Changes from report parliamentary committee draft to plenary report

MOTION FOR A EUROPEAN PARLIAMENT RESOLUTION

▸4 unchanged paragraphs

on European Central Bank – annual report 2023

(2023/2064(INI))

The European Parliament,

– having regard to the European Central Bank (ECB) annual report 2022,

Changed– having regard to the ECB’s feedback of 25 May 2023 on the input provided by the European Parliament as part of its resolution on the ECB’s annual report 2021,

– having regard to the Statute of the European System of Central Banks (ESCB) and of the ECB, in particular Articles 15 and 21 thereof,

– having regard to Articles 123, 127(1) and (2), 130 and 284(3) of the Treaty on the Functioning of the European Union (TFEU),

Added– having regard to Articles 3 and 119 of the Treaty on European Union (TEU),

▸4 unchanged paragraphs

– having regard to the Eurosystem staff macroeconomic projections of 15 June 2023 for the euro area and the decisions taken by the ECB Governing Council,

– having regard to the monetary dialogues between its Committee on Economic and Monetary Affairs and President of the ECB Christine Lagarde of 20 March 2023 and 5 June 2023,

– having regard to the Commission proposal of 28 June 2023 for a regulation of the European Parliament and of the Council on the establishment of the digital euro (COM(2023)0369),

– having regard to its decision of 1 June 2023 on the arrangements in the form of an exchange of letters between the European Parliament and the ECB on structuring the practices for interaction in the area of central banking,

Added– having regard to its resolution of 19 May 2022 on the social and economic consequences for the EU of the Russian war in Ukraine - reinforcing the EU’s capacity to act,

Added– having regard to the Paris Agreement adopted under the UN Framework Convention on Climate Change,

Added– having regard to the European Pillar of Social Rights,

– having regard to Rule 142(1) of its Rules of Procedure,

Changed– having regard to the report of the Committee on Economic and Monetary Affairs (A90000/2023),(A9-0412/2023),

Change 1

ChangedA. whereas, according to the June 2023 Eurosystem staff macroeconomic projections, the growth of the euro area economy is expected to slow down from 3.5 % in 2022 to 0.9 % in 2023;2023, before rebounding to 1.5 % in 2024; whereas, according to a Eurostat flash estimate, the euro area grew by just 0.6 % in 2023; whereas this represents the worst performance since the recession of 2020;

Change 2

ChangedB. whereas, according to the JuneSeptember 2023 Eurosystem staff macroeconomic projections for the euro area, headline inflation is expected to average 5.45.6 % in 2023, 3.03.2 % in 2024 and 2.22.1 % in 2025, despite falling energy prices and easing supply bottlenecks; whereas core inflation has been more persistent, with an increaserising to 5.5 % in June 2023,2023 andthen decreasing to 4.2 % in September 2023; whereas core inflation is projected to overtake headline inflation in the near term and to remain above it until early 2024, mainly owing to strong wage growth;

Change 3

ChangedC. whereas, according to the CommissionCommission’s 2023 economic forecast, government deficits are projected to decline to 3.1 % of GDPgross domestic product (GDP) in 2023 and 2.4 % in 2024; whereas the government debt to GDP ratio decreased in the euro area from 95.0 % to 91.2 % and in the EU-27 from 87.4 % to 83.7 % in 2022 and 2023 respectively; whereas this is still above the Treaty reference values; whereas government debt and deficits vary widely among Member States;

Change 4

ChangedD. whereas the ECB is politically independent, which means that neither EU institutions and agencies nor Member State governments should seek to influence it; this independence requires the ECB to refrain from taking political decisions;

Change 5

RemovedE. whereas the ECB’s primary objective is to maintain price stability, which it has defined as 2 % inflation over the medium term;

AddedE. whereas the European Commission stated that ‘additional private and public investment needs in relation to the twin transitions and their policy objectives are estimated at nearly EUR 650 billion per year until 2030’;

AddedF. whereas the ECB’s primary objective is to maintain price stability, which it has defined as symmetric 2 % inflation over the medium term;

AddedG. whereas, without prejudice to the primary objective of price stability, the ECB should also support the general economic policies in the EU with a view to contributing to the achievement of the EU’s objectives as laid down in Article 3 TEU;

H. whereas Article 123 TFEU and Article 21 of the Statute of the ESCB and of the ECB prohibit the monetary financing of governments;

Change 6

AddedI. whereas the ECB is accountable to Parliament as the institution representing EU citizens;

General overview

Change 7

Removed1. Welcomes the role of the ECB in safeguarding euro stability; underlines that the statutory independence of the ECB, as laid down in the Treaties, is a prerequisite for it to fulfil its mandate of maintaining price stability;

Added1. Recalls that Article 127 TFEU states that ‘The primary objective of the European System of Central Banks (ESCB) shall be to maintain price stability. Without prejudice to the objective of price stability, the ESCB shall support the general economic policies in the Union with a view to contributing to the achievement of the objectives of the Union as laid down in Article 3 of the Treaty on European Union. The ESCB shall act in accordance with the principle of an open market economy with free competition, favouring an efficient allocation of resources, and in compliance with the principles set out in Article 119.’;

Removed2. Underlines that price stability is a prerequisite for the ECB to deliver on its mandate to support the EU’s general economic policies, such as the green and digital transitions; stresses that price stability is essential for attracting long term investments;

Added2. Echoes the statutory independence of the ECB as enshrined in Article 130 TFEU, highlights, moreover, that this independence should always be complemented by a corresponding level of accountability;

Removed3. Fears that, without properly delivering on its mandate of maintaining price stability, the ECB risks losing its legitimacy;

Added3. Is concerned that, if the ECB fails to bring inflation to the target level in a timely manner, while increasing the financing costs in the euro area, particularly for citizens and companies, the ECB risks losing its credibility;

Removed4. Is deeply worried about the persistently high inflation rates, especially core inflation rates, and their detrimental impact on competitiveness, investments, job creation and the purchasing power of consumers;

Added4. Is deeply worried about persistently high inflation rates, especially core inflation rates, and their detrimental impact on competitiveness, investments, job creation and consumers’ purchasing power, affecting those who have fixed or limited incomes in particular; calls on the ECB to take all necessary measures to reduce the inflation rate in accordance with its mandate; recalls that such a situation causes economic uncertainty and increases the cost of living for citizens; stresses that this can lead to increasing inflation expectations, which sustain a cycle of price hikes and undermine economic stability; notes that quantitative inflation targets are to be met over a medium-term horizon; invites the ECB to provide more information on the monitoring and setting of the neutral interest rate;

Change 8

Changed5. ExpressesTakes concernnote aboutof the highdifferent levels of debt anddebt, government deficits and public investment levels within the Member States and the potential risks and problems that this entails;entails notesfor economic stability, investor confidence, economic growth and long-term prosperity; regrets that theinsufficient situationsteps isto worsereform competitiveness and public investment were taken while interest rates were low; stresses its particular concern over rising debt financing costs, especially in the eurocase areaof thansovereign indebt, non-eurodue areato Memberrising States;interest looksrates; forwardrecalls that responsibly addressing public deficit and debt levels is crucial to avoid the risks associated with the current inflation in order to maintain a stable economy and sustainable growth; urges a swift outcome of the Commission’s legislative proposals on revising the EU’s economic governance rules andrules; welcomes the ECB’s opinion in this regard; points out that expansive fiscal policies could counteract the ECB’s policy of monetary tightening;

Change 9

Removed6. Regrets Russia’s ongoing aggression against Ukraine; agrees with member of the Executive Board Isabel Schnabel on the risk the war entails in terms of negative supply side shocks;

Added6. Denounces Russia’s unprovoked invasion and ongoing aggression against Ukraine and the ongoing negative supply-side shocks this entails; is concerned about its enduring, unpredictable and severe repercussions for the European economy and society, particularly for the most exposed and vulnerable groups, such as lower-income households and SMEs; welcomes in this regard the inclusion of REPowerEU in recovery and resilience plans in order to reduce energy dependence on Russia, support strategic autonomy and address supply-side shocks;

Change 10

Changed7. Highlights that threats to European competitiveness and the international role of the euro do not only doarise persistentfrom high levels of inflation, the ongoing war in Ukraine and high and divergent levels of government debt in the Member StatesStates, threatenbut also the competitivenessinstitutional architecture of the European economy, andeuro thusarea, the internationalincreasingly roleburdensome costs of regulation, the euroincreasing asfragmentation well,in butglobal alsotrade, theand upwardan priceimpending pressuresubsidy followingrace theof implementationprotectionist ofpolicies between states; calls on the EuropeanECB Greento Deal,look into strengthening the riseinternational role of fragmentationthe andeuro protectionismwith ina globalview trade,of andenhancing anits impendingattractiveness subsidyas racea betweenreserve states;currency;

Change 11

Changed8. Echoes President Lagarde’s warning that fiscal support should be temporary, targeted and limitedtailored and should not hindercounteract the task of monetary policy; calls on the Member States to align their respective fiscal policies with the overall objective of the ECB’s monetary policy; recalls that the Economic and Monetary Union requires solid fiscal policies in Member States in order to be able to respond to external shocks; calls for fiscal efforts to focus on productive investments and reforms; points out that governments, as well as the Commission, can support citizens and industries not only through fiscal measures, but also by focusing on growth-enhancing reforms;and socially balanced reforms as well as public and private investment in infrastructure; notes, however, that the euro area’s architecture currently remains based on the premise of monetary dominance; notes that the high levels of inflation require a strong commitment by all EU institutions and national authorities in order to tackle the economic and social consequences of the inflationary crisis;

Change 12

Removed9. Welcomes the ECB’s support for a well thought out completion of the banking union and the capital markets union; recalls that this would contribute to a larger spread of risks within and the enhanced financial stability of the monetary union;

Added9. Notes that the ECB’s monetary policies aimed at delivering its primary mandate are subject to a proportionality assessment; notes that the proportionality assessment takes into account the impact of monetary policy measures on the broader economy and economic policies; stresses that, where it faces a choice between different sets of policies that are equally conducive to price stability, the ECB must choose those that are best to support the general economic policies in the EU;

Added10. Welcomes the ECB’s long-standing support for a well thought out completion of economic and monetary union, the banking union and the capital markets union; recalls that this would contribute to a larger spread of risks within, and the enhanced financial stability of, the monetary union and to the EU’s economic and social recovery, the reduction of dependence on bank loans, and competition with Asian and American markets; recalls the need for clear political will to advance the completion of the banking union and the capital markets union; notes the ECB’s support for the establishment of a fully fledged European deposit insurance scheme; acknowledges that risk-sharing and risk-reduction are interlinked and that institutional protection schemes play a key role in protecting and stabilising member institutions; invites the ECB to monitor the situation regarding non-performing loans;

Added11. Underlines the pivotal role of small and medium-sized enterprises (SMEs) in the EU’s economy and economic and social convergence and employment; is especially concerned about the effect that the COVID-19 pandemic and the Russian war of aggression in Ukraine are having on SMEs; reiterates the need to remove bureaucratic barriers to cross-border investments in the EU, alleviate the tax burden on SMEs compared to large corporations, simplify legal frameworks to attract capital, encourage SMEs’ entry into financial markets and foster financial literacy among citizens to raise awareness of the benefits of investments;

Monetary policy

Change 13

Changed10.12. Notes that headline inflation has come down from 8.4 % in 2022 to 5.45.2 % in 2023, mainly driven by lower energy prices and the easing of supply bottlenecks; observes, however, that inflation remains well above the target level of 2 %; recognises the ECB forecast of 2.1 % in 2025; is concerned about second-round effects;effects, about inflation expectations of businesses and households becoming de-anchored, and the possibility of a wage-price development when inflation expectations and therefore wages are increasing across the board, and the need to take into account its implications for growth and employment;

Change 14

Removed11. Expresses its uneasiness with the persistently high rate of core inflation; understands that wage growth is expected to remain more than double its historical average, driven by inflation compensation and the tight labour market; encourages the ECB, furthermore, to look into and report on the inflationary effect of the green transition;

Added13. Notes that high inflation levels disproportionally affect lower-income households, which spend a higher proportion of their budget on necessities; stresses that bringing inflation back down to its target level is therefore also important for maintaining social cohesion;

Removed12. Points out that inflation already began rising above target levels in 2021, thus before Russia’s unprovoked aggression in Ukraine; deplores, however, that the ECB only started to tackle inflation in June 2022, even though the COVID-19 crisis proved that it is able to act in a timely manner; notes that other central banks acted more promptly;

Added14. Expresses its unease at the persistently high rate of core inflation, even though it has now been on a downward path for several months; observes that inflation initially started to rise due to supply bottlenecks; understands that wage growth is expected to rise, driven by inflation compensation and the tight labour market;

Removed13. Fully supports President Lagarde’s statement on fighting inflation for as long as necessary; applauds President Lagarde’s plea for humility and to regularly update the ECB’s models; invites the ECB, however, to fundamentally review its models and their role in its policymaking;

Added15. Points out that inflation already began to rise above target levels in July 2021, due to supply bottlenecks, thus even before Russia’s full-scale unprovoked and illegal aggression in Ukraine, which worsened the inflationary pressure; notes, however, that the ECB only started to tackle inflation in June 2022, even though the COVID-19 crisis proved that it is able to act in a timely manner; notes that other central banks acted more promptly; observes that the ECB should act swiftly, fulfilling its mandate to base all its decisions on economic and financial indicators; maintains that a swifter response could have had an earlier impact on price dynamics, thereby averting peak of 10.6% seen in October 2022;

Removed14. Trusts that the ECB will deliver on its mandate to safeguard price stability; notes that real interest rates are still negative;

Added16. Invites the ECB to pursue the analysis of the supply/demand prorogation of inflation;

Removed15. Notes the inflation target level of 2 % in the medium term; observes that inflation has, thus far, either been well below or far above this target level; questions the scientific evidence for this 2 % target level, as well as the meaning of ‘medium term’; invites the ECB to look into a more qualitative approach to price stability;

Added17. Fully supports President Lagarde’s statement on fighting inflation for as long as necessary, while emphasising that monetary policy normalisation can be achieved by a combination of fiscal, monetary and structural policies; applauds President Lagarde’s plea for humility and for regular updates to the ECB’s models; invites the ECB, however, to fundamentally review and improve its models and their role in its policymaking in light of the subpar performance of the models in recent years, in order to adjust them to new economic trends and trends in EU and global financial markets, while taking into account the lessons learned from the ongoing and previous crises and the challenges posed to monetary policymaking;

Removed16. Supports the ECB’s decision to scale back its asset-purchasing programmes, in view of the excess liquidity in the market; notes the ECB’s announcement to decarbonise its corporate bond holdings by ‘tilting’ its portfolio; stresses the importance of the quality of the collateral;

Added18. Recalls that price stability is far from being reached; notes the symmetric inflation target level of 2 % in the medium term; observes that inflation has, in the last 10 years, either been well below or far above this target level; also takes note that inflation is on a downward trend, nearing the ECB’s medium-term objective;