that the ECB has approved and is implementing?

And you have just said that you would like to give us more examples of how the discussions in the Governing Council work. And you will start publishing the minutes as of -- as of January. So can you give us some details on how much these minutes will reveal, if there will be names, tally of votes, and how detailed will they be? Thank you very much.

DRAGHI: OK, so you asked two questions, basically. The first is about the measures that we’ve taken already. As you know, it’s a combination of three measures, the so-called TLTROs, the purchase of covered bonds, and the ABS purchase program.

We are quite confident that impact on our balance sheet size will be adequate, will be significant, will be sizable. But I would like to stress here the main message is that our balance sheet will keep expanding in the coming months and will continue expanding while the balance sheet of other central banks is bound to contract, because of the different policy and economic cycles.

I think to me that is the most important message that I can give as far as the future outlook is concerned. I said in the past that we are on diverging monetary policy paths, and this is just one element of this basic scenario.

And then, of course, we said there are -- there may be -- are you sure? Well, there may be two contingencies which may push us to do more, and that’s what the paragraph that I’ve just read implies. And the two contingencies are, are the measures that we’ve taken going to produce the effects? We believe so. We are definitely confident that this is going to happen. But the outlook could worsen.

So this is what the main message. And so our balance sheet will continue to expand under all universe, either during -- either under the measures that we have already taken and/or measures that we may have to take if needed.

On the minutes, some of these recent reports that were hinted at just a moment ago mentioned something that would happen at dinner. Well, actually, it was -- someone said it was one of the best discussions we ever had, perhaps the best discussion we ever had, because we discussed the public accounts. We don’t like to call them minutes. And it was actually a very rich discussion, exactly on whether they will contain names or not.

There are some key aspects of this discussion. One is the need to preserve independence for the members of the Governing Council. The second one is the need to preserve candor in the exchanges. The third, which is probably the most important, is to -- is to give information to the markets on how to better interpret our monetary policy decisions.

And so we’ve been discussing this on the basis of an excellent draft work done by the ECB staff, and especially the secretariat, which I wish to thank here. And we will be ready by the next meeting in December to have a full discussion upon which we can take our final decisions.

But I will say, after last night, that -- after last night’s dinner and discussion, that -- that we are quite advanced on this point and well prepared.

QUESTION: The ECB has today published a series of letters relating to an exchange between the former president, Jean-Claude Trichet, and the Irish finance minister at the time of the Irish financial rescue. I was just wondering if you could spell out exactly what the ECB’s concerns were at that time about the exposure in terms of the emergency liquidity that was extended to Irish banks.

And also, how do you respond to the allegation that the ECB was effectively putting a gun to the Irish government’s head by threatening to let the banks go to the wall unless Ireland entered a bailout? Thank you.

DRAGHI: Thank you. We -- I think -- well, a very short answer would be just read the four letters, and they would give you the whole story. The decision to ask for a program was the government’s decision. It was not the ECB forcing the government to doing this.

But I think the four letters actually show exactly the sort of dialog that took place between the government and the then-president of the ECB, Jean-Claude Trichet. So for me, there is very little to add to that.

QUESTION: Just two clarifications. When you say you’ve tasked the ECB staff and the Eurosystem committees, did you give them a deadline for -- before which they had to present this work? And the other clarification, you always make reference to the beginning of 2012. This has been interpreted in different ways, because, of course, the beginning of 2012 can be quite an extended period, so there was a time when the balance sheet was at its peak, was about 3 trillion, and another time when it was slightly lower than that, people have said between 750 billion or 1 trillion above 750 billion or 1 trillion above what it is now. Could you clarify that?

DRAGHI: On the second question, the beginning of 2012 is meant March 2012. That is to say, right after the second LTRO.

On the deadline, we traditionally don’t give deadlines to our committees and our staff. When they’re asked, they work and they produce. I mean, just as normal -- well, I wouldn’t say normal, but some people always give a deadline, but in our case, we’ve never been disappointed by the timeliness with which the staff and committees have responded.

More seriously, we know the risks are on the downside. And we know we have to be prepared. And both the ECB staff and the committees know this very well.

QUESTION: Thank you. I refer again to the letters, Mr. Draghi.


QUESTION: You were a member of the Governing Council in 2010. In your assessment, was it appropriate for Mr. Trichet to threaten the withdrawal of emergency support for the Irish banks at that time? Because we do know there were serious concerns around the stability of the euro zone at large, and those concerns led to the decision or led to the reluctance to accept the burning of senior bank bondholders. So if the ECB was not going to burn senior bank bondholders, it seems very unlikely that the ECB would ever have withdrawn ELA, and yet that’s exactly what Mr. Trichet said he was going to do if there was no bailout.

DRAGHI: Yeah, I’ve said several times also for other countries, it’s a very -- a very big mistake to look at past events with today’s eyes. You should go back and consider what was the situation at that time and ask yourself if, at that time, that -- I wouldn’t say it was a decision by Mr. Trichet, it was a dialog between the government and a decision between the government and the ECB, and a decision by the government, whether at that time, with that sort of information you had at that time, that decision was justified or not.

Subsequent events, the extraordinary performance of Ireland, next year Ireland will be the fastest-growing economy in Europe in the euro area, certainly, seems to say that after all that decision wasn’t that stupid.

QUESTION: I had a second question. Who in your view would be best placed to represent the ECB at the forthcoming parliamentary inquiry into the Irish banking crash? Mr. Trichet, it seems likely, will be invited. Do you think it would be a good idea for Mr. Trichet to go?

DRAGHI: We haven’t looked into this matter. And never forget that the ECB’s accountable to the European Parliament, not necessarily to the national parliaments. We’ve accepted invitations that kindly national parliaments have extended to us, but the normal counterparty is the European Parliament.

QUESTION: Mr. President, two questions, one on whether you have discussed during the Governing Council meeting to also potentially buy government -- not government, corporate bonds. And then my second question would be on the comments by Ben Bernanke. He was saying at an event that the euro zone would face legal and political hurdles or problems when implementing QE. So do you share his view, at least until the European Court of Justice comes up with a final ruling on OMT? Thank you.

DRAGHI: Thank you. First question answer is that, no, we haven’t discussed specific instruments, because you have to understand, we’ve spent several hours discussing how to make the ABS program work, so we’ve just taken these measures. And not only that, but we are confident that these measures will have an impact on our -- on the size of our balance sheet, but also on the medium-term inflation expectations. So it would have been at least premature to have other discussions.

And on the second point, no, frankly, we think that -- we think that if we act within our mandate, we can use a variety of instruments. And the important thing is to -- always to stay within our mandate.

QUESTION: But the question is, is it in your mandate?

DRAGHI: We believe that, if it’s not monetary financing, it’s in our mandate. Thank you.

QUESTION: Hello, Mr. Draghi. I have another question on last night’s dinner. Could you maybe tell us whether there were bilateral discussions to address some of the concerns some Governing Council members may have had? And my second question is, we hear that there will be no burden-sharing in the ABS program, and I was wondering, why not?

DRAGHI: There is burden-sharing? There is -- yeah. On the first part of your question, you are -- you are one of the co-authors of that Reuters report, if I’m not mistaken.

QUESTION: I am, indeed, yes.

DRAGHI: OK. No, I mean, as far as I know, no, there was no concern being raised. The whole dinner was taken up by -- I would say by this discussion. And that’s why I think dinner was successful. It was a very rich and interesting discussion and very candid. But the -- these concerns were not raised, as far as I know, at least.

QUESTION: I was referring more actually to the post-dinner, to bilateral discussions.

DRAGHI: Well, I mean, I’m not ubiquitous, you say. I don’t know what the others might say. I haven’t seen anything. It’s just -- so as far as I know, the dinner went as expected, and actually went better than expected.

The other -- the other question was?


DRAGHI: Oh, the ABS. No, there is no -- there is risk-sharing. It’s normal...

QUESTION: Risk-sharing, yes, but burden-sharing -- I mean, you’re buying on the account of the ECB. But will the losses and the profits be shared across the national central banks?


(UNKNOWN): Yes. Yeah.

QUESTION: And after a year, will you reassess it? Will then the national central banks buy? Or just the ECB?

DRAGHI: We have -- OK, that’s a different question. We start, as you know, outsourcing the purchases with external asset managers, but we certainly are not excluding, ruling out the participation of national central banks to this program. And, in fact, we’ll now try to see which central banks is going to be ready, in how long a time, and adapt the framework that we have today, which is being geared and prepared only for outside measures to include national central banks that might be ready and willing to do it.

QUESTION: Mr. President, there is a long discussion on the size of the balance sheet. But my question is, within this discussion, via implementation of several instruments in TLTRO and the QE-like measures, ABS purchases, covered bonds, and other -- quality of assets, I want to ask you if these kind of measures are more adapted to prevent that the further decline of inflation, rather than really boost the price, because the lowering of the rates -- interest rates at the lower bound didn’t trigger more inflation, so now you have hopes then with the large QE, expectation of inflations will be better (inaudible) or remain (inaudible) but I -- my question in one word is, did QE -- does QE really trigger inflation or more prevent a decline of the low inflation that we have at the time?

DRAGHI: Well, it’s -- we think that the measures -- we are confident that the measures we’ve taken will have an impact on the expectations -- the medium-term inflation expectations. That’s for sure.


DRAGHI: Both in terms -- both because they are -- both credit-easing, and they address fragmentation, and because they improve funding conditions, and because there are going to be spillovers to all other markets, and because they introduce a more balanced funding structure for the banks, and so on and so forth, and also because, frankly, we expect an expansion of the markets that are at present time impaired like the ABS market. And we expect also an expansion of the corporate bonds market, as well.

It’s -- I’ve said that in the past the eligible universe of these securities is about $1 trillion. It’s -- but this should not be taken as the reference number, for two -- for two reasons, first of all, because some of this is going to be retained, not available for sale, but also for the opposite reason, because these markets are bound to respond positively in size to our actions. In other words, we’ll be seeing more issuance of both corporate bonds and ABS.

Incidentally, it’s with -- for those people who say that buying into ABS will reduce the ECB to a bad bank and things like that, I guess you are kind of -- from your face, you say you are fed up with this, but I think it’s worthwhile remarking it again, that, first of all, numbers that I might have given to you in the past for all structured finance in Europe -- all structured finance in Europe, between 2007 and 2013, the default rate was 1.5 comparing with 18.4 in the United States, because the United States have obviously had subprime. The subprime didn’t exist in Europe, so it’s like comparing apples and pears.

But if we restrict this not to the universe of structured finance, but only to the ones we buy, which are RMBS, the default rate is 0.1 percent. And to the consumer loans, ABS is 0.04 percent. So -- now, it’s with enormous satisfaction that today I can read to these people that there is a Fitch ratings document that says -- the title of which says ECB takes minimal credit risk with ABS. And it considers the criteria to be conservative, and as a hypothetical example -- this is especially for the ones who says it’s a bad bank, the ECB -- a hypothetical example, if the same criteria had been used to select eligible bonds from cohorts before the onset of the credit crisis, the resulting lifetime credit losses would have been less than 0.001 percent.

But will these figures make these people change mind? The answer is no, because as someone said, when evidence meets faith, it doesn’t stand a chance.

QUESTION: Thank you for this very long question -- answer to one question.

DRAGHI: Yes, I’m sorry.

QUESTION: My second one, which is -- yes?

DRAGHI: What’s the second one?

QUESTION: More detail -- it comes now -- Governor Noyer from Banque du France, Banque du France, expressed a strong position to the manner how to outsource, I mean, the purchase of ABS. Now is this dispute over? Or can you elaborate on this?

DRAGHI: Yeah, it’s with -- frankly, it’s with satisfaction that I can say it’s over. We found a very reasonable way to proceed. There is a good-faith commitment on both sides in changing our governance structure in time to have also the Banque du France onboard. On the Banque du France side, they will have to be ready by then. And in the meantime, we start with the current governance, because we want to start this program, but there is absolutely no obstacle to have, Banque du France and any other national central bank that is ready to participate to the program.

QUESTION: I have a question on this second -- last sentence in the second paragraph on the balance sheet. And I was wondering whether this is a normative or a positive proposition. In other words, does the Governing Council subscribe to the expectation that this will happen, the expansion? Or does it want this expansion to happen?

DRAGHI: Well, do you think it says -- does it want this expansion to happen?

QUESTION: Yeah, what -- what...

DRAGHI: No, it just says what it reads, which is expected to move towards the dimensions it had at the beginning of 2012, which is exactly the sentence I used in the European Parliament hearing.

QUESTION: So it doesn’t say that we want the balance sheet to expand by this dimension? It only says we...

DRAGHI: No, it does say that...


DRAGHI: ... the measures that we’ve taken are expected to produce an effect of such-and-such size on the balance sheet.


DRAGHI: And then says, however, if this is not enough -- and that’s the next paragraph -- we have tasked the ECB staff and the relevant committees to start preparations. Thank you.

STAFF: OK, I’m sorry. I’m going to have to close the press conference somewhat earlier today. But I would like to thank you all for coming to this conference some of you for very long years. It’s actually been almost 20 years to the date -- to the day of the first press conference of the EMI. And the next press conference in December will be held at our new premises. Thank you very much.

DRAGHI: Thank you. Bye.

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