Christine Lagarde: European Parliament plenary debate on the ECB Annual Report

Introductory statement by Christine Lagarde, President of the ECB, at the plenary session of the European Parliament

• Brussels, 8 February 2021 Honourable President of the European Parliament, Executive Vice-President of the Commission, Honourable Members of the European Parliament, I am pleased to join you today for the plenary debate on your draft resolution on the ECB Annual Report.
• The circumstances could hardly be more different from my first appearance here last year.
• The pandemic has confronted us with a serious public health and economic crisis.
• But people across Europe are still facing the dire social and economic consequences of the virus and the future remains uncertain.
• This Parliament has ensured that the views of European citizens are heard and acted upon as the EU is tackling the crisis.

The year behind us: responding forcefully to an unprecedented crisis

• The European institutions and the EU Member States reacted swiftly, creatively and resolutely, and the ECB played a vital role.
• First, in March 2020 we launched the pandemic emergency purchase programme (PEPP) with an initial envelope of 750 billion.
• The PEPP was tailored to the specific nature of the coronavirus (COVID-19) crisis and serves a dual purpose.
• First, it can be operated as a powerful market backstop to prevent destabilising financial dynamics and breakdowns in monetary transmission.
• The backstop engine was the first to be ignited, amidst the financial panic in the early stages of the pandemic.
• Our targeted longer-term refinancing operations or TLTROs were the second major pillar of our crisis management strategy.

The year ahead: dealing with uncertainty and paving the way for a sustainable recovery

• The start of vaccination campaigns across the euro area provides the eagerly awaited light at the end of the tunnel.
• Output remains well below pre-pandemic levels and uncertainty about how the pandemic will evolve remains high.
• However, when containment measures are lifted and uncertainty recedes, we expect the recovery to be supported by favourable financing conditions, expansionary fiscal policies and a recovery in demand.
• [2] Despite the steep increase in January due to a confluence of factors, inflation remains low.
• It ensures that financing conditions remain favourable to put the economic recovery on a self-sustaining trajectory.
• If implemented as planned, Next Generation EU could even boost growth as early as this year.

Resetting the course of our economies by investing in the future

• This would boost potential growth and contribute to reaching the EUs objectives in the areas of climate change and digitalisation.
• Progress in the area of sustainable finance, for instance, is pivotal to accelerate the transition towards a low-carbon economy.
• Efforts to deepen the Single Market, notably its digital dimension and in the services sector, would provide additional support to the recovery.
• As co-legislator, the European Parliament has a crucial role to play in advancing Europes green and digital agendas.
• The ECB is ready to play its part on these two fronts, as you request in your resolution.
• Central banks are not responsible for climate policy and the most important tools that are needed lie outside of our mandate.
• This analysis will provide important input for the Governing Council when it decides whether or not to launch a digital euro project.

Conclusion

• The ECB is committed to doing its part, within its mandate.
• We are equally committed to continuing and building on the close dialogue with this Parliament.
• But communication is a two-way street, so we will continue our efforts to listen to your requests and remarks more attentively, as summarised in this resolution.
• As usual, we will provide our detailed feedback on the resolution together with the ECB Annual Report 2020.