Mr Papademos justified the progressive scaling back of the ECB's non-standard measures, which have been put in to place to deal with the worst effects of the financial crisis. The ECB also welcomed the tightening of the Stability and Growth Pact rules and the bolstering of economic surveillance
Greece's fiscal consolidation measures and the support plan drawn up by the other EU Member States and the IMF are welcome, but Greece and other Eurozone countries must make a special effort to restore public trust in the sustainability of public finances, said outgoing ECB Vice-President Lucas Papademos in his last appearance before the EP Economic and Monetary Affairs Committee on Tuesday. Mr Papademos was presenting the ECB's annual report for 2009.
In his presentation, Mr Papademos justified the progressive scaling back of the ECB's non-standard measures, put in place to deal with the worst effects of the financial crisis. He also said that the ECB welcomed the tightening of the Stability and Growth Pact rules and the bolstering of economic surveillance.
Greece takes centre stage
Most questions from MEPs were about developments in Greece. Wolf Klinz (ALDE, DE) asked whether the exposure of certain banks to Greek debt could lead to a second banking crisis. Anni Podimata (S&D, EL) asked why markets were still piling the pressure on Greece. "Are they not convinced by the EU/IMF funding mechanism or is pressure building up on all of the Euro zone? she asked. Nikolaos Chountis (GUE, EL) asked what would happen if disagreements arose between the IMF and the EU about the reform measures Greece should take.
Mr Papademos replied that he did not expect Greece's sovereign debt to cause any second crisis for banks. However, in view of the general economic climate, loan losses could persist. Continued market pressures were caused by questions about Greece's ability to refinance its debts, and no discrepancy between the EU and IMF should not arise, because all those involved in assisting Greece share the same objectives, he explained.
Controlling risk and imbalances
Mr Papademos stressed that the economy was in need of risk management and reduction and that containing government expenditure was the key to lessening imbalances in the Eurozone. On reducing risk, Mr Papademos called for speedy implementation of the Alernative Investment Funds and Capital Requirements directives and the financial supervisory package, all currently being discussed by the EP and the Council.
Philippe Lamberts (Greens/EFA, BE) challenged Mr Papademos' prioritisation of containing government expenditure, saying that this was a matter for politicians and not central bankers. Mr Papademos responsed that his statement was in line with what history had proven.
Enikő Győri (EPP, HU) asked for Mr Papademos' views on the differing positions of EU institutions on financial supervision. The ECB Vice-President said he believed that the Commission's proposals were the most realistic, especially regarding micro-prudential supervision.
At the end of the discussion, MEPs thanked Mr Papademos for his contributions during his eight year tenure. He will now be replaced by Vítor Constâncio, currently Portugal's Central Bank Governor
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