The following are highlights of a speech by European Central Bank President Mario Draghi at a news conference after the bank kept its benchmark interest rate at 1 percent on Thursday.
THREE-YEAR OPS HELPED AVOID CREDIT CRUNCH
“Certainly prevented what could have been a major funding constraint for our banking system with all the negative consequence that this could have been on the credit side. We also saw interest rates declining, I would say, substantially, if not dramatically, all along the yield curve.”
“The more time passes since we had the first three-year LTRO, the more we see signs that it has been an effective policy measure … Since then, we also saw that some unsecured bond markets have reopened. They were completely shut.”
NO BIG CURTAILMENT OF CREDIT
“Despite the moderation in loan growth, the figures on lending do not so far suggest for the whole of the euro area that the heightened financial market tensions led to a sizable curtailment of credit in euro area as a whole in the period to November.”
BANKS NOT HOARDING CASH WITH ECB
“By and large, the banks that have borrowed the money from the ECB are not the same (as those) that are redepositing the money with the deposit facility of the ECB.”
BOND-BUYING PROGRAMME
“The main rationale for having the SMP is the unclogging of the monetary policy transmission channels. We still see that … the interbank market is still not functioning … It was rather comforting to see that some opening of the unsecured bond market is actually taking place. But I mean we really are at the beginning of this process.”
INFLATION TO FALL BELOW 2 PCT AFTER SEVERAL MONTHS
“The information that has become available since early December broadly confirms our previous assessment. Inflation is likely to stay above 2 percent for several months to come before declining to below 2 percent.”
RATE DECISION UNANIMOUS
“The decision and the whole discussion was unanimous.”
ASKED IF ECB COULD CUT RATES NEXT MONTH
“In this situation of high uncertainty, we really look at all factors. We monitor all the developments and then we will decide.”
GRADUAL ECONOMIC RECOVERY
“We continue to expect euro area economic activity to recover, albeit very gradually in the course of 2012, supported by developments in global demand, very low short-term interest rates, and all the measures that we have taken to support the functioning of the financial sector.”
SOME SIGNS OF STABILISATION BUT DOWNSIDE RISK
“Ongoing financial market tensions continue to dampen economic activity in the euro area, while, according to some recent survey indicators, there are tentative signs of stabilization activity at low levels. The economic outlook remains subject to high uncertainty and substantial downside risk.”
URGES EARLY SIGNING OF FISCAL COMPACT
“It will be highly welcome if this fiscal compact could be signed at the end of this month rather than waiting for March.”
“(We welcome) the European Council’s agreement to move to a stronger economic union … The new fiscal compact comprising a fundamental restatement of the fiscal rules, together with the fiscal commitments the euro area governments have made, is an important contribution to ensuring the long-run sustainability of public finances in the euro area countries. The wording of such rules needs to be unambiguous and effective.”
PRICE STABILITY
“Wage cost and price pressures in the euro area should remain modest and inflation rates should develop in line with price stability over the policy-relevant horizon.”
PRICE RISKS BROADLY BALANCED
“The Governing Council continues to view the risks through the medium-term outlook for price developments as broadly balanced.”
GREEK FISCAL ACTION
“Greece has to bring back its fiscal action on track, that has to complete the structural reforms and has to basically move forward on the fiscal consolidation front.”
GREEK PSI
“Concerning the involvement of the private sector in financial assistance for indebted countries, we welcome the reaffirmation that the decisions taken on July 21 and Oct. 26 and 27, 2011 concerning Greek debt are unique and exceptional.”
VERY CONCERNED ABOUT HUNGARY
“On Hungary, I have to say that we are really very concerned … the ECB is really very careful about signs of pressure being put on decision-making bodies.”
“I think these pressures are inconsistent with the spirit of the (European Union) treaty.”
FISCAL POLICY
“Euro area governments need to do their utmost to support fiscal sustainability by correcting excessive deficits in accordance with the agreed timetables and by moving to a structural balanced budget or surplus position over the medium term. Slippages in the implementation of fiscal consolidation plans of vulnerable countries must be corrected swiftly by structural fiscal improvements.”
DAMPENED DOMESTIC DEMAND
“Domestic demand is likely to be dampened by the ongoing tensions in the euro area sovereign debt markets, as well as the process of balance sheet adjustment in the financial and non-financial sectors.”
NON-STANDARD MEASURES
“We are actively working towards the implementation of all the measures announced at our December meeting, which should provide additional support to the economy … all the non-standard monetary policy measures are temporary in nature.”
LIQUIDITY PROVISIONS TO CONTINUE TO SUPPORT BANKS
“The provision of liquidity and the allotment modes for refinancing operations will continue to support euro area banks and thus the financing of the real economy. The extensive recourse to the first three-year refinancing operation indicates that our non-standard policy measures are providing a substantial contribution to improving the funding situation of the banks, thereby supporting financing conditions and confidence.”
