13 June 2013

ECB/Draghi: Responsible leadership in times of crisis

The primary responsibility of the ECB is to maintain price stability in the euro area – to secure the value of our common currency. We take this responsibility with the utmost seriousness as it directly affects the lives of 330 million citizens of the euro area. Since the launch of the euro in 1999, we have fulfilled our mandate even through difficult times. We will continue to fulfil this task.

There is no doubt that the recent period of economic and financial turbulence has tested us in new ways. We have had to take new measures to fulfil our responsibility for price stability. We had to look at all the data, assess all the evidence, and decide what measures were necessary to ensure the stability of the euro.

One such decision was to combat market fragmentation by Outright Monetary Transactions (OMT), based on a country committing itself to strict and effective conditionality under an EU/IMF economic adjustment programme. At almost one year from its announcement, the benefits of OMT are visible to everybody:

• Banks have been able to re-access the market, for both funding and for raising capital, and the strong divergence in funding costs across constituencies has receded.
• Deposits have flown back: banks in stressed countries have seen the deposits by the euro area money-holding sector increasing by about 200 billion euros since August 2012.

Another sign of normalisation, and a very important one for German savers, has been the increase in German government bond yields, previously suppressed by panic-driven safe-haven flows, which have edged up by around 25 basis points.

And Target balances, which are a summary indicator of fragmentation, have declined by €285 billion euros, or 25 per cent, since the peak last year, and now are at the same level as in late-2011. Therefore, also perceived risks for creditor countries such as Germany have greatly diminished.

The establishment of OMT has therefore been beneficial to everybody: sovereigns, corporations, banks as well as individuals, and it has benefited both periphery and core countries.

The decision on OMT was necessary. It was effective. And it was in line with our mandate. It was necessary to remove severe obstacles to the appropriate transmission of monetary policy that were putting the singleness of our monetary policy at risk and which were harming the economy of the euro area very deeply. And it is fully in line with our mandate because it is designed to preserve price stability for the euro area and uses instruments foreseen in the Statute.

In short, for the ECB responsible leadership has meant being true to our founding Treaty. Staying independent from the voices calling for us to “do more” or to “do less”; staying fully focused on our mandate to secure price stability for the citizens of the euro area.

Full speech

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