The European Parliament,

–  having regard to the Annual Report 2009 of the European Central Bank (ECB),

–  having regard to Article 284 of the Treaty on European Union,

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

–  having regard to its resolution of 2 April 1998 on democratic accountability in the third phase of the EMU(1),

–  having regard to the Commission communication of 7 October 2009 on the Annual Statement on the Euro Area 2009 (COM(2009)0527) and the Commission staff working document accompanying that communication (SEC(2009)1313/2),

–  having regard to the Report of the High Level Group chaired by Jacques de Larosière of 25 February 2009,

–  having regard to the Commission proposal of 23 September 2009 for a regulation of the European Parliament and of the Council on Community macro prudential oversight of the financial system and establishing a European Systemic Risk Board (COM(2009)0499),

–  having regard to the Commission proposal of 23 September 2009 for a Council decision entrusting the European Central Bank with specific tasks concerning the functioning of the European Systemic Risk Board (COM(2009)0500),

–  having regard to its resolution of 25 March 2010 on the ECB Annual Report 2008(2),

–  having regard to its resolution of 18 November 2008 on Euro@10: The first 10 years of Economic and Monetary Union and future Challenges(3),

–  having regard to Rule 48 of its Rules of Procedure,

–  having regard to the report of the Committee on Economic and Monetary Affairs (A7-0314/2010),

A.  whereas overall real GDP in the euro area shrank by 4.1% in 2009 after the financial turmoil deepened following the collapse of Lehman Brothers; whereas behind such an aggregated figure there are strong disparities between euro-area Member States,

B.  whereas the average annual inflation stood at 0.3% and the medium to longer-term inflation expectations remained in line with the ECB aim to keep inflation rates below, but close to, 2%,

C.  whereas the average general government deficit ratio in the euro area increased to about 6.3% and the public debt-to-GDP ratio rose from 69.4% of GDP in 2008 to 78.7% in 2009 in the euro area,

D.  whereas the exchange rate for the euro against the USD fell from USD 1.39 on 2 January 2009 to USD 1.26 in mid-March 2009, recovered to a peak at USD 1.51 in early December 2009 and depreciated in 2010 to reach a minimum of USD 1.19 on 2 June 2010,

E.  whereas the exchange rate for the renminbi against the euro was misaligned by the Chinese authorities during 2009, with an artificially strong euro against the Chinese currency,

F.  whereas the ECB adjusted interest rates down to 1% and continued substantial and unprecedented non-standard measures to support credit; whereas the ECB balance sheet size has significantly increased throughout the year 2009,

G.  whereas there have been signs of economic stabilisation in the euro area over the second half of 2009 and quarterly growth rates, though still weak, have turned positive, though these aggregated figures highlight that this trend has not been reflected in all its Member States, some of which remained in recession during the same period,

H.  whereas the ECB expected a growth rate between 0,1% and 1,5% of real GDP in the euro area for 2010 before the sovereign debt crisis occurred in several countries within the euro area,

Introduction

1.  Welcomes the fact that the Treaty of Lisbon came into force on 1 December 2009 and gives the ECB the status of an EU institution, which increases the responsibility of Parliament as the primary institution through which the ECB is accountable to the European citizen;

2.  Welcomes the resumption of the Monetary Dialogue with the new European Parliament after the elections of June 2009;

3.  Favours the adoption of the euro by Estonia on 1 January 2011;

4.  Points out that, when it comes to actual price trends, monetary policy measures are only one factor among others, and that in recent years speculative tendencies in individual markets and growing and anticipated shortages of natural resources have played a particular part in pushing up prices;

5.  Points out that these imbalances pose considerable difficulties for a suitable monetary policy within the euro zone; calls on governments, therefore, to coordinate their economic policies;

Economic and financial stability

6.  Is deeply concerned that substantial macroeconomic imbalances between the euro zone economies continue to exist;

7.  Considers that the financial crisis in some countries within the euro area is a serious matter for the euro area as a whole and reflects a dysfunction of the euro area; this shows the need for reform and for stronger coordination of the economic policies within the euro area;

8.  Urges the Commission and the Central Bank to draw up proposals in line with the proposal by the Basel Committee on Basel III laying down binding rules for the introduction of an anticyclical buffer; calls on the Council, the Commission and the Central Bank to work towards the consistent and speedy implementation of the proposals when the Basel Committee proposals are ratified at G20 level;

9.  Points to the fact that the principles of the Stability and Growth Pact were not always fully respected in the past; recalls that, if the objective to regain a balance of public finances and reduce indebtedness is a necessity for over-indebted states, this alone will not solve the problem of economic imbalances between countries of the euro area and, more broadly, of the EU; calls therefore for unrestricted and more coherent application of the Stability and Growth Pact; deems that the Pact should be complemented by the development of an early warning system to identify possible inconsistencies, e.g. in the form of a ‘European semester’, in order not only to enhance surveillance and strengthen economic policy coordination so as to ensure fiscal consolidation but also – beyond the budgetary dimension – to address other macroeconomic imbalances and strengthen enforcement procedures;

10.  Believes that action must be taken now in order to start a gradual reduction of fiscal deficits and restore confidence in European public finances;

11.  Notes that a monetary union needs strong and enhanced coordination of economic policies to be robust; regrets that in the Economic and Monetary Union the emphasis has largely been on the ‘monetary’ side;

12.  Considers that Member States not following the rules of the euro area with regard to public finances and access to credible statistics should subjected to an enlarged and incremental spectrum of measures to ensure stricter compliance;

13.  Believes that the lack of a predefined crisis management mechanism and the behaviour of some governments has made a rapid solution to the sovereign debt crisis in some Member States of the euroarea difficult and will weaken the EMU's ability to react quickly in potentially similar situations in the future; calls therefore for a permanent crisis management framework;

14.  Urges that financial support to EU countries in a debt crisis must be designed to encourage repayment of loans, budgetary balance and economic reform, and stresses the danger of turning loans into financial contributions while encouraging borrowing and the creation of debts;

15.  Calls therefore on the Commission to put forward proposals to strengthen the Stability and Growth Pact by including specific targets for closing the competitiveness gap between European economies, in order to stimulate job-creating growth;

16.  Shares concerns about possible speculation against the euro;

17.  Takes the view that credit growth and assets price developments in the EU and in Member States are crucial indicators for an effective monitoring of financial stability within the EMU and, more broadly, the EU;

18.  Is concerned about continuous strains on the euro area sovereign bond markets reflected in widening spreads; deems that the flight to safety provoked by waves of panic experienced during the current financial crisis has had massive distorting effects and created costly negative externalities;

19.  Asks for a timely implementation of the Regulation on Credit Rating Agencies (Regulation (EC) No 1060/2009) and welcomes the Commission proposal on amending Regulation (EC) No 1060/2009 on Credit Rating Agencies of 2 June 2010, but at the same time calls on the Commission to go further with proposals for the more rigorous surveillance of the operation of these agencies, for improving the liability of Credit Rating Agencies and for assessing the possibility of create a European Credit Rating Agency; underlines the fact that the rating of euro area sovereign debt has proved problematic during the crisis;

Governance and decision-making

20.  Highlights the independence of the ECB;

21.  Recommends that the ECB enhance the transparency of its work in order to increase its legitimacy and predictability. Transparency is also needed with regard to the internal models used to value illiquid collateral and the valuations assigned to specific securities offered as collateral;

22.  Considers that, given the new legal status of the ECB under the Lisbon Treaty, the candidates for the Executive Board proposed by the Council should be subject to special hearings by the relevant parliamentary committee and then to a vote by the European Parliament; notes that, in addition, the role of the ECB has been crucial since the crisis and deems therefore that such a role should involve reinforced transparency and accountability;

23.  Welcomes the conferral of legal personality on the Eurogroup by the Lisbon Treaty and the participation of the ECB in its meetings;

24.  Points out the determination of the European Parliament to continue the Monetary Dialogue as an important element in the democratic scrutiny of the ECB;

25.  Welcomes the proposal to establish a European Systemic Risk Board (ESRB), which will close the current gap in macro-prudential supervision; calls on the ECB to establish clear models and definitions to ensure the effective functioning and accountability of the ESRB; adds that any new tasks conferred upon the ECB with regard to the ESRB will not compromise the independence of the ECB in any way;

26.  Notes that the concept whereby the ESRB only gives warnings and recommendations with no actual enforcement is not satisfactory in terms of effective implementation and responsibility; regrets that the ESRB cannot declare the emergency by itself;

27.  Welcomes the proposal to hold hearings of the Chair of the ESRB before the European Parliament, in a different framework from the Monetary Dialogues;

Exit from the crisis

28.  Believes that the revival of economic activity in the second half of 2009 was a result of the extraordinary measures taken by governments and central banks worldwide since the end of 2008 in the form of guarantees for bank liabilities, capital injections and asset support schemes;

29.  Notes that the financial crisis in the euro area is a solvency crisis that initially manifested itself as a liquidity crisis; deems that such a situation cannot be resolved in the long term by simply pouring new debt and liquidity into highly indebted economies in combination with accelerated plans for fiscal consolidation;

30.  Believes, similarly, that the crisis revealed a trend in the economic policies of recent years which have contributed to the current high level of public and private debt which will take many years to correct; deems that some parts of Europe will find it more difficult than others to tackle the consequences and developments of the crisis and achieve sustainable economic growth, new innovations and the creation of new jobs; underlines the need for reforms throughout Europe;

31.  Recalls that, before the outbreak of the financial crisis, the ratio of public debt to GDP of the euro area and the EU as a whole, as well as the ratio for the majority of Member States, declined between 1999 and 2007 and that, by contrast, debt levels of households, firms and the leverage of the financial sector experienced a significant increase over the same period;

32.  Recalls that the huge increase of public debt since 2008 in several Member States has been triggered by the fact these countries had to face excesses previously caused by an unsustainable growth of private debt and huge financial bubbles; believes therefore that the current crisis made it clear that the fiscal position is unsustainable if the financing of the private sector is unsustainable;

33.  Notes that the crisis, together with subsequent ‘bail-outs’ and economic stimulus packages, has led to far-reaching austerity measures which are often overdue but which at the same time heavily constrain the capacity of governments to act;

34.  Warns that these austerity packages should not lead to measures which could seriously dampen the economic recovery, which requires a new model of economic governance with instruments and a time schedule that will provide a balance between the process of fiscal consolidation and safeguarding needs in terms of investment in jobs and sustainable development;

35.  Underlines that the lack of credit reaching the real economy, specifically for SMEs, stemmed from lower demand due to diminished activity in the real economy as well as from the reluctance of banks to grant credit;

36.  Underlines that several Member States' banks have been excessively reliant on liquidity provided by the ECB;

37.  Notes that the non-standard measures which the ECB has introduced since October 2008 to support credit have been successful in avoiding a deeper recession and additional financial turmoil; reiterates that lifting these measures needs to be well timed and carefully coordinated with national governments and their activities, especially in view of the collective and simultaneous resorting to austerity measures in many Member States;

38.  Is concerned, however, with the potential asymmetric impact of ECB's exit strategy, given the substantial differences between euro area Member States regarding the business cycle;

39.  Would welcome a move from the European Central Bank generally to accept government bonds from euro area countries as security in the context of repurchase agreements, thereby following the tried and tested practice used by the Bank of England and the Federal Reserve Bank;

40.  Emphasises that a gradual exit from public deficits and the long-term sustainability of public finances are of crucial importance for the euro area as a whole;

41.  Notes the number of proposals in the EU to complete the prudential arrangements, to manage the crisis and to regulate the shadow banking sector;

42.  Shares concerns about the pro-cyclical aspects of the current regulatory, prudential, accounting and taxation rules which amplify the fluctuations that are inherent in the functioning of a market economy;

43.  Highlights the need for a decisive increase in banks' capital buffers and to enhance the quality of capital, and welcomes the Basel Committee's proposals for a narrower definition of core capital and the introduction of higher capital ratios; also draws attention to the link between the financial and the real economy and the impacts that regulating one can have on the other;

44.  Considers that the global financial system needs to be made less fragile and that lessons from the crisis must be drawn on a global level in order to reduce systemic risk, tackle financial bubbles and improve the quality of risk management and the transparency of financial markets, reaffirming that their basic role is to finance the real economy;

The external dimension

45.  Notes that the euro had gained status as an international currency throughout 2009, but was subject to heavy pressure in 2010;

46.  Points out that, during a period of high-level exchange rate volatility, the euro has increased its strength, particularly against the US dollar and the renminbi, and expresses concern that this could have a detrimental effect on the competitiveness of the euro area;

47.  Acknowledges that the strength of the euro was partly due to weak economic activity in the US, where the current account deficit narrowed sharply to below 3% of GDP in 2009 and the federal budget deficit widened to about 10% of GDP in the fiscal year 2009, while the decline of the euro was, among other things, also connected to the lack of trust in global markets in some highly-indebted EU Member States; shares concerns about the expansion of the volume of money in the US and, to a lesser extent, in the EU;

48.  Is concerned about the impact of exchange rate volatility and carry trade operations on both global financial stability and the real economy;

49.  Underlines that, regardless of the current global financial and economic crisis, the euro area should be further enlarged, but points out that meeting the Maastricht criteria is regarded as a precondition for euro membership; welcomes the quick adoption of the euro by all Member States which comply with these criteria;

50.  Believes that the adoption of the euro by Estonia shows the status of the euro, despite the public debt crisis; believes that this status will encourage Member States to seek membership of the euro area;

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

(1) OJ C 138, 4.5.1998, p. 177. (2) Texts adopted, P7_TA(2010)0090. (3) OJ C 16 E, 22.1.2010, p. 8.