sector. greater transparency would be possible if more financial products were to be traded on central trading platforms, such as stock exchanges, or settled in clearing houses. given their growing importance, it is particularly crucial for clearing houses to have appropriate risk management schemes in place. furthermore, the activities of non - bis central bankers ’ speeches banks must become more transparent. this also includes improving the quality and plausibility of risk assessments by rating agencies. and third, the banks themselves must be encouraged to undertake reforms and to accept responsibility, in particular, for reviewing their individual corporate governance models as regards risk assessment, incentive structures and compensation. safeguarding the future stability of the euro ladies and gentlemen, allow me now to turn to the second aspect that is of key importance for the stability of the euro, stability - oriented economic and fiscal policies. in order to counter the potential systemic implications of the government debt situation in a number of euro area countries in a decisive and timely manner, the heads of state or government in the eu have agreed on the establishment of a permanent european stability mechanism ( esm ) to safeguard fiscal stability in the whole euro. this mechanism will supersede the european financial stability facility ( efsf ), which will remain temporarily in place until june 2013. the esm will be activated when the financial stability of the euro area as a whole is in jeopardy. member countries in financial distress will receive financial assistance in the form of credit, subject to their fulfilment of strict conditions. i regard this decision as an important contribution to keeping the financial system stable, and thus to safeguarding the stability of the euro. nevertheless, the existence of this mechanism should not be seen as an inducement to postpone a correction of the stance of economic policy for too long and to trust in the help of other euro area countries. in order to prevent this from happening, it is essential that the permanent stabilisation mechanism is underpinned by a fundamental strengthening of the regulatory framework for compliance with fiscal policy objectives and the need for competitiveness. it is thus crucial that the framework for monitoring both the public budgets and economic activity in the euro area is reformed in an effective manner. the van rompuy task force and the european commission have put forward proposals on how improvements can be made in these two areas. the proposals recommend a strengthening of the stability and growth pact. in particular, it is suggested that possible sanctions for member countries with excessive deficits should be imposed sooner than currently foreseen.

christine lagarde : hearing at the committee on economic and monetary affairs of the european parliament introductory statement ( by videoconference ) by ms christine lagarde, president of the european central bank, at the econ committee of the european parliament, frankfurt am main, 28 september 2020. * * * madam chair, honourable members of the economic and monetary affairs committee, ladies and gentlemen, thank you very much for giving me the opportunity to speak to you today and to have a frank and timely discussion about the ecb ’ s monetary policy, as befits the topics you have chosen for this hearing. after a few words on the euro area economic outlook, i will focus my remarks today on the ecb ’ s monetary policy and in particular on the role of asset purchases, before sharing some reflections on the ecb ’ s accountability arrangements. the euro area economic outlook the impact of the coronavirus ( covid - 19 ) pandemic is still being felt across the euro area. businesses are facing difficulties, people are losing their jobs, and prospects about the future remain uncertain. while euro area economic activity rebounded in the third quarter, the recovery remains incomplete, uncertain and uneven. consumer spending has resumed significantly, but consumers remain cautious owing to anxiety about their job and income prospects. 1 similarly, business investment has been picking up, but weaker demand and elevated uncertainty continue to weigh on firms ’ investment plans. in this context, job retention schemes and national guarantees on bank loans remain critically important factors in reducing uncertainty and softening the impact of the pandemic. the latest ecb staff projections foresee annual real gdp growth at – 8. 0 % in 2020, 5. 0 % in 2021 and 3. 2 % in 2022. euro area real gdp is only expected to recover to pre - crisis levels in late 2022. 2 the strength of the recovery remains, however, highly dependent on the evolution of the covid - 19 pandemic and the success of containment policies. the public health crisis will continue to weigh on economic activity and poses downside risks to the economic outlook. the sharp drop in economic activity earlier this year has weakened price pressures. annual headline inflation in the euro area stood at – 0. 2 % in august and is expected to remain negative over the coming months, reflecting the effects of earlier declines in energy prices, a stronger euro, and a temporary reduction in the value - added tax rate in germany. ecb staff project annual inflation to gradually increase