hold at the very low level to which they had been brought in several stages since the autumn of the preceding year. some phasing - out of non - standard measures was announced. however, in may 2010, sovereign debt markets froze in various euro area member states. financial fragmentation took a new and unfamiliar form, with financial conditions and the transmission of our monetary policy varying to a great extent across member states. we responded by introducing the securities markets programme, focused on purchases of government bonds. initially, while the economic impact of the sovereign debt crisis was limited and largely confined to vulnerable economies, the rapid global recovery put upside pressure on energy prices. this drove up inflation also in the euro area. we decided to raise interest rates in bis central bankers ’ speeches early 2011 given upside risks to the medium term inflation outlook stemming from energy prices and from ample monetary liquidity. however, the sovereign debt crisis deepened and the euro area entered a second recession. the inflationary pressures that had emerged before receded. therefore, we lowered interest rates in a series of steps. stress in sovereign debt markets quickly undermined the wholesale funding conditions of banks based in those member states. to forestall a credit crunch, we introduced refinancing operations with maturities of up to three years, in a context of full liquidity allotment at a fixed rate. as the mutual exposures of banks and their sovereigns fed an adverse, self - reinforcing confidence crisis, investors started to fear that public and private liabilities issued in certain member states would not be redeemed in our common currency. a significant redenomination risk arose. as you know, the integrity of the euro area is an absolute precondition for us to be able to deliver on the mandate prescribed by the treaty and in particular to ensure a smooth transmission of our monetary policy. in order to preserve this integrity, we thus announced our readiness to conduct outright monetary transactions with the specific purpose of removing compensation for that risk from the financial pricing of securities. this announcement reversed the destabilising capital flows that redenomination fears had encouraged in spring 2012. while financial markets had been on a steady course toward normalisation for some months, in late spring and summer of 2013 the euro area money market – not unlike elsewhere in the global financial system – became subject to external shocks. we noted a sustained increase in expected interest rates. this was unwarranted in view of our underlying macroeconomic conditions, and was not in

mario draghi : hearing at the committee on economic and monetary affairs of the european parliament introductory statement by mr mario draghi, president of the european central bank, before the hearing at the committee on economic and monetary affairs of the european parliament, brussels, 3 march 2014. * * * madame chair, honourable members, this is my last hearing in econ before the end of this legislature. i would like to first of all thank you, sharon, for the way you have guided this committee throughout a challenging period. let me also thank all of you for the frank and fruitful exchanges we have had in the last twoand - a - half years. it has been an invaluable experience for me. in these difficult crisis times, discharging accountability in front of an assembly with a true european perspective has been helpful for the public acceptance of our actions. moreover, the hearings have always been a welcome occasion to discuss the state of economic and monetary union between two genuinely european institutions and to debate about what is the right way forward. i am very much looking forward to continuing this approach with the new econ committee from july onwards. i would like to take the opportunity of this last hearing to take stock of the monetary policy that the ecb has conducted over the last five years and to review what has been achieved in the euro area over the course of these years. let me then also offer our assessment of the challenges that lie ahead and that will await the new parliament and the new commission. before i start to go into detail in these three areas, let me however remind you that the next meeting of the ecb governing council takes place on thursday. in view of the so - called purdah period, you will understand that i will not be able to give detailed answers on our monetary policy stance today. five years of monetary policy – the ecb has delivered in the last five years, the ecb has continued to take the necessary measures with a view to maintaining price stability in the euro area. let me turn back to the first hearing of this parliament ’ s term which took place with my predecessor in september 2009. at the time, the economy was just bottoming out in the aftermath of the great contraction which had ensued after lehman ’ s failure. we were witnessing negative inflation rates. in this environment, the outlook was seen to be broadly in line with price stability. inflation was projected to increase toward levels close to 2 %. the key ecb interest rates were kept on