vitor constancio : presentation of the european central bank annual report 2015 to the committee on economic and monetary affairs of the european parliament introductory remarks by mr vitor constancio, vice - president of the european central bank, to the committee on economic and monetary affairs of the european parliament, brussels, 7 april 2016. * * * mr chairman, honourable members of the committee on economic and monetary affairs, ladies and gentlemen, i am honoured to once again present the ecb ’ s 2015 annual report to your committee. please allow me to take this opportunity to express my heartfelt thoughts, and those of the ecb ’ s executive board and ecb staff, for the victims of the recent attacks in brussels, in the heart of europe. our thoughts are also with their families and friends. events like this remind us that europe must stand together. and our institutions have a role to play in this respect. the presentation of our annual report to those representing the european union ’ s citizens is a key element of our accountability, which is a necessary counterpart to our independence. that is also why we have decided to publish our feedback to the input you provided in the resolution on the 2014 annual report, together with this report. this is the first time we have done so. this decision reflects the importance of having a fruitful dialogue between our institutions, for the benefit of european citizens. today, i will first discuss the monetary policy measures that the ecb has taken to fulfil its mandate and what impact these have had on the real economy. i will then explain how steps to complete banking union and a capital markets union would not only support a strengthened emu ( along with fiscal and economic union, as well as democratic accountability ) but also contribute to enhancing financial stability. as european developments need to be put into a wider perspective, i will also say a few words on ongoing discussions in international fora regarding global developments and international financial regulation. monetary policy and its impact on the real economy 2015 was characterised by a modest economic recovery. however, inflation dynamics were weak and continued to deteriorate throughout the course of the year. thus, after adopting our credit easing measures in the middle of 2014, we took further decisive action in 2015 to pursue our price stability mandate. let me remind you that, in january last year, inflation in the euro area had moved into negative territory, the outlook on inflation had worsened significantly and market - based inflation expectations stood at historic lows. in this situation, we

judged that our monetary policy measures had to be stepped up in view of our price stability mandate. therefore, as of march 2015 we expanded our asset purchase programme ( limited until then to covered bonds ) to public sector securities. these asset purchases, together with the measures taken since june 2014, have proved very effective by activating a broad range of channels to support growth and inflation in the euro area. bis central bankers ’ speeches first, they have contributed to a tangible, broad - based easing of market funding conditions, transmitting the stimulus to the euro area economy at large. 1 second, through improving borrowing conditions for firms and households in the euro area, these measures have also promoted a recovery in lending that went back to positive growth in the second half of 2014, supporting expenditure on investment and consumption. 2 without these measures, the euro area would have been in outright deflation last year and prices would have fallen at an even faster rate this year. growth would have been significantly lower. 3 towards the end of 2015, significant risks to the inflation outlook started to materialise. headline inflation entered negative territory in september ( – 0. 1 % ), slightly recovered in december ( 0. 2 % ) and january 2016 ( 0. 3 % ) before turning negative again in february ( – 0. 2 % ). this was partly due to a substantial decline in crude oil prices by 48 % in euro terms from may 2015 to january 2016. the decline in oil prices reflected continued oversupply, weakening oil demand and the opec countries not cutting production targets. in particular, around half of the decline in headline inflation from january to february reflects that the already negative annual energy inflation turned even more negative. to counteract the risks to our price stability objective, we first recalibrated our policy stance last december and then unveiled another comprehensive set of measures at our last monetary policy meeting in march 2016. in discussing our recent monetary policy measures, it is essential to consider the global environment in which they were taken. this environment was characterised by subdued growth, historically weak trade developments and low inflationary pressures reflecting sharp falls in energy prices. the more recent developments have been affected in particular by the outlook for emerging markets contributing to global financial market volatility in the second half of 2015 and again in february this year. in this respect, these developments are analysed in the box in the annual report entitled “ financial stress in emerging market economies ” in order to understand their impact on the euro area economy. this is