ECB Press Conference - 21 January 2016
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Draghi, Mario
Constâncio, Vítor
At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.05%, 0.30% and -0.30% respectively.
 Ladies and gentlemen, first of all, let me issue a happy new year. The Vice President and I are very pleased to welcome you to our press conference. We'll now report on the outcome of today's meeting of the governing council, which was also attended by the Commission Vice President, Mr. Dombrowski. Based on our regular economic and monetary analysis and after the recalibration of our monetary policy measures last month, we decided to keep the key ECB interest rates unchanged. And we expect them to remain at present or lower levels for an extended period of time. Regarding our non-standard monetary policy measures, the asset purchases are proceeding smoothly and continue to have a favorable impact on the cost and availability of credit for firms and households. Taking stock of the evidence available at the beginning of 2016, it is clear that the monetary policy measures that we have adopted since mid-2014 are working. As a result, developments in the real economy, credit provision, and financing conditions have improved and have strengthened the euro area's resilience to recent global economic shocks. The decisions taken in early December to extend our monthly net asset purchases of 60 billion euros to at least the end of March 2017 and to reinvest the principal payments of maturing securities for as long as necessary were fully appropriate. They will result in a significant addition of liquidity to the banking system and will strengthen our forward guidance on interest rates. Yet, as we start the new year, downside risks have increased again amid heightened uncertainty about emerging market economies growth prospects, volatility in financial and commodity markets, and geopolitical risks. In this environment, euro area inflation dynamics also continue to be weaker than expected. It will therefore be necessary to review and possibly reconsider our monetary policy stance at our next meeting in early March, when the new staff macroeconomic projections become available, which will also cover the year 2018. In the meantime, work will be carried out to ensure that all the technical conditions are in place to make the full range of policy options available for implementation if needed. Let me now explain our assessment in greater detail, starting with economic analysis. Euro area real GDP growth was confirmed at 0.3% quarter on quarter in the third quarter of 2015, supported mainly by private consumption, while being dampened by negative contribution from net exports. The most recent survey indicators, available up to December, point to ongoing real GDP growth momentum in the fourth quarter of last year. Looking ahead, we expect the economic recovery to proceed. Domestic demand should be further supported by our monetary policy measures and their favorite impact on financial conditions, as well as by the earlier progress made with fiscal consolidation and structural reforms. Moreover, the renewed fall in oil prices should provide additional support for households' real disposable income and corporate profitability, and therefore for private consumption and investment. In addition, the fiscal stance in euro areas becoming slightly expansionary, reflecting in particular measures in support of refugees. However, the economic recovery in the euro area continues to be dampened by subdued growth prospects in emerging markets, volatile financial and economic growth, and the economic recovery in the oil financial markets, the necessary balance sheet adjustments in a number of sectors, and the sluggish pace of implementation of structural reforms. The risk to the euro area growth outlook remain on the downside and relate in particular to the heightened uncertainties regarding developments in the global economy, as well as to broader geopolitical risks. These risks have the potential to weigh on global growth and foreign demand for euro area exports and on confidence more widely. Euro area annual HICP inflation was 0.2% in December 2015, compared with 0.1% in November. The December outcome was lower than expected, mainly reflecting the renewed sharp decline in oil prices, as well as lower food price and services price inflation. On the basis of current oil future prices, which are well below the level observed a few weeks ago, the expected path of annual HICP inflation in 2016 is now significantly lower, compared with the outlook in early December. Inflation rates are currently expected to remain at very low or negative levels in the coming months and to pick up only later in 2016. Thereafter, supported by our monetary policy measures and the expected economic recovery, inflation rates should continue to recover, but risks of second round effects should be monitored closely. A more comprehensive picture of the impact of oil prices and other external and domestic factors on the outlook for HICP inflation will become available in the March 2016 ECB staff macroeconomic projections, which will also cover 2018. Turning to the monetary analysis, recent data confirm solid growth in broad money, M3, with the annual rate of growth of M3 standing at 5.1% in November 2015, after 5.3% in October. Annual growth in M3 continues to be mainly supported by its most liquid components, with a narrow monetary aggregate M1 growing at an annual rate of 11.2% in November, after 11.8% in October. Loan dynamics continued the path of gradual recovery observed since the beginning of 2014. The annual rate of change of loans to non-financial corporations increased to 0.9% in November 2015, up from 0.6% in October. Developments in loans to enterprises continue to reflect the lagged relationship with the business cycle, credit risk and the ongoing adjustment of financial and non-financial sector balance sheets. The annual growth rate of loans to households increased to 1.4% in November, compared with 1.2% in October. The bank lending survey for the Euro area for the fourth quarter of 2015 points to further improvements in demand for bank loans, supported by the low level of interest rates, financing needs for investment purposes and housing market prospects. Credit standards eased further on loans to enterprises, notably owing to increasing competitive pressures in retail banking, and reverted to a net easing on loans to households for house purchases. Overall, the monetary policy measures in place since June 2014 have clearly improved borrowing conditions for both firms and households, as well as credit flows across the Euro area. To sum up, across check of the outcome of the economic analysis with the signals coming from the monetary analysis, confirmed the effectiveness of the monetary policy measures in place and the need to review and possibly reconsider our monetary policy stance at our next meeting in early March in order to secure a return of inflation rates to war towards levels below but close to 2%. Monetary policy is focused on maintaining price stability over the medium term, and its accommodative stance supports economic activity. However, in order to reap the full benefits from our monetary policy measures, other policy areas must contribute decisively. Given continued high structural unemployment and low potential output growth in the Euro area, the ongoing cyclical recovery should be supported by effective structural policies. In particular, actions to improve the business environment, including the provision of an adequate public infrastructure, are vital to increase productive investment, boost job creation, and raise productivity. A swift and effective implementation of structural reforms in an environment of accommodative monetary policy will not only lead to higher sustainable economic growth in the Euro area, but will also raise expectations of permanently higher incomes and accelerate the beneficial effects of reforms, thereby making the Euro area more resilient to global shocks. Physical policies should support the economic recovery while remaining in compliance with the fiscal rules of the European Union. Full and consistent implementation of the stability and growth practice is crucial to maintain confidence in the fiscal framework. At the same time, all countries should strive for a more growth-friendly composition of fiscal policies. And we are now at your disposal for questions. Claire Jones, Financial Times. You said in your opening statement that you could possibly reconsider the monetary policy stance as soon as March. What measures do you still have left and what do you think they can do if these downside risks do materialise? And for my second question, would it be possible for you and perhaps Mr Constanze here as well to clarify the ECB's position on Novo Banco? Now we've heard that the ECB wasn't involved in the decision at all. Would it be possible for you to confirm that? And post January 1st now we have a new bail-in regime in place. Would you expect to be involved in decisions such as those taken by the Bank of Portugal in future? Thank you. I will ask Mr Constanze to answer the second question. Keep in mind, however, that we are not the resolution authority in this. I think that's an important point to keep in mind. As far as your first question is concerned, well, let me just recall my speech in New York, which was actually quoted during our discussion today, saying that, first of all, we have the power, the willingness and the determination to act. There are no limits to how far we are willing to deploy our instruments within our mandate to achieve our objective of a rate of inflation, which is below but close to 2%. So this shouldn't be any doubt about that. And we have plenty of instruments, as you know. And we didn't want to discuss today the specifics of the instruments, but rather to determine and assess the stance that we may have to take in March. And here I'll read again these quite important words. It will therefore be necessary to review and possibly reconsider our monetary policy stance at our next meeting in early March when the new projections will become available. Peter? Yes. Thank you. Yes, we have already communicated that the ECB had no interference on the decisions regarding, Novobankov regarding in particular what you asked about Bailin application. And from now on also there is a single resolution authority in Europe. And the BRRD and the rules about Bailin will be applied by that resolution authority and also if we are talking about smaller banks by the national resolution authorities that exist in all countries. So it's not for the ECB slash SSM to implement the rules about Bailin. Yes, Mr. Ferless. Tom Ferless from the Wall Street Journal. You commented at the meeting last month that the monetary policy stance was adequate. Now six weeks later you're saying that you want to review it again. What does that say? I mean is there a sense that harms the credibility of the ECB? You have to act again so swiftly. And my second question is after these multiple stimulus programs QE and deposit rate and so on inflation is still almost zero. You think it's going to fall below zero? Is there just a sense that central banks don't have as much control over inflation as they used to? Thanks. Thank you. Thank you. Well first let me say that our monetary policy measures have been since that we have undertaken since mid 2014 have been quite effective. If you look at the past through of our measures to the lending rates, the borrowing and lending rates, the financing cost, the improvement in all financial conditions and how these improvements are now being translated into real economy improvements, I think the spectacular, the past through has been quite significant if not spectacular. In December our measures, the measures we decided in December were entirely appropriate and have been effective but they were entirely appropriate based on the circumstances that were prevailing at that time. These circumstances were basically, we look a lot at several variables but certainly we've looked at the exchange, as I think I've said in last press conference, at the exchange rate in effective terms. We looked at the price of oil. We looked at the growth prospects of emerging market economies. Since then these circumstances have changed. Just think about the price of oil has fallen by 40% since the cutoff date of the last projections. The same thing we can say about the exchange rate in effective terms and you can observe what's the situation of the markets, both financial and commodity markets and the geopolitical development since then. So those measures by the way in December were quite significant. If one goes back, I mean our extension of the APP program in the decision to reinvest added something like 600, I'm going to add 680 billion to the liquidity and it's an amount people, I'm not sure people have reflected enough. It's an amount, it's about two thirds of the original size of the program. So now these conditions have worsened and I think to respond to your question the credibility of the ECB would be harmed if we were not ready to review and possibly reconsider monetary policy stance when we will have full information. As I said before the governing council reiterated that it has the power, the willingness, the determination to act and the fact that there are no limits to our action within our mandate of course. Let me also add one other thing that is actually quite maybe relevant in view of the impression. The governing council was unanimous in being committed to this line of communication. This is special. I think there was another question about the power of central banks to control inflation. I think that's a very important question. It's pretty clear that we are adopting our instruments to the changing conditions and the conditions change because some global factors are at play and we are doing whatever is necessary to comply with our mandate and we are not surrendering in front of these global factors actions. So we will confirm our determination to continue to comply with our mandate which is to reach a level of inflation that is below but close to 2% even actually even more so in face of adverse developments. Alessandro speciale Bloomberg News. Mr. President, you have said that there are no limits within your mandate to what you can do and what I would like to ask you if you could clarify a bit how this extends the potential scope of your action. Would this mean that you could extend purchases into classes of assets that are completely out of your scope such as equities or something else? Does it mean that you could lower rates not just the deposit rate but also the main rate? Another question is on the refugee issue in Europe. Are you concerned by the effects that you can have for the European common market and for the European recovery from the border closures possible and of the Schengen system? Thank you very much. Thank you. Thank you. I can only reiterate there are no limits and in a sense you should see the reference to the technical work. In the meantime work will be carried out to ensure that all the technical conditions are in place to make the full range of policy options available for implementation if needed just to make sure that if we are to decide about a specific policy instrument we're going to be absolutely confident that there are no technical limits to the size of its deployment. On the refugees, I think I've commented on this in the past, the refugees are an extraordinary development which will be changing, is changing, will be changing the face of our society in Europe as we know today. But it's entirely, well it's not entirely in our hands, it's also in our hands, the opportunity, the capacity, the ability, the might to transform this development into an opportunity for future growth of Europe. Thank you. Mr. Huing? Jack Huing, New York Times. You referred in the opening statement to the financial turmoil and also yesterday the biggest bank in Germany reported its biggest loss ever. Are you concerned at all about the banking system or about financial stability in light of what's happening in the world? Well the answer as far as our monetary policy is concerned, when these market developments in this heightened volatility in financial and commodity markets translates where to persist longer than in the short run may well become a factor, an unwanted tightening of the financing conditions and therefore that's one of the reasons why as I read before we will review and possibly reconsider our monetary policy stance in March. We are monitoring, constantly monitoring markets and generally the financial sector, the banking sector, trying to see whether our monetary policy is, I should say, not only the ECB monetary policy but all the major central banks monetary policies could become a source of financial instability and so far we have not seen signs of potential financial instability of the like we've seen in the pre-crisis times. Obviously our mandate is a mandate to reach price stability and it's not exactly a mandate to protect banks profitability or for this matter insurance companies profitability. But of course we are aware of the consequences of this and the best answer to these concerns is to make sure that the overall economy returns to growth, to sustainable growth with price stability and that's the best answer for the stability of the financial and the banking sector as well. Mr Kanepa, your Reuters. President Draghi, one of the constraints on your purchases is of a political nature rather than technical and that is the capital key. Now could that constraint also be relaxed or would that generate a political problem? My second question relates to banks once again. We've seen turmoil in financial markets. Have you spotted any sign or at least the potential for any stress when it comes to depositors and well investors confidence in the banking sector? Thank you. Well the first question is really we haven't we never addressed that we've designed our program according to certain parameters so far our program is proceeding smoothly if there were constraints of any kind as I said we'll have technical work making sure that we can use all the instruments up to their full availability. On the second point the best answer to these recent developments in financial markets is to make sure that the banking sector is resilient and I'm confident and actually it's more than confidence a factual statement that all the actions that have been undertaken both in Europe but as well elsewhere in the world have actually produced a much stronger banking sector than it was before the crisis in a sense but one should be very cautious here about not not being too I would say self complementary but certainly the iterations that we are observing in financial and commodity markets on other occasions in other times would have severely tested the resilience of the banking and the financial sectors at that time and so far we've seen actually that they stand pretty pretty resilient. Mr. Lacour? Yes Jean-François, black world is equal. Mr. President I have two questions referring to risks only two risks because I have two questions but there are a lot of more. First China there is a kind of lack of feasibility at this time how the Chinese government will deal the question of the soft lending of the economy which could turn to a hard lending there is a risk so that makes a lot of people nervous I wanted to hear from you how this topic was discussed today because I read in the minutes from the former meeting I guess if I understand that China's risk was more understated. Second question refers to a refugee at New Bed from the German perspective here Jean-Claude Merkel is taking a big risk with her policy and that leads to a lot of criticism inside her party which could if the situation worsened some people guess that she could maybe leave the chancellor. So my question is how do you assess or was it the discussion that this domestic policy crisis in Germany regarding the question of her? Thank you. Thank you. On the first question first of all let me make clear that the reference to China in the accounts of our meetings last time ought to be read for what it is namely the accounts reflect the opinions of some participants to the discussion. Now on coming to the substance of your question there are there have been at least three main developments in the recent weeks in China. The first was a PMI which was weaker than expected the second was the overall situation in the situation in the forex market and the third was the situation in the stock market. All this generated sizeable capital outflows. So we are carefully monitoring these developments and so far all the economic indicators show that there is a gradual deceleration by and large in line with our expectations. The outlook however for the euro area following these developments has been as I was saying before revised downward and the effect of these developments on the commodity markets are quite visible has been renewed decline since mid-October with both oil prices and commodity prices at having reached lows by especially around the end of 2015 and now. So for as far as oil prices are concerned we have both supply and demand factors. Clearly what's happening in China is contributing to the demand side of this development. Let me however give you a line which has surfaced in the discussion. What are we going to expect? And it was recalled that the Chinese authorities have a reputation for acting responsibly and what they have done in I would say the last two weeks shows that they are gaining control over their policy making. Now on the refugees the nature of your question is certainly important but it is very likely I can do about how the refugees issues being viewed in one specific country. I can only give general impressions of how we view the whole phenomenon which as I said is a big is an important structural sociopolitical change but also it could be come an opportunity. Well that's that's now for me. Thank you. Mr. Zydra. Mr. President I'd like to pose a question on the oil price. Wouldn't it be just be better to more or less ignore the impact of the lower oil price on inflation? I mean history shows that oil prices go up go down and they will go up again. I mean that's for sure I guess. So why not just be patient and wait the oil price to rise and then get the higher inflation rate as a free lunch maybe. Well it would be a perfect world like this but why is it so important to look on the oil price? Let me refer to what we are looking at when we have these dramatic movement in oil price but also other commodity prices. We look at basically three factors. The first is the persistence of these changes. It's quite clear that if it were to be a short-term effect as you seem to hint at we would look through but that's not been our experience over the last two years at least. We will we look at the materiality namely the size and when you look at that as I said before since the cutoff of the last projections in December oil prices fell by 40 percent. And we look and that's also very important for us we look at second round effects namely whether low oil prices and low commodity prices do feed into other prices that and then that could generate exactly what we want to avoid namely a spiraling downward spiraling downward phenomenon. So far we don't have that but we have seen we got to be very vigilant about that and even when we look at the recent developments in the known energy inflation core so-called core inflation we don't have many reasons to be optimistic about that. When we look at the wage development we don't have many reasons to be optimistic about that. So we we have to take seriously the fact that low oil prices low commodity prices for a long period of time may actually have second round effects that we definitely want to take action against. Mr Blaszak. Thank you Mario Blaszak World Business Plus online. President Draghi mentioned as an illustration I guess the three major factors that you take into account namely the exchange rate developed on the oil prices and the emerging markets effect or slowdown at emerging markets. So I was just wondering if you can give us the sense of the combination of all three at the moment given the slowdown or deflating China effect on both the financial market volatility and oil prices. That's my first question and the second question relates to global sell-off on equity markets that creates a lot of free liquidity and as an option of safe haven maybe the assets there are purchased by the European Central Bank might be the target for the free money so aren't you worried that this development should continue what kind of jeopardize the targets of ECB. Thank you. Thank you. Well I mentioned these three in fact we look at many other many other factors and and by the way let me state once again that the exchange rate is not a policy target but it's pretty clear that our actions have an effect on the exchange rate and I was pretty clear also about specifying that the exchange rate I'm referring to is an effective exchange rate so it reflects the actions taken by a variety of other countries. So that the oil prices and the growth process in emerging market economies were three of several factors that we look at and that we had to look at as changing the outlook for the euro area economy and the outlook and the medium-term outlook for inflation. So that's what we are looking at, what we are monitoring and that's why I said we will review and possibly reconsider our monetary policy stance. Your second question is very difficult to answer to. It's quite clear that we see we see major movements in the marketplace and what could be the sources of these movements, the causes of these movements it's very very difficult to to assess whether they're going to be sort of transient short-term movements or whether they're going to be persisting whether these the markets will sort of adjust to a different level or not these are all questions that probably market analysts are better positioned to answer. Mr. Merli. Alessandro Merli of Il Sole 24 ore. I would like to go back to the question of the financial stability of the financial sector. There was this wave of selling in stock markets in recent days and especially on bank shares and if I may say also especially on Italian bank shares. You are also the supervisor of all these entities and you've conducted a comprehensive assessment last year then a so-called SREP which has just concluded I believe and more or less given a clean bill of health to this to the most the banks the markets seem to be disagree completely with your assessment as they keep selling bank shares. I wonder what your assessment is on that. The other question is about NPLs which is an acute problem in banking in various banking systems and you are you've just advanced the request of information about NPLs to a number of banks I think a few dozen banks. Could you explain what is the purpose of this exercise and if these banks are singled out for further action on top of what they had to take after the comprehensive assessment and the SREP? I think it's that's a good question because it allows me to clarify what is a what is a significantly confused perception. I think there are very good reasons for returning to normality. First let me make a series of statements first of all the NPLs we talked about were fully identified and assessed by the comprehensive assessment so there's nothing new here. Second the provisioning against these NPLs was fully determined by the comprehensive assessment which means that no new unexpected provisioning nor new unexpected requests for more capital will be made by the supervisor. Specific on specific on Italy the overall reading is that Italian banks have on average a level of provisions similar to what is prevailing in the euro area and have also a fairly high level of guarantees and collateral. Fourth or fifth point the SSM the european supervisor you know I have I'm commenting on these things but you should be aware that we are in a separation principle so before preparing this answer I widely consulted with the chairman of the SSM Madame Nui. The fourth or fifth the european supervisor the SSM is fully aware that to deal effectively with the NPLs it takes years. It's not something that can be urged and resolved in a very short period of time. A good example is what's happening in Ireland which is one of the most successful countries as far as recovery is concerned and regaining market access and they're dealing with the NPLs gradually. Now we come to the questionnaire that was sent by the SSM. It was sent to several banks in the euro area was not sent only to the Italian banks. What is this questionnaire? It's an inquiry on how the banks are doing are managing their NPLs. In other words said in other words it is an inquiry on the governance of the NPL process management. What's the purpose of this questionnaire? Of this inquiry is to look at different national practices with the view finally in due time to get one best practice. Nothing more. It's not an initiative that would push the banks to deal with the NPLs urgently and as I said we know very well that it takes a long time. I think I've answered all your questions. There is no discrepancy. The market behavior with respect to banks depends on the confusion that was originated by the account about what this questionnaire was and what's going to happen. Of course all the discussions about the bank and different valuations. You know about that as well of course. The NPLs when we value NPLs we have to be aware that a single number doesn't mean anything. There are NPLs for vis-a-vis corporates. There are NPLs vis-a-vis SMEs. There are NPLs of different kinds and each of them might have a number and there are practices differing from bank to bank. When we come with when we have a valuation of an NPL this valuation will necessarily be affected but what sort of NPL is this? What's the other party? What sort of bank is actually managing this NPL? So here we have so the process of valuation has necessarily to be a granular process. On the other hand if one has in mind a say a wholesale disposal of NPLs then one will come out with a number with a different number and that's what the difference is between a wholesale valuation and a granular valuation of NPLs. But so I don't think the markets are actually disagreeing with the assessment made by the SSM but there has been a significant amount of confusion which and I hope that this exchange will help. Thank you. Mr Perez. Claudia Perez from El Pais. If this inflation is is is becoming a mid to long term problem while ACV is far from achieving its mandate what's your message for countries like Spain whose painful internal internal devaluation is less effective with this average inflation? And a second question if I may. You said in December that we have to rethink the fiscal stance of the euro area and the European Commission is telling us another message which is which is not necessary to rethink that. You have talked in your introductory remarks that the necessity of infrastructure investment do you think that we need a change in the fiscal policy in the euro zone? Well on the first point I think Spain is one of the countries that has really achieved the most significant progress in its reform and its structural reforms especially. The figures that Spain has enjoyed in terms of output recovery growth and by and large all sectors are simply remarkable. And so the country is now on its way to continue the recovery, to continue its process structural reforms and it's quite clear what you said is absolutely true with the very low inflation rates for a prolonged period of time the internal revaluations become much more difficult. That's one of the reasons by the way why in a monetary union like ours the objective of a rate of inflation close but below 2% makes a lot of sense. Makes even more sense in a monetary union like ours. The second point I don't think there is any disagreement between the Commission's view about fiscal policy in the ECB. What the ECB insists that they need its own obviously its own competence because we are not the guardian of the fiscal policy in the monetary union that role is the Commission's. What we always said is that fiscal consolidation should be growth friendly namely based on tax cuts current government expenditure control and possibly public investment with high return and accompanied by the structural reforms which will make potential output grow. Mr. Schras. Thank you. My first question in an October last year the statement said that the governing council would reexamine the monetary policy stance at the next meeting and that was seen as a strong signal for further action at the December meeting and indeed that was the case. The statement today is slightly different it says it will be therefore be necessary to review and possibly reconsider the stance. Is there any difference between these two sentences when it comes to substance and commitment? And the second question is on inflation expectations. How worried are you about the recent drop in inflation expectations for example the five year five year in parallel to the oil price especially given the fact that in December you emphasized that the correlation between the ECB inflation expectations measures and the recent oil price has decreased or just disappeared. Thank you. Thank you. Answering to your second question it's first of all let me say we use a variety of inflation expectations indicators not only the five year five year but certainly all inflation expectations measures wherever it's five year one year or whatever they have declined and they have declined and I would say more worryingly their correlation with current inflation has increased and their correlation and therefore their correlation with oil price has also increased. That's why that's why what I was saying before second round effects are especially important and as I said before the governing council has the power and this answers your first question the power the willingness the determination to act and there are no limits to how far we are willing to deploy our instruments within our mandate to achieve this objective and this is New York speech which is after the press conference. Ms. Niguas please. I would change with the Spanish press agency FA which is your assessment of the results in the results in the recent Spanish parliament elections and the currently negotiations. Good. Do they have an effect in the growth in Spain? Thank you. Thank you. I'm sorry but I'll have to abstain from making political comments. It's not in our mandate. Mr. McHugh. Thank you. Dave McHugh AP. Before the December 3rd meetings the markets got a little bit ahead of themselves based on statements October 22nd and I thought it asked us at a risk or a concern now and what if any caution would you offer so that people don't get a little overheated ahead of the March meeting. That's a good question but they're all good questions but the let me say that we are communication well let me say you probably noticed that as far as myself is concerned I abstained from making comments about markets about blaming abstain abstain from blaming markets as such communication is and why is that so because communication is a two-way affair so it's very hard to put the blame of some disappointment on one side only and we so that's that's what that's what I want to say in substance I think the the governing council is open to use all the necessary instruments to cope with the situation which is materially different from what it was in beginning of December. Mr. Fonsgrive. So, Romain Fonsgrive, Agence France-Presse, hello. You're making very bold claims that the ECB is ready to act in its next March meeting. The last minutes have shown that the governing council is seems to be divided and was kind of pulled down by its more conservative members. Some my first question would be how confident are you that you can pull together a majority to for further easing measures and I have a second question about the target of the ECB the 2% target. The ex-chief economist of the ECB Mr. Ising is proposing today in the person's title that the target should be achieved in the long run and not in the median run because it harms the credibility of the ECB to fail to reach this target. What do you think of this proposition? Thank you. First question let me disagree with your reading of the minutes. They don't show such divisions as you've hinted. Let me restate that this line of communication today was unanimous. And finally to your more specific question how do you think you put together a majority for taking monetary policy decisions? Well that's what we've done over the last four years on and on and on. So one shouldn't have any doubt that the governing council in its collective wisdom not only has the power, the willingness and the determination but also the cohesion that's necessary to take the actions that are needed. The second point about this about the objective of inflation. First of all it's remarkable that at a time when you have people suggesting that we should revise the inflation objective to something lower than 2%. By the way incidentally you also have other people who are saying that we should strive to have an inflation rate above 2% as well. So the camps are divided. Professor Easton confirmed the validity of the objective of an inflation rate below but close to 2% as the governing council definition of price stability. He also confirmed the validity of taking not the core inflation but the HICP inflation as its objective. The horizon over which this objective is going to be reached is the argument of his interview. Here the view of the governing council is that we should absolutely reject any suggestion that we may do less than what's necessary to achieve the objective of the inflation rate of below but close to 2% without undue delay. In other words the governing council is firm in assessing the necessity of reaching this objective without undue delay, namely to deploy all the instruments that are necessary to achieve this objective without hesitation and mine it's an objective in the medium term. So the substantial there is a substantial agreement on this point on the other hand we have to understand each other or what medium term means, how long it is. And so the stance of the governing council and the ECB is the following. There are global developments sometimes they're adverse very often recently they're adverse to us reaching this objective. Is this a good reason to give up? No, it's not a good reason to give up. How do you give up? Either accepting a lower objective which we don't do or saying that this objective will be reached in a certain very large number of years and we don't do that either. We don't give up. And I think on that note we close the press conference for today. Thank you very much.
 Ladies and gentlemen, first of all, let me issue a happy new year.  The Vice President and I are very pleased to welcome you to our press conference.  We'll now report on the outcome of today's meeting of the governing council,  which was also attended by the Commission Vice President, Mr. Dombrowski.  Based on our regular economic and monetary analysis and after the recalibration  of our monetary policy measures last month, we decided to keep the key ECB interest rates unchanged.  And we expect them to remain at present or lower levels for an extended period of time.  Regarding our non-standard monetary policy measures, the asset purchases are proceeding smoothly  and continue to have a favorable impact on the cost and availability of credit  for firms and households.  Taking stock of the evidence available at the beginning of 2016,  it is clear that the monetary policy measures that we have adopted since mid-2014 are working.  As a result, developments in the real economy, credit provision, and financing conditions  have improved and have strengthened the euro area's resilience to recent global economic shocks.  The decisions taken in early December to extend our monthly net asset purchases of 60 billion euros  to at least the end of March 2017 and to reinvest the principal payments of maturing securities  for as long as necessary were fully appropriate.  They will result in a significant addition of liquidity to the banking system  and will strengthen our forward guidance on interest rates.  Yet, as we start the new year, downside risks have increased again amid heightened uncertainty  about emerging market economies growth prospects, volatility in financial and commodity markets,  and geopolitical risks.  In this environment, euro area inflation dynamics also continue to be weaker than expected.  It will therefore be necessary to review and possibly reconsider our monetary policy stance  at our next meeting in early March, when the new staff macroeconomic projections become available,  which will also cover the year 2018.  In the meantime, work will be carried out to ensure that all the technical conditions are in place  to make the full range of policy options available for implementation if needed.  Let me now explain our assessment in greater detail, starting with economic analysis.  Euro area real GDP growth was confirmed at 0.3% quarter on quarter in the third quarter of 2015,  supported mainly by private consumption, while being dampened by negative contribution from net exports.  The most recent survey indicators, available up to December, point to ongoing real GDP growth momentum  in the fourth quarter of last year.  Looking ahead, we expect the economic recovery to proceed.  Domestic demand should be further supported by our monetary policy measures and their favorite  impact on financial conditions, as well as by the earlier progress made with fiscal consolidation  and structural reforms.  Moreover, the renewed fall in oil prices should provide additional support for households'  real disposable income and corporate profitability, and therefore for private consumption and investment.  In addition, the fiscal stance in euro areas becoming slightly expansionary, reflecting in particular  measures in support of refugees.  However, the economic recovery in the euro area continues to be dampened by subdued growth prospects  in emerging markets, volatile financial and economic growth, and the economic recovery  in the oil financial markets, the necessary balance sheet adjustments in a number of sectors,  and the sluggish pace of implementation of structural reforms.  The risk to the euro area growth outlook remain on the downside and relate in particular to the  heightened uncertainties regarding developments in the global economy, as well as to broader  geopolitical risks.  These risks have the potential to weigh on global growth and foreign demand for euro area exports  and on confidence more widely.  Euro area annual HICP inflation was 0.2% in December 2015, compared with 0.1% in November.  The December outcome was lower than expected, mainly reflecting the renewed sharp decline in  oil prices, as well as lower food price and services price inflation.  On the basis of current oil future prices, which are well below the level observed a few weeks ago,  the expected path of annual HICP inflation in 2016 is now significantly lower, compared with  the outlook in early December.  Inflation rates are currently expected to remain at very low or negative levels in the coming  months and to pick up only later in 2016.  Thereafter, supported by our monetary policy measures and the expected economic recovery,  inflation rates should continue to recover, but risks of second round effects should be  monitored closely.  A more comprehensive picture of the impact of oil prices and other external and domestic  factors on the outlook for HICP inflation will become available in the March 2016 ECB staff  macroeconomic projections, which will also cover 2018.  Turning to the monetary analysis, recent data confirm solid growth in broad money,  M3, with the annual rate of growth of M3 standing at 5.1% in November 2015, after 5.3% in October.  Annual growth in M3 continues to be mainly supported by its most liquid components,  with a narrow monetary aggregate M1 growing at an annual rate of 11.2% in November,  after 11.8% in October.  Loan dynamics continued the path of gradual recovery observed since the beginning of 2014.  The annual rate of change of loans to non-financial corporations increased to 0.9% in November  2015, up from 0.6% in October.  Developments in loans to enterprises continue to reflect the lagged relationship with the  business cycle, credit risk and the ongoing adjustment of financial and non-financial  sector balance sheets. The annual growth rate of loans to households increased to 1.4% in November,  compared with 1.2% in October.  The bank lending survey for the Euro area for the fourth quarter of 2015  points to further improvements in demand for bank loans, supported by the low level of interest rates,  financing needs for investment purposes and housing market prospects.  Credit standards eased further on loans to enterprises, notably owing to increasing  competitive pressures in retail banking, and reverted to a net easing on loans to households  for house purchases. Overall, the monetary policy measures in place since June 2014  have clearly improved borrowing conditions for both firms and households, as well as credit  flows across the Euro area. To sum up, across check of the outcome of the economic analysis  with the signals coming from the monetary analysis, confirmed the effectiveness of the  monetary policy measures in place and the need to review and possibly reconsider our monetary  policy stance at our next meeting in early March in order to secure a return of inflation rates to  war towards levels below but close to 2%. Monetary policy is focused on maintaining  price stability over the medium term, and its accommodative stance supports economic activity.  However, in order to reap the full benefits from our monetary policy measures,  other policy areas must contribute decisively. Given continued high structural unemployment  and low potential output growth in the Euro area, the ongoing cyclical recovery should be supported  by effective structural policies. In particular, actions to improve the business environment,  including the provision of an adequate public infrastructure, are vital to increase productive  investment, boost job creation, and raise productivity. A swift and effective implementation  of structural reforms in an environment of accommodative monetary policy will not only  lead to higher sustainable economic growth in the Euro area, but will also raise expectations of  permanently higher incomes and accelerate the beneficial effects of reforms, thereby making  the Euro area more resilient to global shocks. Physical policies should support the economic  recovery while remaining in compliance with the fiscal rules of the European Union. Full and  consistent implementation of the stability and growth practice is crucial to maintain confidence  in the fiscal framework. At the same time, all countries should strive for a more growth-friendly  composition of fiscal policies. And we are now at your disposal for questions.  Claire Jones, Financial Times. You said in your opening statement that you could possibly  reconsider the monetary policy stance as soon as March. What measures do you still have left and  what do you think they can do if these downside risks do materialise? And for my second question,  would it be possible for you and perhaps Mr Constanze here as well to clarify the ECB's position on  Novo Banco? Now we've heard that the ECB wasn't involved in the decision at all. Would it be  possible for you to confirm that? And post January 1st now we have a new bail-in regime in place.  Would you expect to be involved in decisions such as those taken by the Bank of Portugal in future?  Thank you. I will ask Mr Constanze to answer the second question.  Keep in mind, however, that we are not the resolution authority in this. I think that's an  important point to keep in mind. As far as your first question is concerned,  well, let me just recall my speech in New York, which was actually quoted during our  discussion today, saying that, first of all, we have the power, the willingness and the determination  to act. There are no limits to how far we are willing to deploy our instruments within our  mandate to achieve our objective of a rate of inflation, which is below but close to 2%.  So this shouldn't be any doubt about that. And we have plenty of instruments, as you know.  And we didn't want to discuss today the specifics of the instruments, but rather to determine  and assess the stance that we may have to take in March. And here I'll read again these quite  important words. It will therefore be necessary to review and possibly reconsider our monetary  policy stance at our next meeting in early March when the new projections will become available.  Peter? Yes. Thank you. Yes, we have already communicated that the ECB had no interference  on the decisions regarding, Novobankov regarding in particular what you asked about  Bailin application. And from now on also there is a single resolution authority in Europe.  And the BRRD and the rules about Bailin will be applied by that resolution authority and also  if we are talking about smaller banks by the national resolution authorities that exist in all  countries. So it's not for the ECB slash SSM to implement the rules about Bailin.  Yes, Mr. Ferless.  Tom Ferless from the Wall Street Journal. You commented at the meeting last month that the  monetary policy stance was adequate. Now six weeks later you're saying that you want to review it  again. What does that say? I mean is there a sense that harms the credibility of the ECB? You have to  act again so swiftly. And my second question is after these multiple stimulus programs QE and  deposit rate and so on inflation is still almost zero. You think it's going to fall below zero?  Is there just a sense that central banks don't have as much control over inflation as they used to?  Thanks. Thank you. Thank you. Well first let me say that our monetary policy measures have been  since that we have undertaken since mid 2014 have been quite effective. If you look at the past  through of our measures to the lending rates, the borrowing and lending rates, the financing cost,  the improvement in all financial conditions and how these improvements are now being translated  into real economy improvements, I think the spectacular, the past through has been quite  significant if not spectacular. In December our measures, the measures we decided in December were  entirely appropriate and have been effective but they were entirely appropriate based on the  circumstances that were prevailing at that time. These circumstances were basically, we look a lot  at several variables but certainly we've looked at the exchange, as I think I've said in last  press conference, at the exchange rate in effective terms. We looked at the price of oil. We looked  at the growth prospects of emerging market economies. Since then these circumstances have changed.  Just think about the price of oil has fallen by 40% since the cutoff date of the last projections.  The same thing we can say about the exchange rate in effective terms and you can observe what's  the situation of the markets, both financial and commodity markets and the geopolitical development  since then. So those measures by the way in December were quite significant. If one goes back,  I mean our extension of the APP program in the decision to reinvest added something like 600,  I'm going to add 680 billion to the liquidity and it's an amount people, I'm not sure people  have reflected enough. It's an amount, it's about two thirds of the original size of the  program. So now these conditions have worsened and I think to respond to your question the  credibility of the ECB would be harmed if we were not ready to review and possibly  reconsider monetary policy stance when we will have full information.  As I said before the governing council reiterated that it has the power, the willingness, the  determination to act and the fact that there are no limits to our action within our mandate of  course. Let me also add one other thing that is actually quite maybe relevant in view of the  impression. The governing council was unanimous in being committed to this line of communication.  This is special.  I think there was another question about the power of central banks to control inflation.  I think that's a very important question. It's pretty clear that we are adopting our  instruments to the changing conditions and the conditions change because some global factors  are at play and we are doing whatever is necessary to comply with our mandate  and we are not surrendering in front of these global factors actions.  So we will confirm our determination to continue to comply with our mandate which is to reach a  level of inflation that is below but close to 2% even actually even more so in face of adverse  developments.  Alessandro speciale Bloomberg News. Mr. President, you have said that there are no limits within  your mandate to what you can do and what I would like to ask you if you could clarify a bit  how this extends the potential scope of your action. Would this mean that you could extend  purchases into classes of assets that are completely out of your scope such as equities  or something else? Does it mean that you could lower rates not just the deposit rate but also  the main rate? Another question is on the refugee issue in Europe. Are you concerned by the  effects that you can have for the European common market and for the European recovery  from the border closures possible and of the Schengen system? Thank you very much.  Thank you. Thank you. I can only reiterate there are no limits and in a sense you should see the  reference to the technical work. In the meantime work will be carried out to ensure that all the  technical conditions are in place to make the full range of policy options available for  implementation if needed just to make sure that if we are to decide about a specific policy  instrument we're going to be absolutely confident that there are no technical limits to the size  of its deployment. On the refugees, I think I've commented on this in the past, the refugees are  an extraordinary development which will be changing, is changing, will be changing the face of our  society in Europe as we know today. But it's entirely, well it's not entirely in our hands,  it's also in our hands, the opportunity, the capacity, the ability, the might to transform  this development into an opportunity for future growth of Europe. Thank you.  Mr. Huing?  Jack Huing, New York Times. You referred in the opening statement to the financial turmoil  and also yesterday the biggest bank in Germany reported its biggest loss ever.  Are you concerned at all about the banking system or about financial stability in light of what's  happening in the world? Well the answer as far as our monetary policy is concerned,  when these market developments in this heightened volatility in financial and commodity markets  translates where to persist longer than in the short run may well become  a factor, an unwanted tightening of the financing conditions and therefore that's one of the reasons  why as I read before we will review and possibly reconsider our monetary policy stance in March.  We are monitoring, constantly monitoring markets and generally the financial sector,  the banking sector, trying to see whether our monetary policy is, I should say,  not only the ECB monetary policy but all the major central banks monetary policies could become a  source of financial instability and so far we have not seen signs of potential financial instability  of the like we've seen in the pre-crisis times.  Obviously our mandate is a mandate to reach price stability and it's not exactly a mandate to  protect banks profitability or for this matter insurance companies profitability. But of course  we are aware of the consequences of this and the best answer to these concerns is to make sure  that the overall economy returns to growth, to sustainable growth with price stability and that's  the best answer for the stability of the financial and the banking sector as well.  Mr Kanepa, your Reuters.  President Draghi, one of the constraints on your purchases is of a political nature rather than  technical and that is the capital key. Now could that constraint also be relaxed or would that  generate a political problem? My second question relates to banks once again. We've seen turmoil  in financial markets. Have you spotted any sign or at least the potential for any stress  when it comes to depositors and well investors confidence in the banking sector? Thank you.  Well the first question is really we haven't we never addressed that we've designed our program  according to certain parameters so far our program is proceeding smoothly if there were constraints  of any kind as I said we'll have technical work making sure that we can use all the instruments  up to their full availability. On the second point the best answer to these recent developments in  financial markets is to make sure that the banking sector is resilient and I'm confident  and actually it's more than confidence a factual statement that all the actions that have been  undertaken both in Europe but as well elsewhere in the world have actually produced a much stronger  banking sector than it was before the crisis in a sense but one should be very cautious here about  not not being too I would say self complementary but certainly the iterations that we are observing  in financial and commodity markets on other occasions in other times would have severely  tested the resilience of the banking and the financial sectors at that time and so far we've  seen actually that they stand pretty pretty resilient. Mr. Lacour?  Yes Jean-François, black world is equal. Mr. President I have two questions referring to risks  only two risks because I have two questions but there are a lot of more. First China  there is a kind of lack of feasibility at this time how the Chinese government will deal the  question of the soft lending of the economy which could turn to a hard lending there is a risk  so that makes a lot of people nervous I wanted to hear from you how this topic was discussed today  because I read in the minutes from the former meeting I guess if I understand that China's  risk was more understated. Second question refers to a refugee at New Bed from the German  perspective here Jean-Claude Merkel is taking a big risk with her policy and that leads to a lot  of criticism inside her party which could if the situation worsened some people  guess that she could maybe leave the chancellor. So my question is how do you assess or was it  the discussion that this domestic policy crisis in Germany regarding the question of her?  Thank you. Thank you. On the first question first of all let me make clear that the reference to  China in the accounts of our meetings last time ought to be read for what it is namely the accounts  reflect the opinions of some participants to the discussion. Now on coming to the substance of your  question there are there have been at least three main developments in the recent weeks in China.  The first was a PMI which was weaker than expected the second was the overall situation in the  situation in the forex market and the third was the situation in the stock market.  All this generated sizeable capital outflows. So we are carefully monitoring these developments  and so far all the economic indicators show that there is a gradual deceleration  by and large in line with our expectations.  The outlook however for the euro area following these developments has been as I was saying before  revised downward and the effect of these developments on the commodity markets are  quite visible has been renewed decline since mid-October with both oil prices and commodity  prices at having reached lows by especially around the end of 2015 and now. So for as far as oil  prices are concerned we have both supply and demand factors. Clearly what's happening in China is  contributing to the demand side of this development. Let me however give you a line which has surfaced  in the discussion. What are we going to expect? And it was recalled that the Chinese authorities  have a reputation for acting responsibly and what they have done in I would say the last two weeks  shows that they are gaining control over their policy making.  Now on the refugees the nature of your question is certainly important but it is  very likely I can do about how the refugees issues being viewed in one specific country.  I can only give general impressions of how we view the whole phenomenon which as I said is  a big is an important structural sociopolitical change but also it could be come an opportunity.  Well that's that's now for me. Thank you. Mr. Zydra.  Mr. President I'd like to pose a question on the oil price. Wouldn't it be just be better to more  or less ignore the impact of the lower oil price on inflation? I mean history shows that oil prices  go up go down and they will go up again. I mean that's for sure I guess. So why not just be patient  and wait the oil price to rise and then get the higher inflation rate as a free lunch maybe.  Well it would be a perfect world like this but why is it so important to look on the oil price?  Let me refer to what we are looking at when we have these dramatic movement in oil price  but also other commodity prices. We look at basically three factors. The first is the persistence  of these changes. It's quite clear that if it were to be a short-term effect as you seem to  hint at we would look through but that's not been our experience over the last two years at least.  We will we look at the materiality namely the size and when you look at that as I said before  since the cutoff of the last projections in December oil prices fell by 40 percent.  And we look and that's also very important for us we look at second round effects namely whether  low oil prices and low commodity prices do feed into other prices that and then that could generate  exactly what we want to avoid namely a spiraling downward spiraling downward phenomenon. So far  we don't have that but we have seen we got to be very vigilant about that and even when we look at  the recent developments in the known energy inflation core so-called core inflation we don't  have many reasons to be optimistic about that. When we look at the wage development we don't have  many reasons to be optimistic about that. So we we have to take seriously the fact that low oil  prices low commodity prices for a long period of time may actually have second round effects  that we definitely want to take action against.  Mr Blaszak.  Thank you Mario Blaszak World Business Plus online. President Draghi mentioned  as an illustration I guess the three major factors that you take into account namely the  exchange rate developed on the oil prices and the emerging markets effect or slowdown at emerging  markets. So I was just wondering if you can give us the sense of the combination of all three  at the moment given the slowdown or deflating China effect on both the financial market  volatility and oil prices. That's my first question and the second question relates to global  sell-off on equity markets that creates a lot of free liquidity and as an option of safe haven maybe  the assets there are purchased by the European Central Bank might be the target for the free money  so aren't you worried that this development should continue what kind of jeopardize the targets of  ECB. Thank you. Thank you. Well I mentioned these three in fact we look at many other many other  factors and and by the way let me state once again that the exchange rate is not a policy target  but it's pretty clear that our actions have an effect on the exchange rate and I was pretty  clear also about specifying that the exchange rate I'm referring to is an effective exchange rate  so it reflects the actions taken by a variety of other countries. So that the oil prices and the  growth process in emerging market economies were three of several factors that we look at and  that we had to look at as changing the outlook for the euro area economy and the outlook and the  medium-term outlook for inflation. So that's what we are looking at, what we are monitoring  and that's why I said we will review and possibly reconsider our monetary policy stance.  Your second question is very difficult to answer to. It's quite clear that we see  we see major movements in the marketplace and what could be the sources of these movements,  the causes of these movements it's very very difficult to to assess whether they're going to  be sort of transient short-term movements or whether they're going to be persisting whether these  the markets will sort of adjust to a different level or not these are all questions that  probably market analysts are better positioned to answer.  Mr. Merli.  Alessandro Merli of Il Sole 24 ore. I would like to go back to the question of the financial  stability of the financial sector. There was this wave of selling in stock markets in recent days  and especially on bank shares and if I may say also especially on Italian bank shares.  You are also the supervisor of all these entities and you've conducted a comprehensive  assessment last year then a so-called SREP which has just concluded I believe and more or less  given a clean bill of health to this to the most the banks the markets seem to be disagree completely  with your assessment as they keep selling bank shares. I wonder what your assessment is on that.  The other question is about NPLs which is an acute problem in banking in various banking systems  and you are you've just advanced the request of information about NPLs to a number of banks  I think a few dozen banks. Could you explain what is the purpose of this exercise and if these  banks are singled out for further action on top of what they had to take after the comprehensive  assessment and the SREP? I think it's that's a good question because it allows me to clarify  what is a what is a significantly confused perception.  I think there are very good reasons for returning to normality. First let me make a series of  statements first of all the NPLs we talked about were fully identified and assessed by the comprehensive  assessment so there's nothing new here. Second the provisioning against these NPLs was fully  determined by the comprehensive assessment which means that no new unexpected provisioning nor  new unexpected requests for more capital will be made by the supervisor.  Specific on specific on Italy the overall reading is that Italian banks have on average  a level of provisions similar to what is prevailing in the euro area and have also a fairly high  level of guarantees and collateral. Fourth or fifth point the SSM the european supervisor  you know I have I'm commenting on these things but you should be aware that we are in a separation  principle so before preparing this answer I widely consulted with the chairman of the SSM  Madame Nui. The fourth or fifth the european supervisor the SSM is fully aware that to deal  effectively with the NPLs it takes years. It's not something that can be urged and resolved  in a very short period of time. A good example is what's happening in Ireland  which is one of the most successful countries as far as recovery is concerned  and regaining market access and they're dealing with the NPLs gradually.  Now we come to the questionnaire that was sent by the SSM. It was sent to several banks in the  euro area was not sent only to the Italian banks. What is this questionnaire? It's an inquiry  on how the banks are doing are managing their NPLs. In other words said in other words it is an  inquiry on the governance of the NPL process management. What's the purpose of this questionnaire?  Of this inquiry is to look at different national practices with the view finally  in due time to get one best practice.  Nothing more. It's not an initiative that would push the banks to deal with the NPLs urgently  and as I said we know very well that it takes a long time. I think I've answered all your questions.  There is no discrepancy. The market behavior with respect to banks depends on the confusion  that was originated by the account about what this questionnaire was and what's going to happen.  Of course all the discussions about the bank and different valuations. You know about that as well  of course. The NPLs when we value NPLs we have to be aware that a single number doesn't mean anything.  There are NPLs for vis-a-vis corporates. There are NPLs vis-a-vis SMEs. There are NPLs of different  kinds and each of them might have a number and there are practices differing from bank to bank.  When we come with when we have a valuation of an NPL this valuation will necessarily be affected  but what sort of NPL is this? What's the other party? What sort of bank is actually managing this NPL?  So here we have so the process of valuation has necessarily to be a granular process.  On the other hand if one has in mind a say a wholesale disposal of NPLs  then one will come out with a number with a different number and that's what the difference is  between a wholesale valuation and a granular valuation of NPLs.  But so I don't think the markets are actually disagreeing with the assessment made by the SSM  but there has been a significant amount of confusion which and I hope that this exchange will help.  Thank you. Mr Perez.  Claudia Perez from El Pais. If this inflation is is is becoming a mid to long term problem  while ACV is far from achieving its mandate what's your message for countries like Spain  whose painful internal internal devaluation is less effective with this average inflation?  And a second question if I may. You said in December that we have to rethink the fiscal  stance of the euro area and the European Commission is telling us another message which is which  is not necessary to rethink that. You have talked in your introductory remarks that  the necessity of infrastructure investment do you think that we need a change in the fiscal policy  in the euro zone? Well on the first point I think Spain is one of the countries that has  really achieved the most significant progress in its reform and its structural reforms especially.  The figures that Spain has enjoyed in terms of output recovery growth and by and large  all sectors are simply remarkable. And so the country is now on its way to continue the recovery,  to continue its process structural reforms and it's quite clear what you said is absolutely true  with the very low inflation rates for a prolonged period of time the internal  revaluations become much more difficult. That's one of the reasons by the way why in a  monetary union like ours the objective of a rate of inflation close but below 2% makes a lot of sense.  Makes even more sense in a monetary union like ours.  The second point I don't think there is any disagreement between the Commission's view  about fiscal policy in the ECB. What the ECB insists that they need its own obviously its own  competence because we are not the guardian of the fiscal policy in the monetary union that role  is the Commission's. What we always said is that fiscal consolidation should be growth friendly  namely based on tax cuts current government expenditure control and possibly public investment  with high return and accompanied by the structural reforms which will make potential output grow.  Mr. Schras.  Thank you. My first question in an October last year the statement said that the  governing council would reexamine the monetary policy stance at the next meeting  and that was seen as a strong signal for further action at the December meeting  and indeed that was the case. The statement today is slightly different it says it will  be therefore be necessary to review and possibly reconsider the stance. Is there any difference  between these two sentences when it comes to substance and commitment?  And the second question is on inflation expectations. How worried are you about the  recent drop in inflation expectations for example the five year five year in parallel to the oil  price especially given the fact that in December you emphasized that the correlation between the  ECB inflation expectations measures and the recent oil price has decreased or just disappeared.  Thank you. Thank you. Answering to your second question it's first of all let me say we use a  variety of inflation expectations indicators not only the five year five year but certainly all  inflation expectations measures wherever it's five year one year or whatever they have declined  and they have declined and I would say more worryingly their correlation with current inflation  has increased and their correlation and therefore their correlation with oil price  has also increased. That's why that's why what I was saying before second round effects are  especially important and as I said before the governing council has the power and this answers  your first question the power the willingness the determination to act and there are no limits to how  far we are willing to deploy our instruments within our mandate to achieve this objective  and this is New York speech which is after the press conference. Ms. Niguas please.  I would change with the Spanish press agency FA which is your assessment of the results in the  results in the recent Spanish parliament elections and the currently negotiations.  Good. Do they have an effect in the growth in Spain? Thank you.  Thank you. I'm sorry but I'll have to abstain from making political comments.  It's not in our mandate.  Mr. McHugh.  Thank you. Dave McHugh AP. Before the December 3rd meetings the markets got a little bit ahead  of themselves based on statements October 22nd and I thought it asked us at a risk or a concern now  and what if any caution would you offer so that people don't get a little overheated ahead of the  March meeting. That's a good question but they're all good questions but the  let me say that we are communication well let me say you probably noticed that as far as  myself is concerned I abstained from making comments about markets about blaming abstain  abstain from blaming markets as such communication is and why is that so because communication is  a two-way affair so it's very hard to put the blame of some disappointment on one side only  and we so that's that's what that's what I want to say in substance I think the  the governing council is open to use all the necessary instruments to cope with the situation  which is materially different from what it was in beginning of December.  Mr. Fonsgrive.  So, Romain Fonsgrive, Agence France-Presse, hello. You're making very bold claims that the ECB is  ready to act in its next March meeting. The last minutes have shown that the governing council  is seems to be divided and was kind of pulled down by its more conservative members. Some  my first question would be how confident are you that you can pull together a majority to  for further easing measures and I have a second question about the target of the ECB the 2%  target. The ex-chief economist of the ECB Mr. Ising is proposing today in the person's title  that the target should be achieved in the long run and not in the median run because it harms  the credibility of the ECB to fail to reach this target. What do you think of this proposition?  Thank you. First question let me disagree with your reading of the minutes.  They don't show such divisions as you've hinted. Let me restate that this line of communication  today was unanimous. And finally to your more specific question how do you think you put together  a majority for taking monetary policy decisions? Well that's what we've done over the last four  years on and on and on. So one shouldn't have any doubt that the governing council in its collective  wisdom not only has the power, the willingness and the determination but also the cohesion  that's necessary to take the actions that are needed. The second point about this about the  objective of inflation. First of all it's remarkable that at a time when you have people  suggesting that we should revise the inflation objective to something lower than 2%. By the way  incidentally you also have other people who are saying that we should strive to have an inflation  rate above 2% as well. So the camps are divided. Professor Easton confirmed the validity of the  objective of an inflation rate below but close to 2% as the governing council definition of  price stability. He also confirmed the validity of taking not the core inflation but the HICP  inflation as its objective. The horizon over which this objective is going to be reached  is the argument of his interview. Here the view of the governing council is that we should  absolutely reject any suggestion that we may do less than what's necessary to achieve the  objective of the inflation rate of below but close to 2% without undue delay. In other words the  governing council is firm in assessing the necessity of reaching this objective without  undue delay, namely to deploy all the instruments that are necessary to achieve this objective  without hesitation and mine it's an objective in the medium term. So the substantial there is a  substantial agreement on this point on the other hand we have to understand each other or what  medium term means, how long it is. And so the stance of the governing council and the ECB is  the following. There are global developments sometimes they're adverse very often recently  they're adverse to us reaching this objective. Is this a good reason to give up? No, it's not a  good reason to give up. How do you give up? Either accepting a lower objective which we don't do or  saying that this objective will be reached in a certain very large number of years and we don't  do that either. We don't give up. And I think on that note we close the press conference for today.  Thank you very much.
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