Piero Cipollone: Opening statement - Economic and Monetary Affairs
Committee of the European Parliament
Opening statement by Mr Piero Cipollone, Deputy Governor of the Bank of Italy, to the
Economic and Monetary Affairs Committee of the European Parliament, Strasbourg, 9
October 2023.
* * *
Madam Chair,
Honourable Members of the European Parliament,
It is an honour to appear before you today. I am grateful and humbled to have been
nominated to serve as a Member of the ECB's Executive Board.
The European Parliament plays a key role in ensuring the ECB's accountability. I
therefore regard it as being of the utmost importance to appear before the
representatives of EU citizens, as part of my appointment process.
I would like to take this opportunity to outline my personal qualifications and discuss
with you what I see as the guiding principles for the ECB to best deliver on its mandate
and address the challenges ahead.
* * *
I have been a central banker for most of my career, from my arrival at the Bank of Italy
as an economist in 1993 to my appointment as Deputy Governor in 2020. I have taken
part in the Bank of Italy's policy and research activities, experiencing the many facets of
central banking.
Throughout my career, I have also witnessed the immense value in cultivating strong
relationships with European and international counterparts.
I have been a member of Eurosystem bodies since the early days of the single currency
and I still am, including in relation to the digital euro project. I have also participated in
European and international fora. I took part in the G7 and G20 meetings on behalf of
the Italian government and I served as an Executive Director at the World Bank. I am
currently a member of the EU's Economic and Financial Committee and of the OECD
and BIS committees.
* * *
As a member of the ECB's Executive Board, my commitment would be to serve Europe
by ensuring that the ECB fulfils its primary objective.
Maintaining price stability is the best contribution that monetary policy can make to
sustainable growth, job creation, economic welfare and an inclusive and cohesive
society. At present, rising prices are the main concern for Europeans.
History has taught us the high costs of entrenched inflation: loss of economic output
and reduced employment and purchasing power, with disproportionate effects on those
with lower incomes.
To me this is more than mere theory. I vividly recall the early '80s, when high inflation
ignited social tensions, thereby endangering our democratic fabric. My university
mentor, Ezio Tarantelli, was assassinated by terrorists for his ideas on combating
inflation through social dialogue. It was nearly a decade before Prime Minister Carlo
Azeglio Ciampi implemented Tarantelli's ideas.
We would be well advised to heed these lessons.
Recently, the euro area economy has faced major negative supply shocks, such as
supply chain disruptions, the energy crisis, and the broader consequences of Russia's
aggression against Ukraine.
In response, the ECB reacted decisively to keep inflation expectations anchored and to
stave off second-round effects.
Inflationary pressures are now easing, and inflation is set to reach the 2% target by the
end of 2025 according to the latest ECB staff projections. Expectations remain
anchored.
Yet we cannot be complacent.
The ECB's policy will need to continue to be based on the evolving assessment of the
inflation outlook in light of the incoming economic and financial data, the dynamics of
underlying inflation, and the strength of monetary policy transmission.
This prudent approach is warranted by the prevailing economic and geopolitical
uncertainty. As proof of how difficult it currently is to predict what is coming next, it
suffices to recall that euro area growth prospects for 2023 were estimated at 0.5% in
the December round of macroeconomic projections, 1% in March, 0.9% in June and
0.7% in September. The tragic events we have just witnessed in Israel and their
possible repercussions further reinforce uncertainty in the environment we face.
In addition, the need for a data-dependent but forward-looking approach is reinforced
by the lags with which monetary policy operates: the full impact of monetary policy
action on the economy and inflation requires time and the length of time it takes to fully
materialise is also uncertain. This is not because our economists have forgotten how to
estimate econometric models. Rather, we have not faced a similar situation for at least
30 years, and there is thus little precedent in the available data. Therefore, we need to
constantly strive to improve the ECB's models, while using sensitivity and scenario
analyses to account for the prevailing uncertainty.
Robust data-driven analysis remains essential to enable us to base our policies on a
deep understanding of how economic developments and policies impact everyone in
society. My experience in analysing labour markets from a policy and research
perspective taught me that evaluating the strength of a disinflationary process hinges
on a good understanding of the interaction between wage formation and price setting
dynamics. This can, in turn, inform the decisions of the central banks and support the
dialogue amongst social partners, which played a positive role in some of the past
disinflation episodes, as I mentioned earlier.
* * *
The adverse supply shocks that have hit the euro area predominantly originated
abroad, and the global landscape in which the ECB operates is evolving rapidly.
While fostering international cooperation is essential to addressing global challenges, it
is not sufficient on its own. Europe should act as one to address the challenges of our
times.
I was myself directly involved in the negotiations on Next Generation EU. The readiness
to act together played a key role in restoring confidence and supporting the recovery
from the pandemic alongside the ECB's monetary policy response. And it showed what
we can achieve when fiscal and monetary policies work together.
Next Generation EU has been a powerful tool for supporting the green and digital
transitions, two transformative forces that are increasingly shaping the economic
environment in which the ECB operates.
Without a successful energy transition, we will be exposed to the risk of more frequent
inflation shocks.
Likewise, the digitalisation of payments and finance raises fundamental questions about
the future of money. It creates opportunities for innovation, but also risks that we need
to be alert to.
Without prejudice to its primary mandate, the ECB can do - and is doing - its part in
ensuring that Europe can navigate these challenges.
The ECB has rightly taken steps to integrate climate change considerations into its
monetary policy framework, its financial stability monitoring, and banking supervision.
The ECB has also been at the forefront of the advanced economies when it comes to
central bank digital currency. I have personally contributed to this endeavour as a
member of the ECB's High-Level Task Force on a Digital Euro. Based on a legislative
framework that is for you as co-legislator to define, a digital euro, if issued, would
ensure our currency is fit for the digital age. Alongside banknotes and coins, it would
offer our fellow citizens a digital form of cash, i.e. a digital means of payment that is
universally accepted throughout the euro area, that offers the highest protection of their
privacy and that they can use free of charge, both online and offline.
We also need to continue to improve the efficiency and resilience of our payment
systems. This includes exploring the potential of new technologies for wholesale central
bank money settlement and improving cross-border payments, primarily by interlinking
fast payment systems, a theme I have been very vocal about in the past 3 years.
* * *
Finally, to remain true to its values and its mission of ensuring price stability in the euro
area, the ECB must also continuously adapt and transform as an institution, leveraging
diversity.
I have always believed in fostering an environment where challenging views are
welcomed, not feared. My work experience has taught me that this is crucial for
navigating uncertain times.
For example, the importance of supply-side shocks for monetary policy and the fact that
they frequently originate outside the economic domain, be it from geopolitics, the
environment or technology, should be taken into account when reviewing the
competency mix of central banks' staff.
Positive changes are promoted not just by diversifying competencies but also by
embracing a culture of pooling together different cultures, perspectives and opinions.
This approach is nurtured first and foremost by giving voice and real career
opportunities to all staff, irrespective of their gender, sexual orientation, religious
denomination, ethnic group, or economic and social background.
In my previous roles, I have adopted these principles, driving transformative changes
within the institution. At the Bank of Italy, we started tackling gender diversity years ago,
by adopting multi-year Strategic Plans and creating a Diversity Manager responsible for
promoting inclusion policies and women's professional growth.
The introduction of flexible work arrangements that allow employees to work remotely
and the availability of childcare structures contributed to ensuring a work-life balance
especially, but not only, for women. The introduction of mentorship programmes and a
balanced gender composition of panels reduced implicit discrimination.
The results of these efforts are tangible: at the Bank of Italy, for instance, the proportion
of women with a managerial role now reflects the proportion of women in the overall
staff. More than 31 percent of managers are now women. There is still plenty of room
for improvement, but this is a significant increase compared to just a few years earlier.
We have addressed the question of the well-being and inclusiveness of all our staff
head-on, so that every employee's voice is heard and differences are respected and
valued. I have taken personal responsibility to ensure our workplace is suitable for
colleagues with disabilities such as deafness.
The need to devote special attention to diverse perspectives goes beyond ensuring a
workplace free from any form of direct or indirect discrimination. It entails reflecting the
diversity of the societies we serve. A better understanding of the various needs and
experiences in our society helps us to design better and more inclusive policies. In our
work on a digital euro, we are seeking to develop a digital means of payment that
leaves no one behind.
* * *
Allow me to conclude by reiterating that thorough accountability - as illustrated by your
monetary dialogue with Madame Lagarde and the regular exchanges you had with Mr
Panetta on the digital euro - strengthens both the ECB's legitimacy and the efficacy of
its policies.
Should I be appointed as an Executive Board member, I would always be willing to
engage in dialogue with this Honourable Committee. This commitment to regular
reporting is consistent with the Bank of Italy's tradition: this year, for instance, I have
addressed the Italian Parliament on several occasions.
It would be a privilege for me to join the ECB's Executive Board, to contribute my
experience and commitment to the ECB's mission. It would be an honour to receive
your support and serve the citizens of Europe that you represent.
Thank you for your attention. I look forward to your questions.