ECB Bini Smaghi: Policy rules and institutions in times of crisis

15 September 2011

He stressed that the ECB acts in full independence, with a clear primary objective, which is price stability in the euro area as a whole. In recent months, the ECB has taken measures commensurate with the gravity of the situation with the intent of pursuing the objective that it has been assigned.

Bini Smaghi presented the following conclusions:

• The ECB is fully aware of the risks, related to a possible excess of activism on the one hand and benign neglect on the other. The ECB has assumed their responsibilities in full, and seeks to remind other institutions of theirs. The ECB has explained the reason for their actions, the impact they have on market conditions and liquidity and its aims. They are subject to scrutiny by the public and the markets.
• Anyone who thinks that the ECB has been excessively active on the market, for example on the market for government securities, or the opposite, must first of all demonstrate that such actions have not enabled the ECB to achieve its goal. Bini Smaghi does not think there is any indicator – based on market expectations, those of professional forecasters and other indicators – which shows that any of the interventions implemented have undermined the ability of the ECB to maintain price stability in the euro area in the years to come. So he regards many of the criticisms of the ECB to be the result of inadequate economic analysis, of insufficient knowledge of the crisis in which we find ourselves and of anxiety resulting from experiences in the distant past that are not relevant to the current situation.
• There is no doubt that we are going through a difficult period for the economic and financial stability of the euro area. The will to act in order to defend what we have gained is not enough; drawing up plans for the long term is not enough either. Rapid action is needed by various policy-makers, with each living up to his own responsibilities. The consolidation of public finances and the restoration of competitiveness at a global level are the top priority. This result is not possible in many countries without calling into question prerogatives and rights that until now were regarded as acquired, which nobody wants to give up, but which in the current situation means rent positions, privileges, preferential treatment.
• There is no upcoming generation to whom we can pass the burden of adjustment. It’s up to this generation – in other words, us – to shoulder our own responsibilities.

Full speech

© ECB - European Central Bank