willem f duisenberg : economic and monetary developments and other activities of the eurosystem introductory statement delivered by dr willem f duisenberg, president of the european central bank, at a hearing before the committee on economic and monetary affairs of the european parliament, brussels, on 12 september 2000. * * * today we shall continue our regular exchange of views on monetary policy and other activities of the eurosystem. i am glad to see that since our last meeting on 20 june the prospects for economic growth in the euro area have remained very favourable. at the same time, upward pressures on prices had emerged which needed to be addressed by the ecb in a timely manner and led to the decision on 31 august to increase the ecb interest rates by 25 basis points. i shall start my remarks by commenting in detail on this step and on our assessment of the monetary and economic developments in the euro area which underpinned our decision. subsequently i shall address some other issues of topical interest, namely the preparation of the euro cash changeover, the current efforts to improve the availability of statistical data in the eu and the role of the ecb in the oversight of payment systems. i shall then be happy to answer your questions. 1. economic and monetary developments turning to the ecb ’ s decision to increase the ecb interest rates by 25 basis points on 31 august, i should like to start my explanations by pointing out that, prior to the interest rate hike, upside risks to price stability were evident from both pillars of the ecb ’ s monetary policy strategy. starting with the first pillar, some moderation in the evolution of monetary aggregates has been gradually detectable over recent months. this could be related to the increase in short - term interest rates in the euro area over the course of this year, which has had a dampening effect on the demand for the most liquid components of m3, namely those included in m1 ( currency in circulation and overnight deposits, both of which bear little or no remuneration ). however, in spite of the deceleration observed recently, m3 growth has remained above the reference value. this, in part, reflects the relatively strong increase in nominal gdp in the euro area. furthermore, in order to assess the overall liquidity situation in the euro area, we have to acknowledge that, owing to the protracted deviation of m3 growth from the reference value which has occurred since the start of stage three of emu, the actual level of the stock of m3

. that ’ s true in every country. some households, typically older and richer households, are savers. other households, because they ’ re at a different point in their life, or their individual circumstances are different, are debtors. roughly speaking, about 30 % of european households are in debt, so their attitude to low interest rates would be quite different from someone who ’ s fortunate enough to have a significant amount of savings. do you think that this accommodative monetary policy fuelled right - wing populism in northern european countries? as you know, the former german finance minister, wolfgang schauble, accused the ecb of having strengthened the afd. i think this discussion has to evolve over time. the ecb or any other central bank has to recognise what the market forces are delivering. the big, difficult discussion is : how do governments respond to that in terms of their reform policies, in terms of their fiscal policies? essentially, if the world economy is growing slowly, if there is not sufficient support from fiscal policy, if the reform policies are not sufficiently ambitious, then the policy choices for the ecb or any other central bank are going to be quite limited. on the other hand, right - wing populists in southern european countries, the italian lega for example, often blame the euro for the weak growth of the last decades. how dangerous are those discussions for the future of the common currency? it ’ s an important debate and it ’ s an evolving one. recent eurobarometer surveys show a significant improvement in the attitude of individuals towards the euro. some of the worst of this is fading. one has to remember that the euro remains a very young currency ; it ’ s only 20 years old this year. we should all recognise how important it has been to reform the institutional architecture of the euro area, particularly in the last years. it ’ s a massive regret that some of the reforms that are now in place had not been implemented in advance of the crisis. the crisis could have been managed better if we had already put the european stability mechanism ( esm ), the banking union and so on in place earlier. thanks to these reforms, we now have a lot more stability, which has helped the euro area to perform better. but other important factors have had a role in influencing the debate around the euro. which ones? in the last 25 years a number of developments overlapped with the introduction of the euro. we ’