christine lagarde : hearing of the committee on economic and monetary affairs of the european parliament speech by ms christine lagarde, president of the european central bank, at the hearing of the committee on economic and monetary affairs of the european parliament, brussels, 5 june 2023. * * * it is a pleasure to be with you again today for our second regular hearing this year and immediately after celebrating the ecb's 25th anniversary. i am delighted that several members of this parliament were able to join the celebrations in frankfurt a few days ago, reflecting the close and fruitful dialogue our institutions have always maintained. since the ecb's creation in 1998, members of its executive board have attended over 100 hearings before this parliament. this engagement has been central to the ecb's accountability and has contributed to the euro becoming a currency that our fellow citizens trust. let us now turn our attention to the current matters at hand. let me start by providing a brief overview of the economic outlook before going on to discuss our latest monetary policy decisions. economic outlook growth in the euro area nearly stalled in early 2023. activity is being supported by lower energy prices, easing supply bottlenecks and fiscal policy support to firms and households. as the energy crisis fades, governments should roll back the related support measures promptly and in a concerted manner to avoid driving up medium - term inflationary pressures, which would call for a stronger monetary policy response. the ecb welcomes the european commission's recommendation to member states to wind down in 2023 the fiscal measures taken in response to the energy price shock. domestic demand, especially consumption, remains weak. business and consumer confidence indicators point to weak activity in the second quarter and remain lower than before russia's unjustified war against ukraine and its people. we see a divergence across sectors of the economy. the manufacturing sector is still working through a backlog of orders, but its prospects are worsening. meanwhile, the services sector remains resilient, owing in particular to the reopening of the economy after the pandemic. household incomes are benefiting from fiscal support measures and the strength of the labour market, with the unemployment rate having fallen to a new historical low. looking at inflation, according to eurostat's flash estimate, headline inflation has declined from its october peak and stood at 6. 1 % in may. while base effects have led 1 / 4 bis - central bankers'speeches to some variation in energy inflation in

productivity and unit labour costs which in ireland can flatter. in fact, after the very steep fall during the crash of 2008 – 9, the economic activity has been broadly unchanged since early 2009. growth in export - oriented sectors has been offset by shrinkage in domestic demand. only in 2013 does the central bank expect the domestic demand to stop falling. aggregate employment has been falling for five years now. bank lending, despite all of the policy efforts, remains timid. despite the fact that exports have held up, adverse external factors have been holding the irish economy – one of the most open in the world – back. for example, the fact that economic activity in ireland in 2012 is almost 2 per cent below what was expected at the outset of the programme gels with an average underperformance of the rest of eu economy of about the same percentage. the continued high rate of personal savings and the fiscal adjustment have also been adverse factors – though as i mentioned the latter factor has been minimised thanks to the availability of troika funding. any overall assessment that must therefore by highly qualified. though there have been several setbacks in the euro area and some missed opportunities, step by step actions have been taken to build the conditions needed to ensure a stronger recovery of the irish economy. according to the forecasters, a return to output and employment growth is in sight, and, while there will no doubt be some more setbacks on the way, it is not unreasonable to hope that the balance of negative and positive surprises will be better than it was. however, the high and still - growing debt is reflected in the yield spreads : financing conditions do need to be improved, as has been acknowledged at the latest summit. while some may have hoped for more from europe in the past couple of years, any fairminded assessment must acknowledge that the official financing received has been a lifeline. if financial markets and growth conditions in europe can indeed be stabilised, if financing conditions for ireland can be improved, and if restraint remains the policy watchword at home, the corner can soon be turned. bis central bankers ’ speeches