Changes from report parliamentary committee draft to plenary report

Added6. Stresses that both the ECB’s monetary policy, delivering on its mandate, and fiscal policies, should work in tandem to help European citizens and households, as well as small businesses;

Removed6. Regrets that core inflation remains high, with only two euro area Member States reporting core inflation rates below 2 % in September 2024;

Added7. Takes note of the disparities between Member States with regard to inflation levels above or below the ECB’s 2 % target; emphasises that inflation diminishes the purchasing power of fixed incomes, savings and pensions and that it distorts the signalling function of prices, that ensures an efficient allocation of resources, thereby having a negative impact on economic stability;

Removed7. Warns the ECB against the temptation to lower interest rates too quickly, given the risk that inflation levels could start increasing again; stresses that the ECB itself expects a temporary increase in inflation levels in the last quarter of 2024 as previous sharp falls in energy prices drop out of the annual rates;

Added8. Stresses that inflation triggered a ‘cost of living crisis’ for EU citizens; emphasises therefore the imperative of reducing inflation to its target rate of 2 %; notes that high inflation levels disproportionally affect lower-income households that spend a higher proportion of their budget on necessities; stresses that bringing headline and core inflation back down to their target levels is therefore also important to maintaining social cohesion;

Removed8. Recalls that the Economic and Monetary Union requires solid fiscal policies in the Member States in order to be able to respond to external shocks;

Added9. Regrets that core inflation still remains high in the euro area (2.7 % in November 2024), with only one euro area Member State reporting core inflation rates below 2 % in November 2024; recalls that this situation generates economic uncertainty, discourages savings and increases citizens’ living costs, particularly affecting those on fixed and limited incomes;

Removed9. Recalls that prudent fiscal policies by the Member States can complement the ECB’s efforts to keep inflation low; highlights that addressing excessive public deficit and debt levels is crucial to maintaining a stable economy and sustainable growth;

Added10. Stresses that keeping interest rates too high could harm economic growth; calls on the ECB not to lower interest rates too quickly, given the risk that inflation levels could start increasing again while inflation is already above 2 %; highlights the key role that inflation expectations play and that excessive volatility in inflation rates might distort inflation expectations; invites the ECB to assess the impact of interest rate changes on different economic sectors, among them capital-intensive sectors;

Removed10. Expresses concern about the high levels of government debt and deficits within the Member States and the risks of fiscal dominance that this entails;

Added11. Acknowledges that the monetary policy decisions taken by the Governing Council of the ECB since the inflation crisis stemming from the rise in energy prices have put inflation on a path which is compatible with the achievement of the objective of price stability, while avoiding a serious deterioration in economic activity or employment;

Added12. Recalls that the Eurosystem was built on the principle of monetary dominance and that the economic and monetary union therefore requires solid fiscal policies in the Member States in order to be able to respond to external shocks; recalls the need for adequate implementation of the new fiscal framework to ensure the credibility of fiscal policies at the level of the economic and monetary union; notes that sufficient fiscal space also allows Member States to respond to external shocks; notes the flexibility provided by the new fiscal rules in this regard; points out that Member States can enhance their resilience to external shocks through fiscal measures as well as with growth-enhancing reforms;

Added13. Recalls that prudent fiscal policies by the Member States can complement the ECB’s efforts to keep inflation low and thereby protect incomes; highlights that addressing excessive public deficit and debt levels is crucial to maintaining a stable economy, sustainable growth and to having the policy space available for governments to respond to adverse shocks; notes in this respect the recent findings of the Financial Stability Review concerning high levels of national debt;

Added14. 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;

Monetary policy

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Changed11.15. Strongly welcomes the fact that headline inflation has come down from its peak of 10.6 % in October 2022 to 1.72.2 % in SeptemberNovember 2024;

Change 10

Changed12.16. Welcomes the decrease in core inflation from its peak of 7.6 % in March 2023 to 2.7 % in SeptemberNovember 2024, but expresses its unease at its historically and persistently high level; notes with concern that high core inflation could translate into higher headline inflation numbers;

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Changed13.17. RegretsNotes that it has taken the ECB more than three years to achieve a level of inflation that is commensurate with its target level of 2 %; recalls in this regard the ECB’s incorrect assessment that inflation was expected to be only transitory;

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Removed14. Stresses that the ECB was late to act when inflation started rising in January 2021 and surpassed the 2 % target level in July 2021; recalls in this regard the ECB’s assessment that inflation was expected to be only transitory;

Added18. Stresses that supply shocks, primarily originating from external sources, were among the key drivers of the inflation surges; recognises that monetary policy has a more direct effect on inflation levels when it stems primarily from demand factors rather than supply factors;

Removed15. Invites the ECB 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;

Added19. Welcomes the ECB’s efforts to regularly update its models; invites the ECB to continue reviewing and improving its models and their role in its policymaking in light of the subpar performance of the models in recent years, in order to learn from previous crises, particularly to better distinguish between demand-driven and supply-side sources of inflation; stresses that economic supply shocks can arise from many sources, among others geopolitical events, climate-related or natural disasters and cyberattacks;

Removed16. Supports the ECB’s decision to scale back its asset purchase programmes, in view of the excess liquidity in the market and decreased levels of inflation;

Added20. Stresses that the inclusion of owner-occupied housing (OOH) in the HICP is desirable for reasons of both representativeness and comparability across countries in the euro area; calls for an acceleration of the roadmap in order to ensure the rapid inclusion of OOH data in the HICP; welcomes the Governing Council of the ECB’s commitment to consider both in its monetary policy assessments and decisions also the available inflation measures regarding the quarterly stand-alone OOH index;

Change 13

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Removed18. Regrets the establishment of the transmission protection instrument (TPI) in July 2022; calls on the ECB to respect not just the legal prohibition of monetary financing but also its economic meaning; stresses in this regard that selectively purchasing government debt amounts to monetarily financing an EU Member State;

Added22. Underlines that interest on commercial banks’ holdings of bank reserves resulted in the Eurosystem paying more than EUR 120 billion interest to credit institutions in 2023, amounting to at least 0.8 % of euro area GDP; considers this is a significant subsidy to the banking sector; asks the ECB to mitigate this issue;

Removed19. Stresses that diverging interest rates in the euro area are generally the result of different risk premia on government bonds; stresses that purchases under the TPI would merely conceal the symptoms of loose fiscal policy; calls on Member States to conduct responsible fiscal policies and ensure sustainable debt levels;

Added23. Stresses that the ECB’s purchase programmes are unconventional policies applicable only during crisis periods that, if not carefully implemented, risk contravening the prohibition on monetary financing under Article 123(1) TFEU; invites the ECB to continue monitoring the gradual reduction of its balance sheet, to limit prolonged potential destabilising effects in the euro area, while monitoring the growth and competitiveness of the EU’s economy; invites the ECB to share insights on the impact of the purchasing programmes on the functioning of financial markets, including the impact on pension funds and pension insurance cooperation;

Added24. Stresses that an even transmission of monetary policy is vital to the achievement of the ECB’s price stability mandate; underlines that excessive divergence in sovereign yields makes credit conditions inconsistent with the uniform transmission of monetary policy and makes reducing public debt exceedingly difficult; takes note of the establishment of the transmission protection instrument (TPI) in July 2022 as a tool to support the effective transmission of monetary policy;

Added25. Stresses that diverging interest rates in the euro area are – in the absence of any serious financial disturbances – generally the result of different risk premiums on government bonds reflecting, among other factors, different approaches to fiscal policy; notes that TPI interventions may conceal underlying fiscal challenges; stresses that TPI should be used under the conditions set by the ECB only to address financial market stress unrelated to economic fundamentals; calls on Member States to conduct responsible fiscal policies and ensure sustainable debt levels, thereby ensuring their resilience against current and future shocks;

Digital euro

Change 15

Removed20. Welcomes the ECB’s progress on the digital euro project and its ongoing dialogue with Parliament; highlights the expected benefits, such as enhanced strategic autonomy, improved financial inclusion and the availability of an offline back-up payment system;

Added26. Welcomes the ECB’s progress on the digital euro project and its ongoing dialogue with Parliament; underscores that the digital euro should deliver clear added value to European citizens, including enhanced strategic autonomy in payments, a higher level of competition in the retail payment market, potential to foster innovation in payments and finance, improved financial inclusion and a reliable offline backup payment system; calls on the ECB to clearly communicate these benefits in order to foster public trust and awareness; notes that the EU co-legislators will need to strike the right balance, among others, on holding limits, privacy concerns, competition with private payment solutions and usability in a business context;

Removed21. Reiterates that the digital euro should serve as a complement to physical cash, that it should not replace cash entirely and that cash should remain available at all times;

Added27. Considers that the digital euro will only become a success story if it provides tangible added value for European citizens that they can understand; notes that currently many European citizens either have not heard about the digital euro project or remain sceptical; invites the ECB, together with relevant stakeholders, to launch a broad information campaign on the digital euro in order to allay citizens’ concerns;

Removed22. Stresses the need for a compensation model for the banking sector, which is tasked with the practical implementation of the digital euro project;

Added28. Reiterates that the digital euro will serve as complement to physical cash, that it should not replace cash and that cash will remain widely available and accessible at all times in order to ensure a plurality of means of payment; welcomes, in that context, the proposal for a regulation on the use of euro cash as legal tender;

Change 16

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Change 17

Added30. Calls on the ECB to take due account of financial stability concerns and potential changes in the structure of the financial sector resulting from the introduction of the digital euro; recalls the importance of holding limits, in order not to create additional risks for banks’ balance sheets, especially during crises;

Added31. Calls on the ECB to prioritise robust privacy safeguards, establishing them as a gold standard for privacy for central bank digital currency (CBDC), to secure public confidence and address citizens’ concerns regarding data protection and autonomy;

Secondary objectives

Change 18

Removed24. Calls on the ECB to refrain from taking politically motivated decisions and to stick to its mandate of maintaining price stability; stresses that overstepping this mandate touches on the central bank’s political independence;

Added32. Stresses that the EU’s secondary objectives are indeterminate as currently specified by the Treaties; notes that the supportive nature of the ECB’s secondary objectives complements the primary mandate; according to the Treaties, the EU’s aim is to promote peace, its values and the well-being of its peoples, create balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment;

Removed25. Stresses that the ECB’s secondary objectives are best achieved when the free market operates in a stable macroeconomic environment, based on predictable price levels, that encourages investment;

Added33. Recalls that without prejudice to the ECB’s primary mandate, the Treaties require it to support the general economic policies of the Union; calls on the ECB to adhere to its mandate when interpreting or acting upon its secondary objectives; stresses that overstepping this mandate touches on the independence of the ECB; considers that maintaining price stability and stable macroeconomic conditions is conducive to creating the right conditions for the implementation of the EU’s general economic policy objectives;

Removed26. Stresses that the ECB should prevent distortions in the signalling function of prices given this function’s role in ensuring an efficient allocation of resources; invites the ECB to assess to what extent climate change affects its ability to maintain price stability;

Added34. Stresses that the ECB’s secondary objectives are best achieved when operating in a stable macroeconomic environment based on predictable price levels that encourages investment; calls on the ECB to include a specific chapter in its annual report explaining how it has interpreted and implemented its secondary objectives;

Removed27. Insists that the ECB respect the market neutrality principle in all of its monetary operations; regrets that the ECB’s actions to decarbonise its corporate bond holdings have not followed a market neutral approach by its very definition;

Added35. Stresses that the ECB should prevent distortions in the signalling function of prices that ensures an efficient allocation of resources; invites the ECB to further assess to what extent climate change affects its ability to maintain price stability;

Removed28. Calls on the ECB to use all its available tools to ensure that banks take climate risk seriously in order to mitigate the financial risks resulting from climate change;

Added36. Insists that the ECB respect the market neutrality approach in its monetary operations;

Added37. Notes that the ECB’s actions to decarbonise its corporate bond holdings have not strictly followed a market neutral approach;

Added38. Invites the ECB to review its policies to ensure that these measures promote EU competitiveness whereas such actions should in no way jeopardise the primary objective of the ECB;

Added39. Calls on the ECB to use all its available tools to ensure that banks take all financial and external risks, including climate and geopolitical risks, seriously; welcomes the ECB’s activities to further enhance the Eurosystem’s risk assessment tools and capabilities in order to better include climate- and environment-related risks, particularly because climate change and extreme weather phenomena could lead to greater price volatility, especially in the agri-food sector; invites the ECB to continue its work on climate risk stress tests developed to assess the resilience of banks and corporations in the face of climate transition risk;

Added40. Notes the Climate and nature plan 2024-2025; invites the ECB to draft a Geopolitics plan 2025-2030 in order to better understand the implications of war and conflict on price stability and treat all potential sources of external shocks equally;

Other aspects

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Changed29.41. Underlines that a strengthened international role of the euro would lead to lower interest rates in the euro area, increased status for the EU on the international stage and enhanced macroeconomic stability; recalls that strengthening the international role of the euro would contribute to enhancing the EU’s strategic autonomy;

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Changed30.42. Calls on the ECB to look into strengthening the international role of the euro with a view to enhancing its attractiveness as a reserve currency and support market-driven shifts in this direction; notes that the completion of the economic and monetary union could foster the international role of the euro;

Change 21

Removed31. Welcomes the attention that the ECB is paying to the risks of cyberattacks; calls on the ECB to ensure the safety and security of the monetary system for its users, especially in the light of ongoing geopolitical developments;