Mario Draghi: ECB press conference – introductory statement
Introductory statement by Mr Mario Draghi, President of the European Central Bank, and
Mr Vítor Constâncio, Vice-President of the European Central Bank, Frankfurt am Main,
7 March 2013.
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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
Based on our regular economic and monetary analyses, we decided to keep the key ECB
interest rates unchanged. HICP inflation rates have declined further, as anticipated, and fell
below 2% in February. Over the policy-relevant horizon, inflationary pressures should remain
contained. The underlying pace of monetary expansion continues to be subdued. Inflation
expectations for the euro area remain firmly anchored in line with our aim of maintaining
inflation rates below, but close to, 2% over the medium term. Overall, this will allow our
monetary policy stance to remain accommodative. Available data continue to signal that
economic weakness in the euro area has extended into the beginning of the year, while
broadly confirming signs of stabilisation in a number of indicators, albeit at low levels. At the
same time, necessary balance sheet adjustments in the public and private sectors will
continue to weigh on economic activity. Later in 2013 economic activity should gradually
recover, supported by a strengthening of global demand and our accommodative monetary
policy stance. In order to support confidence, it is essential for governments to continue
implementing structural reforms, to build further on the progress made in fiscal consolidation,
and to proceed with financial sector restructuring.
With regard to the liquidity situation of banks, counterparties have so far repaid €224.8 billion
of the €1,018.7 billion obtained in the two three-year longer-term refinancing operations
(LTROs) settled in December 2011 and March 2012. In net terms, this implies that, of the
increase in the outstanding volume of bank refinancing through the ECB’s monetary policy
operations of around €500 billion between mid-December 2011 and early March 2012, about
€200 billion have now been repaid. These repayments reflect improvements in financial
market confidence over the last few months and receding financial market fragmentation. We
are closely monitoring conditions in the money market and their potential impact on the
stance of monetary policy and the functioning of the transmission of our monetary policy to
the economy. Our monetary policy stance will remain accommodative with the full allotment
mode of liquidity provision.
Let me now explain our assessment in greater detail, starting with the economic analysis.
The GDP outcome for the fourth quarter of 2012 was weak, with Eurostat’s second estimate
indicating a contraction of 0.6% quarter on quarter. The decline was largely due to a fall in
domestic demand but also reflected weak exports. As regards 2013, recent data and
indicators suggest that economic activity should start stabilising in the first part of the year. A
gradual recovery should commence in the second part, with export growth benefiting from a
strengthening of global demand and domestic demand being supported by our
accommodative monetary policy stance. Furthermore, the improvements in financial markets
since July last year and the continued implementation of structural reforms should work their
way through to the economy. At the same time, necessary balance sheet adjustments in the
public and private sectors, and the associated tight credit conditions, will continue to weigh
on economic activity.
This assessment is also reflected in the March 2013 ECB staff macroeconomic projections
for the euro area, which foresee average annual real GDP growth in a range between –0.9%
and –0.1% in 2013 and between 0.0% and 2.0% in 2014. Compared with the December
2012 Eurosystem staff macroeconomic projections, the ranges have been revised slightly 2 BIS central bankers’ speeches
downwards. The revision for 2013 mainly reflects a more negative carry-over effect from the
outcome for real GDP in the fourth quarter of 2012, while the projected path of the recovery
has remained broadly unchanged.
The Governing Council continues to see downside risks surrounding the economic outlook
for the euro area. The risks relate to the possibility of weaker than expected domestic
demand and exports and to slow or insufficient implementation of structural reforms in the
euro area. These factors have the potential to dampen the improvement in confidence and
thereby delay the recovery.
According to Eurostat’s flash estimate, euro area annual HICP inflation was 1.8% in February
2013, down from 2.0% in January. The on-going decline in annual inflation rates mainly
reflects the energy and food components of the price index. Looking ahead, while the
monthly pattern of headline inflation rates may be somewhat volatile, underlying price
pressures should remain contained given the environment of weak economic activity in the
euro area. Inflation expectations are well-anchored and in line with price stability over the
The March 2013 ECB staff macroeconomic projections for the euro area foresee annual
HICP inflation in a range between 1.2% and 2.0% in 2013 and between 0.6% and 2.0% in
2014. In comparison with the December 2012 Eurosystem staff macroeconomic projections,
the ranges are broadly unchanged.
In the Governing Council’s assessment, risks to the outlook for price developments continue
to be seen as broadly balanced over the medium term, with upside risks relating to stronger
than expected increases in administered prices and indirect taxes, as well as higher oil
prices, and downside risks stemming from weaker economic activity.
Turning to the monetary analysis, monetary figures for January 2013 support our
assessment that the underlying pace of monetary expansion continues to be subdued. The
annual growth rate of M3 remained broadly unchanged at 3.5% in January, after 3.4% in
December 2012. The annual rate of growth of the narrow monetary aggregate, M1,
increased to 6.7% from 6.3% in December 2012. The deposit base of MFIs in a number of
stressed countries strengthened further in January.
The annual growth rate of loans (adjusted for loan sales and securitisation) to non-financial
corporations stood at –1.5% in January, after –1.3% in December 2012. The annual growth
in MFI loans to households moderated slightly to 0.5%, from 0.7% in December. To a large
extent, subdued loan dynamics reflect the current stage of the business cycle, heightened
credit risk and the ongoing adjustment of financial and non-financial sector balance sheets.
At the same time, available information on the access to financing of non-financial corporates
indicates tight credit conditions for small and medium-sized enterprises.
In order to ensure adequate transmission of monetary policy to the financing conditions in
euro area countries, it is essential to continue reducing fragmentation of euro area credit
markets and strengthening the resilience of banks where needed. Decisive steps for
establishing an integrated financial framework will help to accomplish this objective. The
future Single Supervisory Mechanism (SSM) is one of the main building blocks, together with
a Single Resolution Mechanism (SRM). Both are crucial elements for moving towards reintegrating the banking system.
To sum up, the economic analysis indicates that price developments should remain in line
with price stability over the medium term. A cross-check with the signals from the monetary
analysis confirms this picture.
While the accommodative monetary policy stance will continue to support the recovery in the
euro area, it is essential that fiscal and structural policies strengthen the prospects for
economic growth over the medium term. As regards fiscal policies, the European
Commission’s 2013 winter forecast reflects progress in reducing fiscal imbalances in the
euro area. The euro area-wide general government deficit is expected to have declined from BIS central bankers’ speeches 3
4.2% of GDP in 2011 to 3.5% of GDP in 2012 and is projected to be reduced further to 2.8%
of GDP this year. Governments should build on this progress with a view to further restoring
confidence in the sustainability of public finances. At the same time, fiscal consolidation must
be part of a comprehensive structural reform agenda to improve the outlook for job creation,
economic growth and debt sustainability. In the view of the Governing Council, it is of
particular importance at this juncture to address the current high long-term and youth
unemployment. To this end, further product and labour market reforms are needed to create
new job opportunities by supporting a dynamic, flexible and competitive economic
We are now at your disposal for questions.