Members of the EP Economic and Monetary Affairs Committee approved by acclamation the appointment of Peter Praet, the Belgian candidate for a place on the Executive Board of the European Central Bank.
In his appearance before the committee, Mr Praet emphasised that that the eurozone had brought a degree of price stability: a great benefit in a financial crisis. The crisis had shown the need to beef up eurozone governance, with public support. The three big challenges in the coming months were in his view: management of the credit cycle in the economy, strengthening the European dimension of monetary union and hence eurozone governance and, lastly, normalisation of monetary policy, with an end to exceptional measures and a return to the ECB's initial mandate.
Replying to the many questions asked by MEPs, Mr Praet underlined the importance of reverting to the ECB's initial mandate, namely to achieve price stability. The European Stability Mechanism (ESM) should have a broad range of instruments, he believed. He called for the right balance between solidarity and responsibility and also stressed that the public must feel a sense of ownership of the goals pursued in relation to governance, as these were crucial to the mechanism's success. The ECB had a fundamental interest in seeing that financial structures functioned well and wished to be involved in devising norms and standards. The time was not yet ripe for Eurobonds, in his view. While unconvinced of the value of a tax on financial transactions at European level, he acknowledged that a feasibility study as proposed by Parliament could provide useful ideas.
Combining price stability and financial stability remained the key challenge, argued Mr Praet. The eurozone pact, due to be adopted at the spring European Council, seemed to him a step in the right direction. However, he called for stricter rules and automatic sanction mechanisms, although he stressed the need for public support in order to avoid any populist backlash.
Answering questions about the situation in Greece, Mr Praet did not back the option of debt restructuring but emphasised the importance of giving Greece time to implement the agreed reform programme and restore the situation. Lastly, turning to the current events in Japan, he said the necessary contacts had been made to ensure that local financial infrastructure functioned smoothly. The disaster was of course a human tragedy. It was difficult to make an overall assessment of its impact at this point but this new element of uncertainty, added to the situation in the Middle East, could have a deleterious effect on growth.
Next Steps:
The plenary vote on Mr Praet's appointment is scheduled for Thursday 24 March.
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