Changes from report parliamentary committee draft to plenary report

EXPLANATORY STATEMENT

Over the past four years, the European Union has grappled with exceptionally high levels of inflation. Rising energy prices have had a cascading effect on the economy, resulting in increased consumer prices. As the institution tasked with maintaining price stability in the euro area, the European Central Bank (ECB) bears the responsibility of addressing this issue and facilitating a swift return to stable prices. However, it took the central bank over three years to bring inflation back to normal levels. This in contrast to the United States, where the Federal Reserve managed to control inflation more promptly.

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ChangedThe recent decline in both the Harmonizedharmonised Consumerconsumer Priceprice Indexindex (HCIP)(HICP) and core inflation is certainly encouraging. Nevertheless, it is important to note that the ECB's initial response was delayed and indecisive, allowing inflation to escalate more than necessary. Clearly, its models have underperformed in recent years and should be fundamentally reassessed and improved. With inflation levels now normalised, it is imperative for the ECB to reduce its purchasing programs,programmes, which have effectively amounted to monetary financing through unconventional policies. While these programsprogrammes were legally permissible, the ECB should adhere to the spirit of the EU Treaty, which prohibits the monetary financing of European governments.

On a more fundamental level, the rapporteur underscores the significance of central bank independence. To prevent political interference in its mandate to achieve price stability, the central bank has been granted statutory independence. This autonomy allows the ECB to focus on its objectives without external pressures, which necessitates that it refrains from making political decisions. The rapporteur considers this principle vital for safeguarding the integrity of the common currency and its issuer. In practice, this applies to the ECB’s secondary objectives, which aim to support the broader goals of the European Union. It is essential that the ECB pursues these objectives without compromising its primary focus on price stability or succumbing to political motivations. The rapporteur considers that the ECB should therefore limit itself to fostering a stable macroeconomic environment characterised by low and predictable levels of inflation.

Additionally, the ECB is making progress on the digital euro. This initiative offers clear benefits, including enhanced strategic autonomy and improved financial inclusion. However, it is important to emphasise that the digital euro should complement, rather than replace, physical cash.