mario draghi : opening statement at deutscher bundestag speech by mr mario draghi, president of the european central bank, at the discussion on ecb policies with members of parliament, berlin, 24 october 2012. * * * dear president lammert, honourable committee chairs, honourable members of the bundestag, i am deeply honoured to be here today. as president of the european central bank ( ecb ), it is a privilege for me to come to the heart of german democracy to present our policy responses to the challenges facing the euro area economy. i know that central bank actions are often a topic of debate among politicians, the media and the general public in germany. so i would like to thank president lammert and all committee chairs most warmly for this kind invitation – and the opportunity it gives me to participate in that discussion. it is rare for the ecb president to speak in a national parliament. the ecb is accountable to the european parliament, where we have scheduled hearings every three months and occasional hearings on topical matters. we take these duties of accountability to the citizens of europe and their elected representatives very seriously. but i am here today not only to explain the ecb ’ s policies. i am also here to listen. i am here to listen to your views on the ecb, on the euro area economy and on the longer - term vision for europe. to lay the ground for our discussion, i would like to explain our view of the current situation and the rationale for our recent monetary policy decisions. i will focus in particular on the outright monetary transactions ( omts ) that we formally announced in september. financial markets and the disruptions of monetary policy transmission let me begin with the challenges facing the euro area. we expect the economy to remain weak in the near term, also reflecting the adjustment that many countries are undergoing in order to lay the foundations for sustainable future prosperity. for next year, we expect a very gradual recovery. euro area unemployment remains deplorably high. in this environment, the ecb has responded by lowering its key interest rates. in normal times, such reductions would be passed on relatively evenly to firms and households across the euro area. but this is not what we have seen. in some countries, the reductions were fully passed on. in others, the rates charged on bank loans to the real economy declined only a little, if at all. and in a few countries, some lending rates have actually risen. why did this

considered very carefully the possible risks – and we designed our operations to minimise them. but i am aware that some observers in this country remain concerned about the potential impact of this policy. i would therefore like to use this opportunity to go through those concerns – one by one – and explain our views. first, omts will not lead to disguised financing of governments. we have specifically designed our interventions to avoid this. they will take place solely on secondary markets, where bonds that have already been issued are traded. if interventions take place, they will involve buying government debt from investors, not from governments. all this is fully consistent with the treaty ’ s prohibition on monetary financing. moreover, they will focus on shorter maturities and leave room for market discipline. second, omts will not compromise the independence of the ecb. the ecb will continue to take all decisions related to omts in full independence. it will decide whether to intervene based on its own assessment of monetary policy transmission and with the aim of safeguarding price stability. the fact that governments have to comply with conditionality will actually protect our independence. the ecb will not be forced to step in for a lack of policy implementation. third, omts will not create excessive risks for euro area taxpayers. such risks would only materialise if a country were to run unsound policies. this is explicitly prevented by the esm programme. and we have been very clear that each time a programme starts being reviewed, we will routinely suspend operations and resume them only if the review has been concluded positively. this will ensure that the ecb intervenes only in countries where the economy and public finances are on a sustainable path. fourth, omts will not lead to inflation. we have designed our operations so that their effect on monetary conditions will be neutral. for every euro we inject, we will withdraw a euro. in our assessment, the greater risk to price stability is currently falling prices in some euro area countries. in this sense, omts are not in contradiction to our mandate : in fact, they are essential for ensuring we can continue to achieve it. moreover, we see no signs that our announcement has affected inflation expectations. they continue to be firmly anchored. this is testament to our track record on price stability over the last decade and our credible commitment to maintaining price stability. the citizens of the euro area can be confident that we will remain permanently alert to risks to price stability. we have all the necessary tools at our disposal to