EN Official Journal of the European Union CE 4/44

Thursday 25 March 2010

ECB annual report for 2008

P7_TA(2010)0090

European Parliament resolution of 25 March 2010 on the ECB Annual Report 2008 (2009/2090(INI))

2011/C 4 E/07

The European Parliament,

having regard to the Annual Report 2008 of the European Central Bank (ECB),

having regard to Article 113 of the EC Treaty,

having regard to Article 15 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank annexed to the Treaty,

having regard to the Treaty of Lisbon, amending the Treaty on European Union and the Treaty establishing the European Community,

having regard to its resolution of 2 April 1998 on democratic accountability in the third phase of EMU (1),

having regard to the Commission communication of 7 October 2009, ‘Annual Statement on the Euro Area 2009’ (COM(2009)0527), and the Commission staff working document accompanying that communication (SEC(2009)1313/2),

having regard to the Commission's September 2009 interim economic forecast,

having regard to the Commission proposal of 23 September 2009 for a regulation of the European Parliament and of the Council on Community macro prudential oversight of the financial system and establishing a European Systemic Risk Board (COM(2009)0499),

having regard to the Commission proposal of 23 September 2009 for a Council decision entrusting the European Central Bank with specific tasks concerning the functioning of the European Systemic Risk Board (COM(2009)0500),

having regard to Rule 48 of its Rules of Procedure,

having regard to the report of the Committee on Economic and Monetary Affairs (A7-0010/2010),

A. whereas the financial and economic crisis has seen the worst global economic decline since the 1930s, whose repercussions will continue to have a major impact on countries’ economic and social fabric for years to come,

B. whereas in 2008 the real GDP of the euro area grew by only 0,7 % owing to the financial and economic crisis, and GDP is expected to have decreased considerably in 2009,

C. whereas in 2008 the average annual inflation rate was 3,3 %, peaking at 4,0 % in summer 2008, the highest rate recorded since the introduction of the euro, and whereas inflation subsequently fell to negative rates in summer 2009,

D. whereas the average general government deficit in the euro area increased from 0,6 % of GDP in 2007 to 1,9 % in 2008, and, by mid-October 2009, twenty Member States were subject to an excessive deficit procedure,

E. whereas the average government debt ratio in the euro area increased from 66,2 % of GDP at the end of 2007 to 69,6 % at the end of 2008, and whereas that ratio is expected to increase further in the coming years,

F. whereas in 2008 the exchange rate of the euro against the US dollar fluctuated sharply, peaking at USD 1.60 in July and reaching USD 1.25 in October, but subsequently rose to USD 1.50 in October 2009,

G. whereas the ECB kept interest rates unchanged in the first half of 2008, before raising them in July 2008 by 25 basis points to 4,25 %, and lowering them incrementally during the last quarter of 2008 to 2,5 %, and then 1 % in 2009,

H. whereas, in response to the financial crisis, the ECB significantly enlarged liquidity provisions to banks in the euro area and took a number of non-standard measures to improve the impaired functioning of money markets; whereas similar liquidity-enhancing facilities were provided only to a certain number of Member States not in the euro area,

Introduction

1. Welcomes Slovakia to the euro area and takes note of its successful entry;

2. Points out that membership of the European Union is a precondition for euro membership;

3. Welcomes the fact that the Treaty of Lisbon gives the ECB the status of an EU institution; believes that this increases the responsibility of Parliament, as the primary institution through which the ECB is accountable to European citizens;

The ECB's response to the financial crisis

4. Notes that 2008 was the year in which, in response to the disastrous economic and financial crisis and its far-reaching repercussions, the ECB had to take some of the toughest decisions it has faced since its inception;

5. Notes that the ECB's economic projections, like those of the IMF and other international institutions, failed to forecast the severity of the downturn in 2008;

6. Notes that the ECB continued to respond to the financial crisis by assisting Member States by maintaining and extending its liquidity provisions to credit institutions; recommends that the ECB extend such liquidity outside the euro area to assist those Member States which have been worst hit by the financial crisis;

7. Expresses disappointment that some commercial banks did not pass on interest rate cuts to their customers, and that this approach was particularly prevalent when the ECB’s interest rates reached their lowest levels;

8. Welcomes the fact that the ECB has broadened its normal approach to monetary policy and taken a number of special measures, such as gearing the provision of liquidity to actual demand and making liquidity available for longer periods;

9. Notes that the ECB's interest rate cuts were less radical than those made by other central banks, including the US Federal Reserve and the Bank of England in the UK, and compared with what many economic observers expected at the time;

10. Expresses disappointment that the extra liquidity injected by the ECB did not sufficiently ease the credit crunch faced by industry, particularly small and medium-sized businesses, and was instead used by some banks to improve their margins and cover losses;

11. Regrets that the Member States have not followed the ECB's advice to make bank support programmes subject to conditions jointly established at European level concerning dividend and bonus payments, support for economic activity, especially SMEs, and transactions effected in tax havens;

12. Agrees with the ECB that the increasing complexity of financial instruments, alongside a certain lack of transparency of financial institutions, supervisory failure by regulators and gaps in financial market regulation, has contributed to heightened systemic risk; adds that this has contributed to an increasing lack of public confidence in financial institutions;

13. Requests the views of the ECB on the setting-up of a clearing house for instruments such as credit default swaps (CDS) within the euro area;

14. Draws the attention of the ECB to the risk that fresh speculative bubbles may be triggered, particularly on the commodities market; urges it to warn governments without delay;

15. Concurs with the ECB about the need to learn lessons from the crisis, in particular that management of risk and liquidity in the financial system, and the transparency of financial markets and institutions must be improved if a similar crisis is not to be repeated; recalls that global imbalances related to exchange rate fluctuations between the euro and third-country currencies, such as the US dollar and the renminbi-yuan, must also be addressed to avoid financial crises in the future;

16. Welcomes the steps taken by the ECB to propose a detailed ‘exit strategy’ from its monetary easing, to be implemented as and when necessary; insists that timing and policy coordination between Member States are essential in this regard; in that connection, welcomes the fact that most of these measures will automatically cease to apply if the economic situation steadily improves;

17. Recommends that any moves to increase interest rates should be made with the utmost caution so as not to endanger future economic growth;

18. Considers that Member States should maintain their fiscal stimulus measures to protect jobs, encourage investment and stimulate growth and that they should revoke those measures once there is a sustainable return to growth, at which time they should address excessive public deficits;

Economic and monetary stability

19. Shares the ECB's concerns about divergences between economies in the euro area and the way in which the crisis has affected different countries, particularly those with pre-existing structural inefficiencies, high unit labour costs, current account deficits and debt;

20. Calls on all Member States in the euro area to take note that, for genuine economic and monetary union to exist, participation in the euro area cannot be regarded as an end in itself, and stresses the need for structural reforms; adds that failure to undertake such reforms would jeopardise the credibility and sustainability of the Stability and Growth Pact;

Governance and decision making

21. Points out that, during a period marked by a high degree of exchange rate volatility, the euro has increased its strength, particularly against the US dollar and the renminbi-yuan, and expresses concern that this could have a detrimental effect on the competitiveness of the euro area;

22. Recommends that the ECB enhance the transparency of its work in order to increase its legitimacy and predictability, in particular by publishing the minutes of the meetings of the Governing Council, in accordance with the practices of the US Federal Reserve System, the Bank of England and the Bank of Japan; takes the view that such transparency is also needed as regards the internal models used to value illiquid collateral and as regards the valuations assigned to specific securities offered as collateral;

23. Reaffirms its support for the quarterly monetary dialogue between Parliament and the ECB; adds that the dialogue is an important mechanism for scrutinising the workings of the ECB and contributing to its public accountability and transparency;

24. Highlights the independence of the ECB, to which the procedure for appointing its Executive Board contributes; considers that this could be enhanced by use of the new legal status conferred on the ECB under the Lisbon Treaty and the existing ECB Statute to make candidates proposed by the Council subject to a vote by the European Parliament;

25. Undertakes to set up a selection board made up of outside experts which would make it possible in 2010 to select a number of candidates for the post of Executive Board member; points out that those selected would then be summoned to a hearing by the European Parliament's Committee on Economic and Monetary Affairs, which would formalise the European Parliament's consultative role in the evaluation of the candidates; this would lead to the adoption by the European Parliament in plenary sitting of a resolution to be forwarded to the Council before it issues its recommendation to the Member State governments;

26. Considers that the crisis has demonstrated that markets are prone to systemic risks; welcomes the proposal to establish a European Systemic Risk Board (ESRB), which will provide early warnings about future risks and imbalances in financial markets; notes that the ESRB must react promptly and effectively to an incipient systemic risk; notes that a qualitative definition of ‘systemic risk’ must exist to allow the effective functioning of the ESRB; therefore calls on the ECB to establish clear models and definitions and, more generally, to give full support to the effective functioning of the ESRB; adds that any new tasks conferred upon the ECB with regard to the ESRB should not compromise the independence of the ECB in any way;

27. Notes the role played by the Eurogroup in developing closer coordination of economic policies within the euro area; consequently, welcomes the conferral by the Lisbon Treaty of legal personality on the Eurogroup; further recommends that the ECB continue to participate fully in the informal meetings between Eurogroup members;

The external dimension of the euro

28. Welcomes the fact that the euro has contributed to an increase in cross-border provision of financial services in the euro area, and therefore contributed to a highly integrated money market;

29. Notes that the status of the euro as an international currency continues to rise, with 26,5 % of global currency reserves held in euro at the end of 2008;

30. Believes that the growing international status of the euro will offer advantages and responsibilities on the world stage; believes that this will continue to encourage Member States outside the euro area and third countries to seek membership of the euro area;

31. Feels that Parliament should work with the ECB and with the other EU institutions in order to continue to enhance the role of the euro area on the world monetary and financial stage;

32. Considers that, in expressing its vision for the future of the international monetary system, the European Union should draw inspiration from the process which made possible the adoption of the euro;

33. Considers that the ECB, the national central banks and the Governing Council must recognise and fulfil their social responsibility towards their staff and the general public and take greater account of the memorandum on social aspects drawn up by the Standing Committee of European Central Bank Unions;

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34. Instructs its President to forward this resolution to the Council, the Commission, the Eurogroup and the European Central Bank.

(1) OJ C 138, 4.5.1998, p. 177.