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, 9 october 2012. * * * madam chair, honourable members of the committee on economic and monetary affairs, it is a pleasure to be back here in parliament and in front of your committee for our regular exchange of views. • as you know, the european central bank ( ecb ) has recently taken important decisions to address severe distortions in government bond markets. the ecb stands ready to undertake, under appropriate conditions, what we have called outright monetary transactions ( omts ). these provide a fully effective backstop to avoid destructive scenarios that might threaten price stability in the euro area. • our omt announcements have helped to support financial market confidence. the ecb ’ s actions can help to build a bridge. but the bridge must have a clear destination. • reaching that destination involves three processes : first, full implementation of fiscal consolidation and structural reforms to enhance competitiveness ; second, full implementation of financial sector reform ; and third, completion of a genuine economic and monetary union. the establishment of a single supervisory mechanism ( ssm ) is a key step in these processes. today, i will review economic and monetary developments since july. i will then explain in some detail the rationale and modalities of the omts. i will end by sharing my views on one of the four building blocks of a genuine economic and monetary union, namely the financial market union. 1. economic and monetary developments let me start with the economy. since our last meeting, the ecb has left its key interest rates unchanged : the main refinancing rate stands at 0. 75 % ; and the deposit rate at 0 % ; the marginal lending facility at 1. 50 % ;. economic activity contracted in the second quarter of 2012. looking ahead, we expect weak economic activity in the near term and only a very gradual recovery after that. the risks to this outlook are on the downside, mainly related to the tensions in several euro area financial markets. average inflation in the euro area stood at 2. 7 % in september, reflecting indirect taxes and high energy prices. it should decline to below 2 % in the course of 2013. underlying price pressures should remain moderate given modest economic growth and well - anchored long - term inflation expectations. risks to the outlook

having to follow the same path you have over the last 30 years? mr. trichet : first let me reassure you : i will execute all my inspiring and heavy responsibilities until the 31 october 2011! my colleagues and i, we have to do the job. to deliver price stability in the medium and long - term and, by doing that, contributing to the financial stability in the long run! i insist on the long run! a central bank is an institution that has to be credible in the long run. some treasuries are issuing treasuries for 50 years. the corresponding very long - term interest rates depend on the independence and the credibility of the central bank. question : a local question in germany : the landesbanken and the crisis they ’ ve gone through ; do you feel that ’ s been taken care of or do you think public sector banks in germany and elsewhere need consolidation as some people are calling for? what needs to happen? mr. trichet : we have always called all over europe, in all countries, for getting rid of anomalies we were seeing in the market in this domain. it is not the case of germany in particular, but we always said that there was an immense stake in having institutions that would not be abnormally behaving for reasons that were due their own structure. i said that publicly before the crisis so i have no hesitation in confirming it. question : what is your reaction to president ’ s obama bank reform plan, which would set new limits on the size of trading activities of the largest banks? do you think it would help to solve the too - big - too - fail problem and curb global systemic risk and whether any aspects of the plan would be suitable for consideration in europe such as limits on proprietary trading operations of banks? mr. trichet : the reform proposals are relevant and interesting. we are examining them with great care. they go in the same direction of our own position, namely ensuring that the banking sector focuses on financing the real economy, which is its key role. there is naturally an international coordination mechanism at the level of the g20 and the financial stability board, where proposals should be coordinated globally to ensure that there are no loopholes in our integrated global financial system. i expect therefore that the international community will work actively on such ideas to improve our collective effort against systemic risks. question : ben bernanke has faced a difficult confirmation process for another term as fed chairman that still hasn ’ t been