The Eurozone still faces "the most difficult phase of the process", but growth fuelled by foreign demand and European Central Bank action will be forthcoming, ECB President Mario Draghi assured Economic and Monetary Affairs Committee MEPs on Wednesday. MEPs wanted to know where funds pumped into the system by the ECB were going, and urged it to more flexible so as to promote growth.
Speaking at the regular monetary dialogue meeting organised by the committee, Mr Draghi also underlined the need to step up reflection on the EU's long-term goals and vision, in addition to fighting fires on a daily basis.
Where the money goes
MEPs pressed Mr Draghi for details of the ECB's Long Term Refinancing Operations (LTRO) programme, which has channelled € 1 trillion into banks, prompting many questions as to how these funds are being used.
"We need more transparency on how the LTRO funding is being used. Why does the ECB not place conditions on how this funding is used, when it did place such conditions on countries accessing its Secondary Market Programme (SMP)?" asked Pascal Canfin (Greens/EFA, FR).
Similarly, Jürgen Klute (GUE/NGL, DE), asked how the ECB could explain to EU citizens why its support was being used to give more lenient treatment to banks.
Dirk Jan Eppink (ECR, BE), asked whether the ECB was planning a third LTRO, insisting that it was pumping in in too much money, to too little effect. Geoffrey Bloom (EFD, UK), said that the ECB would be obliged to enter into another round of LTROs and that it was breaking its own charter.
Mr Draghi countered that the LTRO had brought results and that the funding was indeed flowing through the system, as could be seen by the reopening of various money transmission channels and markets. He also insisted that banks should not be shackled with conditions, since they were an essential channel for Europe's credit process. However, he also warned banks to rein in their employees' bonuses and consolidate their capital bases.
Sylvie Goulard (ALDE, FR), observed that the Eurozone was being fragmented, and solidarity among its members eroded, due to bond markets becoming more national. Mr Draghi admitted that the problem of banks only buying their own country's debt was real one, but insisted that the LTRO programme had nonetheless produced various successes.
Growth, not just austerity
MEPs once again stressed the need for an agenda for growth, and several argued that austerity had failed. "Is growth not too slow due to a tight monetary policy? Is it not time for the ECB to change course?" asked Arlene McCarthy (S&D, UK).
Pablo Zalba Bidegain (EPP, ES), asked whether the ECB would consider intervening on the secondary bond markets in order to buttress countries' fiscal consolidation actions.
Mr Draghi refused to accept that the ECB's monetary policy had been too tight and insisted that intervening on secondary bond markets would go against the Treaty and reduce the ECB's credibility.
"Credibility of the ECB is one of the few things left", he said. Growth, he added, would depend on countries undertaking substantial structural reforms to make their economies more competitive.
In the chair: Sharon Bowles (ALDE, UK)