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Procedure : 2006/2206(INI)
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Document selected : A6-0349/2006

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PV 26/10/2006 - 3
CRE 26/10/2006 - 3

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PV 26/10/2006 - 6.15
CRE 26/10/2006 - 6.15
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Thursday, 26 October 2006 - Strasbourg
European Central Bank Annual Report 2005

European Parliament resolution on the 2005 Annual Report of the European Central Bank (2006/2206(INI))

The European Parliament,

–   having regard to the 2005 Annual Report of the European Central Bank,

–   having regard to Article 113 of the EC Treaty,

–   having regard to Article 15 of the Statute of the European System of Central Banks and of the European Central Bank,

–   having regard to its resolution of 2 April 1998 on democratic accountability in the third stage of Economic and Monetary Union(1),

–   having regard to its vote of 5 July 2005 rejecting the motion for a resolution on the 2004 Annual Report of the European Central Bank(2),

–   having regard to its resolution of 4 April 2006 on the situation of the European economy: preparatory report on the broad economic policy guidelines for 2006(3),

–   having regard to its resolution of 17 May 2006 on public finances in the economic and monetary union (EMU)(4),

–   having regard to the Commission communication of 12 July 2006 on the annual statement on the euro area (COM(2006)0392),

–   having regard to its position of 13 March 2003 on the recommendation of the European Central Bank for a proposal for a Council decision on an amendment to Article 10.2 of the Statute of the European System of Central Banks and of the European Central Bank(5),

–   having regard to its resolution of 14 March 2006 on the strategic review of the International Monetary Fund(6) (IMF),

–   having regard to the European Central Bank's reports on financial stability and on financial integration in the euro zone,

–   having regard to the letter of 5 May 2006 from the chairwoman of its Committee on Economic and Monetary Affairs to the President-in-Office of the Ecofin Council concerning the procedure for appointing the European Central Bank's Executive Board,

–   having regard to the Eurosystem economic forecasts issued in June 2006,

–   having regard to Rules 106 and 112(1) of its Rules of Procedure,

–   having regard to the report of the Committee on Economic and Monetary Affairs (A6-0349/2006),

A.   acknowledging the full independence of the European Central Bank (ECB) and the European System of Central Banks (ESCB),

B.   whereas the main objective of the ECB and of the ESCB is to maintain price stability while supporting the general economic policies of the Community, as defined in Article 2 of the EC Treaty; whereas Article 105 of the EC Treaty states that monetary policy should contribute 'without prejudice to the objective of price stability' to the achievement of the Community objectives,

C.   whereas the gross domestic product (GDP) of the euro zone increased by 1,4% in 2005, below the 2004 figure of 1,8%, whilst the inflation rate in the euro zone was 2,2%, close to the 2004 figure of 2,1%,

D.   whereas Member States were unable to benefit equally from strong worldwide growth in 2005; whereas, among other reasons, this can be attributed to rising oil prices and unfavourable movements in exchange rates, which left the euro at more than USD 1,17 in December 2005 (compared with its December 2004 peak of USD 1,36), whereas growth forecasts point to a degree of economic recovery, with projections by the Commission indicating growth of 2,5% for 2006 and between 1,3% and 2,3% for 2007, together with inflation at slightly more than 2%,

E.   whereas the Governing Council of the ECB, after keeping key interest rates constant for two-and-a-half years at 2%, increased them by 25 basis points successively on 1 December 2005, 2 March, 8 June, 3 August and 5 October 2006, and whereas interest rates remain at low levels in both nominal and real terms,

F.   whereas there are many existing nominees for appointments to senior positions at the IMF, the WTO and the OECD, quite apart from those at the World Bank, with no adverse implications for the candidates' career prospects,

G.   whereas in recent months, several third-country central banks have announced their intention to increase the proportion of their foreign exchange reserves held in euros,

H.   whereas worldwide imbalances increased in 2005, mainly as a result of the increase in the US balance of payments deficit, which reached 6,4% of GDP,

I.   whereas the ECB's annual accounts for 2005 show a net profit of zero, which is accounted for by full provisioning of the results achieved,

J.   whereas the ECB plays a key role in the proper functioning of the European exchange rate mechanism (ERM II) and in the fight against inflation,

K.   whereas Parliament is keen to help strengthen the role and international authority of the ECB on the international scene,

Economic and monetary developments

1.  Emphasises that against the background of economic recovery , with an annual growth in real GDP of 2,5% and a contribution of domestic demand of 2,1% in the second quarter of 2006, recent economic growth is supported by national reforms and investment programmes in the labour, financial and product markets; considers that any raising of interest rates should be undertaken with caution in order not to endanger economic growth; draws attention to the risks linked to the increase in the euro exchange rate and the oil price, factors which contributed to the weak level of growth in 2005; praises the ECB's policy of concentrating on its most important objective, preserving price stability; considers, accordingly, that the ECB responded correctly to economic and financial developments in 2005 by raising its interest rate after peaks in inflation to 2.6% in September 2005;

2.  Stresses that the ECB must, however, be aware of the risks, from the point of view of growth, of continuous interest rate rises in the context of the recent economic recovery; points out that, in order to support the economic recovery, Member States must implement the necessary structural reforms and investment activities; considers that interest rate policy is influenced by the progress made with improving public-sector finances in the Member States;

3.  Notes that over the period 2003 to 2005, interest rates of 2% were historically low in order to support the economic recovery; calls on the ECB to continue to comply with its duty by its policy of ensuring a solid anchoring of medium to long-term inflation expectations at levels consistent with price stability; stresses that the ECB should continue to keep a close eye on oil prices, property prices and continuing surplus liquidity;

4.  Notes that it is essential for the consolidation embarked on by the Member States to continue, so as to provide the foundations for long-term growth, although at the same time investment in a society capable of facing the future must not be neglected; the IMF's current World Economic Outlook supports this diagnosis; further progress towards reform in the Member States of the euro zone remains a decisive factor in strengthening the foundations for long-term growth;

5.  Notes that, at the end of 2001 and at the beginning of 2003, there were signs of economic recovery similar to those that can currently be observed, but that these did not produce sustained growth; notes that the Commission's estimates and those of the Eurosystem point to a slight recovery in 2006, followed by a slowdown in 2007; takes the view that any increase in the potential for growth in the euro zone depends on structural reforms as well as carefully implemented investment activities in the Member States; recognises that competition in EU markets and high-quality employment are driving forces for economic growth and that its impact on efficiency gains and innovation should not be hindered; notes the recent economic recovery in 2006 and stresses that Member States should reap further benefits from this positive situation by more seriously consolidating their budgets;

6.  Takes the view that an increase in the potential for growth in the euro zone is contingent on the continued consistent implementation of the reform agenda; at all events this must include future-proofing social security systems with a view to demographic changes; against this backdrop, European macroeconomic dialogues to develop benchmarks for the national reform agendas and a well-balanced macro-economic policy remain an important factor; in this context it is important for the ECB to preserve its independence;

7.  Considers that the divergences within the euro zone, where there are disparities in growth (up to 4,5% in 2005) and in inflation rates (up to 2,7% in 2005) constitute a major threat to the EMU in the long term;

8.  Notes that there is an increasing risk of property prices being adjusted to reflect the rapid and unsustainable price rises in recent years; wishes to see a clarification of the ECB's policy with regard to changes in asset prices, including property prices; considers that, in the long term, a clearer position would help to avoid speculative bubbles developing;

9.  Welcomes the accession of Cyprus, Latvia and Malta to ERM II on 29 April 2005 and that of Slovakia on 25 November 2005; supports the introduction of the euro by all the Member States; considers that due attention should be paid to the accuracy and credibility of Member States' statistics in connection with compliance with the convergence criteria; calls on the other Member States to take measures without delay to likewise comply with the criteria set for accession to the euro zone;

10.  Notes that there are differences in the transmission mechanism of the monetary policy among the Member States of the euro zone with some countries, in particular, being more reactive on account of a predominance of indebtedness at variable rates; calls on the ECB and the Commission to submit a clear analysis of these differences and of improvements which might be made in order to facilitate the transmission of the monetary policy; the chances of an awakening in Europe can be increased only if the guiding principle of 'unity in diversity' is accepted both socially and economically;

11.  Emphasises the risks inherent in rapid adjustments to international disequilibria, which may lead to a rise in the euro exchange rate vis-à-vis the dollar; invites the Eurogroup, the Council and the ECB to step up coordination of their action in the sphere of exchange rate policy;

12.  Notes that the ECB is in favour of strengthening the preventive arm of the stability and growth pact (SGP), but has also repeatedly taken a critical position in relation to a possible relaxation of the corrective arm of the SGP, a position which is consistent with that of all other central banks in the euro zone, some of which have expressed strong criticism in this context;

Monetary policy

13.  Takes the view that more clarity and consistency are needed in the monetary policy applied by the ECB, in particular in defining the relative importance of and the relationship between the two main policy pillars, i.e. the money supply (M3) and all other relevant information on future inflation developments; believes that clear and transparent rules on how these two pillars affect the operational decisions on monetary policy would make the ECB's policies more predictable and effective;

14.  Calls on the ECB to take action with regard to the persistently high values of the M3 money supply (8,8% in May 2006, as against 7,4% in December 2005) by comparison with the long-term reference value of 4,5%; points, in particular, to the substantial growth in notes and cash in circulation and in call money deposits, is concerned that such expansion will be unsustainable in the long term; asks the ECB to investigate closely developments in the mortgage market and merger and acquisition loans, and their possible effects in terms of systemic risk, consumer confidence and interest rate development;

Financial stability and integration

15.  Welcomes the publication of the ECB's first report on financial integration in the euro zone, since this is vital both for putting across information concerning monetary policy and for financial stability; notes that, according to the ECB, financial integration calls for the integration of market infrastructures, in particular settlement-delivery systems; notes the intention of the ECB to create a settlement infrastructure; notes that, until such time as an infrastructure may have been introduced, an ECB governance must be put in place;

16.  Condemns the fact that the ECB made contact with the Committee of European Securities Regulators concerning level 2 measures even before the legislator became active;

17.  Shares the fears expressed by the ECB regarding hedge funds and calls on the ECB to carry out further analyses in this area;

18.  Invites the Commission to pay closer attention to the impact of the behaviour of the financial markets on the macroeconomic situation of the euro zone;

19.  Notes the threats to financial market stability generated by cross-border mergers; therefore calls on the ECB to carry out an analysis, focusing in particular on the question of the lender of last resort, and to present corresponding analyses in the 2007 monetary dialogue;

20.  Looks forward to the implementation of an integrated TARGET II system, which will improve liquidity management across the ESCB and will generate considerable efficiency gains; urges the ESCB to draw up a comprehensive, transparent and robust legal framework for the future operation of TARGET II;

21.  Regrets the fact that the ECB, like the Council, has not seen fit to inform Parliament of the Memorandum of Understanding on the management of financial crises;

External role of the euro

22.  Repeats its request for moves to unify the representation of the euro zone within international financial institutions so as to defend its interests with a force consistent with its economic weight;

23.  Notes with interest that several central banks have announced that they intend to increase the proportion of their euro reserves; calls on the ECB to monitor these movements closely and, as part of its annual report on the international role of the euro, to present a quantification thereof and to analyse their consequences, in particular with regard to exchange rates;


24.  Notes that the value of the euro banknotes in circulation has continued to increase quickly, with a rise of 12,8% in 2005; notes that this steady increase is mainly accounted for by large denomination notes, in particular EUR 500 banknotes, the number of which in circulation has increased by 20,9%; calls on the ECB to examine the reasons for this substantial increase, and to analyse the type of transactions carried out with these notes and the breakdown in demand by country, with a view to identifying the attendant risks;

25.  Considers that the first generation of banknotes, which are devoid of all representations of real living beings, landscapes or monuments, helps to convey a cold image of monetary integration, and contributes to Europeans distancing themselves from the euro; invites the ECB to introduce living beings, landscapes, European human undertakings or European personalities on which there is a consensus into the second generation of notes; invites the ECB to present its ideas on this issue to Parliament;

Democratic scrutiny

26.  Welcomes the ECB's clear commitment to the ratification of the draft Constitution, which lists the essential elements for the policy framework for EMU under both the monetary pillar and the economic and fiscal pillar; stresses that the ratification process has no bearing on the functioning of the monetary union and does not affect the stability of the euro; calls on the ECB to continue to ensure the credibility of the euro and to deliver price stability, which is a prerequisite for a non-inflationary macroeconomic environment conducive to economic growth and employment creation;

27.  Considers that the independence of the ECB, including the procedure for appointing the members of the Executive Board, has proved its worth; stresses that Article 112(2)(b) of the EC Treaty provides for the members of the Executive Board of the ECB to be appointed from among persons of recognised standing and professional experience in monetary or banking matters, and emphasises that their nationality should be irrelevant and that they will continue to be judged by the strict criteria of the Treaty, such as that of their qualifications; considers that ex-ante democratic accountability and transparency would improve if the Council evaluated several potential candidates and if the candidate proposed by the Council were then subject to a vote of approval by the Parliament;

28.  Calls on the Council to continue with the procedure for appointing the members of the Executive Board; stresses its willingness to join the other institutions in exploring possible improvements before the Executive Board next comes up for renewal in 2010;

29.  Considers that the monetary policy dialogue between Parliament and the ECB has been a success, and one which should be built on further; emphasises that the ex-post accountability of the ECB is of primordial importance for confidence, and hence stability, on the financial markets; it is important for the unity of the Executive Board and the Governing Council to continue to be assured in their public presentation; supports a targeted information policy on the part of the ECB vis-à-vis the Parliament, the Council and the Commission; stresses very strongly that the call for improvements in the ECB's communication policy must be seen solely against the backdrop of the simultaneous preservation of the independence of the ECB and of its bodies; reiterates, however, its call for the annual publication not only of an overview broken down by country, but also of a regional and cross-border overview about relevant trends, along the lines of the US Federal Reserve Beige Book, which would give the ECB the opportunity to influence the debate about productivity trends and the outlook for prices and pay; urges the ECB to examine the possibility of publishing summary minutes;

30.  Emphasises that the credibility of the ECB is also dependent on a high degree of transparency in its decision-making processes; reiterates its call, that, shortly after meetings of the Governing Council of the ECB, summary minutes of these meetings will be published containing a clear statement of the arguments in favour and against the decisions taken, the reasons why these decisions were taken and whether or not these decisions were taken unanimously; insists that this form of communication should not replace the information given by the President of the ECB immediately after monetary decisions are taken, which provide an invaluable and timely insight for observers and market participants; considers this transparency to be important because in this way the market will be able to gain a clearer picture of the ECB's monetary policy;

31.  Points out that it rejected as too complex the system of rotating voting rights applicable to decisions of the Governing Council as adopted in 2003; considers, with a view to future enlargements of the euro zone, that a system should be introduced which combines fairness and effectiveness; recalls its resolution calling for an ECB board of nine members, which would be in charge of monetary policy, thus replacing the cumbersome system existing now and avoiding the even more complex solution decided upon for the future; urges that the Treaty be changed accordingly;

32.  Invites the ECB to give greater weight in its communication strategy to hearings of its President by the Parliament committee responsible for economic and monetary affairs;

Management of the ECB

33.  Notes that the ECB's staff complement has increased steadily and substantially since 1999, an increase of 86% over that period; notes that the ECB reports a temporary freeze on its staff complement over several months in 2005, but that it nonetheless continued to increase by 3,5% that year; notes that the ECB has emphasised its determination to increase its internal effectiveness; regards that objective as laudable, and hopes that it can be achieved on a sustainable basis, in particular by means of a long-term stabilisation in staff numbers;

34.  Stresses the importance that the ECB and the national central banks must accord to the quality of dialogue, transparency of information and recognition of the existence of trade unions at meetings of the staff committee;

35.  Considers that involving the staff and their trade unions in the decisions that concern them, and high-level social dialogue, will contribute to the emergence of a common culture within the Eurosystem and the ESCB;

36.  Notes that the ECB's entire 2005 surplus of EUR 992 million has been set aside as a provision to cover exchange rate risk, interest rate risk and the risk of fluctuations in the price of gold, resulting in a net profit of zero; notes that the level of this provision will be reviewed annually; notes, at the same time, that the cost of constructing the ECB's new headquarters is put at EUR 850 million; calls on the ECB to clarify its targets regarding the level of own funds and provisions, and also to implement a budgetary policy which, while ensuring appropriate cover for the risks to which it is exposed, enables it to achieve satisfactory financial results;

o   o

37.  Instructs its President to forward this resolution to the President of the Eurogroup, the Council, the Commission and the European Central Bank.

(1) OJ C 138, 4.5.1998, p. 177.
(2) OJ C 157 E, 6.7.2006, p. 19.
(3) Texts Adopted, P6_TA(2006)0124.
(4) Texts Adopted, P6_TA(2006)0214.
(5) OJ C 61 E, 10.3.2004, p. 374.
(6) Texts Adopted, P6_TA(2006)0076.

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