ECB Press Conference - 3 June 2015
Draghi, Mario
At the 3 June, 2015 meeting of the Governing Council of the ECB, it was decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.05%, 0.30% and -0.20% respectively.
 I take the size of your attendance is inversely correlated on how things go, clearly. Ladies and gentlemen, the vice president and I are very pleased to welcome you to our press conference. We will now report on the outcome of today's meeting of the Governing Council, which was also attended by the commission vice president, Mr. Dombrowski. Based on our regular economic and monetary analysis, and in line with our forward guidance, we decided to keep the key ECB interest rates unchanged. Regarding non-standard monetary policy measures, the asset purchase programs are proceeding well. As explained on previous occasions, our asset purchases of 60 billion euros per month are intended to run until the end of September 2016, and in any case, until we see a sustained adjustment in the path of inflation that is consistent with our aim of achieving inflation rates below but close to 2% over the medium term. When carrying out its assessment, the Governing Council will follow its monetary policy strategy and concentrate on trends in inflation, looking through fluctuations in measured inflation in either direction if judged to be transient and to have no implication for the medium term outlook for price stability. Our monetary policy measures have contributed to a broad-based easing in financial conditions, recovering inflation expectations, and more favorable borrowing conditions for firms and households. The effects of these measures are working their way through to the economy and are contributing to economic growth, a reduction in economic slack, and money and credit expansion. The full implementation of all our monetary policy measures will provide the necessary support to the euro area economy. That lead to a sustained return of inflation rates towards levels below but close to 2% in the medium term and underpin the firm anchoring of medium to long-term inflation expectations. Let me now explain our assessment in greater detail, starting with the economic analysis. In the first quarter of 2015, real GDP in the euro area rose by 0.4% quarter on quarter, after 0.3% in the last quarter of 2014. In recent quarters, domestic demand and, in particularly, private consumption were the main drivers behind the ongoing recovery. The latest survey data to May remain consistent with a continuation of the modest growth trend in the second quarter. Looking ahead, we expect the economic recovery to broaden. Domestic demand should be further supported by our monetary policy measures and their favorable impact on financial conditions, as well as by the progress made with fiscal consolidation and structural reforms. Moreover, the low level of the price of oil should continue to support households' real disposable income and corporate profitability, and therefore private consumption and investment. Furthermore, demand for euro area exports should benefit from improvements in price competitiveness. However, economic growth in the euro area is likely to continue to be dampened by the necessary balance sheet adjustments in a number of sectors and the sluggish pace of implementation of structural reforms. This assessment is also broadly reflected in the June 2015 Euro System Staff macroeconomic projections for the euro area, which foresee annual real GDP increasing by 1.5% in 2015, 1.9% in 2016, and 2% in 2017. Compared with March 2015 ECB staff macroeconomic projections, the projections for real GDP growth over the projection horizon remain virtually unchanged. While remaining on the downside, the risks surrounding the economic outlook for the euro area have become more balanced on account of our monetary policy decisions and oil price and exchange rate developments. Inflation bottomed out at the beginning of the year. According to Eurostat's flash estimate, euro area annual HICP inflation was 0.3% in May 2015, up from 0% in April, and compared with minus 0.6% in January. On the basis of the information available and current oil futures prices, annual HICP inflation is expected to remain low in the months ahead and to rise towards the end of the year, also on account of base effects associated with the fall in oil prices in late 2014. Supported by the expected economic recovery, the impact of the lower euro exchange rate and the assumption embedded in oil futures markets of somewhat higher oil prices in the years ahead, inflation rates are expected to pick up further during 2016 and 2017. This assessment is also broadly reflected in the June 2015 Euro System Staff macroeconomic projections for the euro area, which foresee annual HICP inflation at 0.3% in 2015, 1.5% in 2016, and 1.8% in 2017. In comparison with the March 2015 ECB staff macroeconomic projections, the inflation projections have been revised upwards for 2015 and remain unchanged for 2016 and 2017. The Governing Council will continue to monitor closely the risks to the outlook for price developments over the medium term. In this context, we will focus in particular on the past through of our monetary policy measures as well as on geopolitical exchange rate and energy price developments. We acknowledge that the staff projections are conditional on the full implementation of all our monetary policy measures in place. We also take into account that the degree of forecast uncertainty tends to increase with the length of the projection horizon. Turning to the monetary analysis, recent data confirmed the increase in underlying growth in broad money, M3. The annual growth rate of M3 increased to 5.3% in April, up from 4.6% in March. Annual growth in M3 continues to be supported by its most liquid components, with a narrow monetary aggregate M1 growing at an annual rate of 10.5% in April. Non-dynamics gradually improved further. The annual rate of change of loans to non-financial corporations was minus 0.1% in April after minus 0.2% in March, continuing its gradual recovery from a trough of minus 3.2% in February 2014. Despite these improvements, the dynamics of loans to non-financial corporations remain subdued. They continued to reflect the lagged relationship with the business cycle, credit risk, credit supply factors, and the ongoing adjustment of financial and non-financial sector balance sheets. The annual growth rate of loans to households increased further to 1.3% in April 2015 after 1.1% in March. The monetary policy measures we have put in place will support further improvements both in borrowing costs for firms and households and in credit flows across the Euro area. To sum up, a cross-check of the outcome of the economic analysis with the signals coming from the monetary analysis confirms the need to maintain a steady monetary policy course, firmly implementing the Governing Council monetary policy decisions. The full implementation of all our monetary policy measures will provide the necessary support to the economic recovery in the Euro area and lead to a sustained return of inflation rates towards levels below but close to 2% in the medium term. Monetary policy is focused on maintaining price stability over the medium term and its accommodative stance contributes to supporting economic activity. However, in order to reap the full benefits from our monetary policy measures, other policy areas must contribute decisively. Given continued high structural unemployment and low potential output growth in the Euro area, the ongoing cyclical recovery should be supported by effective structural policies. In particular, in order to increase investment, boost job creation and raise productivity, both the implementation of product and labour market reforms and actions to improve the business environment for firms need to gain momentum in several countries. A swift and effective implementation of these reforms in an environment of accommodative monetary policy will not only lead to higher sustainable economic growth in the Euro area, but will also raise expectations of permanently higher incomes. Therefore, it will encourage both households to expand consumption and firms to increase investment today, thus reinforcing the current cyclical economic recovery. As concerns fiscal developments reflect in mainly the cyclical recovery and the low level of interest rates, the aggregate Euro area general government deficit ratio is projected to decline gradually from 2.1% of GDP this year to 1.5% in 2017. The general government debt ratio is projected to decline gradually from 91.5% of GDP this year to 88.4% in 2017. Fiscal policies should support the economic recovery while remaining in compliance with the stability and growth pact. Full and consistent implementation of the pact is key for confidence in our fiscal framework. We are now at your disposal for questions. Claire Jones, Financial Times. I was wondering if it would be possible for you to discuss the package agreed in Berlin on Monday night between yourself and the other Greek creditors, specifically how the ECB would react if Prime Minister Cyprus did not accept the package that is now in the process of being tabled. For my second question, in light of the delay in the publication of the remarks by Benoit Couré last month, would it be possible for you to comment on the pros and cons of private meetings between senior ECB officials and market participants? Thanks. Thank you. Well, the first question, I mean, the answer is no, because basically negotiations, and this, by the way, holds for also for all the other possible questions on this issue. Negotiations are proceeding at this point in time, and so there is no point in me commenting on different aspects of these negotiations and different proposals. The both the Greek government and the institutions have now sets of proposals that they are confronting with each other. Let me say that the one general statement, I mean, the governing council of the ECB wants Greece to stay in the Euro, but there should be a strong agreement. A strong agreement is one that produces growth that has social fairness, but that is also fiscally sustainable and addresses the remaining sources or factors of financial instability in the financial sector. So this would be the component of a strong agreement. So that's what I want to say about that. The other point, two considerations. The first is that we are certainly aware of the prerequisite and the rules that are contained in the code of ethics, the ethical code that governs the executive board members appearances in different sites and on different occasions. They basically amount to saying that we should avoid any situation or conflict of interest and we should not divulge public information. What happened on that occasion was basically a mistake. The text of the speech was meant to go live immediately before the speech would take place just before and instead went live the morning after. So this is leading us now to review our rules, to revisit our rules, making them more explicit and will shortly come out with a new set of rules for as far as speaking engagements are concerned. John Adonno? You mentioned the issue of Greek debt sustainability or alluded to it and the importance of that. Is it perhaps appropriate that the ambition in relation to the primary surplus targets takes into account the recent downward developments in the Greek economy? And secondly, under what circumstances might the ECB be prepared to extend the limit on T-bills acceptance as collateral for emergency liquidity? Well on the second question, you know what the condition should be. That there should be a credible perspective for a successful conclusion of the current review and that would imply by the member countries a disbursement. That would be the condition for the governing council to consider because in any event there is no automaticity for consider a lifting of the T-bills thresholds. And we are not there. On the first question, the answer is yes, yes definitely. It would be the current downgraded perspectives, growth perspectives of the Greek economy should be taken into account in determining what the appropriate budget surplus figures should be. Johanna Tricke? Johanna Tricke, MNI. Mr. Draghi, there is a slight change in language in the introductory statement this month compared to your previous meeting as regarding growth. While this statement only says you expect the economic recovery to broaden, last time it said you expect it to broaden and strengthen. So does that mean that we are running out of steam already? So if you could clarify that please. And then a second question again on Greece, even if you can't give us details about the ongoing negotiations. But should there be no deal by next week? In light of the IMF's OK for Greece to repay the bundling its June repayment to the end of the month, would a non-payment this Friday then have any consequences to the HACAD schedule that you apply on ELA? Thank you very much. Yeah, there is a difference. Yes. Now, the first question quite rightly pointed out there is a difference because there is a, let me say, recovery is on track exactly according to our projections. And however, we had expected stronger figures, stronger than our projections originally. And at some point, many, some indicators were showing this. There has been a loss of some loss of momentum, modest I would say loss of momentum, mostly due to weakening of the economies outside the euro area, emerging markets mostly. And on the other hand, all survey indicators and other data show that domestic demand in the euro area remains strong. So we just wanted to point out this slight loss of momentum coming from the trade sector. On the second point, I don't want to comment on that. We will have to examine exactly what the conditions are. The option of bundling the payments has been used by one country in the 70s, if I'm not mistaken, and we'll see. Thank you. Alessandro Merli. Alessandro Merli, with Solio 24. There was a recent rise in yields in a number of government bonds sector in Europe, especially in boons. Could you give us your assessment of that? Was this positive development that follows the recovery of the economy, or was it an unjustified tightening of conditions? And is there a fear or concern in the governing council that QE may be adding to volatility in markets? Thank you. Well, yes, indeed, there was some reversal in general in financing conditions. Of recent, there have been many explanations that have been given, one of which is what you hinted at. Namely, there is an improvement. One could be there is an improvement in the perspectives of growth. A second explanation is the higher inflation expectations. A third explanation is actually a bunch of technical conditions present in the markets, like, and here I'm going through quickly, them, there have been one directional investments into long-term maturities, and the turnaround has been quite abrupt. Second, there was a strong supply pressure in the sense that issuance had been quite significant by various governments in the meantime. The third explanation is that when shorter dated German bonds became eligible, which they were not because of their negative yields, and they became more eligible later on, there was less need to buy longer dated bonds, and that produces steepening of the curve. The fourth technical condition is simply that volatility by itself generated further volatility and further selling, and the fifth is poor market liquidity because of the absence of certain significant investors during the period of time. Now, it's very difficult to distinguish between these three sets of factors, sets of conditions. So we won't speculate exactly on what explanation is the most likely. But silly, one lesson is that we should get used to periods of higher volatility. At very low levels of interest rates, asset prices tend to show higher volatility. And in terms of the impact that this might have on our monetary policy stance, let me tell you that the Covening Council was unanimous in its assessment that we should look through these developments and maintain a steady monetary policy stance. One question that we have to get used to, greater volatility, what are you planning on doing against that greater volatility? Are you planning on managing the yield curve going forward a bit more, or don't you care about greater volatility? And another question on greater volatility and at the low rates is the IMF is warning that asset managers and insurers in the Eurozone could get actually in trouble because of that policy. So are you preparing the next financial crisis? What would you do? The answer to both questions is no, nothing. But let me also qualify this. We won't plan to change our monetary policy stance. That will stay. As you know, as I've said many times, we have mandate which is maintaining price stability in the definition that we've discussed several times. And we plan to keep our steady course, our course steady and unchanged. And if anything, if necessary, we'll actually add to that. To the second point, it's quite right. A long period, a protracted period of very low interest rates causes a series of problems. First of all, it may increase the financial stability risk, but also it causes problems for insurance companies and for other important financial market actors. Is this a good reason to change our monetary policy? The answer is no. If we were to do the wrong monetary policy for addressing the problems of these specific sectors, we actually would do them a disservice. We would undermine our price stability objective, we would create in the end a more difficult situation for everybody. But what's the answer? The answer is that when we see financial stability risk, they should be addressed by the proper instruments, which they are macro prudential instruments. The second issue is typical of insurance companies. Clearly, insurance companies try to respond to this situation in a variety of ways, which I don't want to discuss because some of them have to do with their business models. But certainly, it's quite clear that certain regulatory provisions make their task of diversifying their investments into higher yield and potentially more liquid investments, they make their task more difficult. Thank you. Mr. Draghi, can you tell us if you think that the negotiations with the Greek government are going in the right direction? If you think that an agreement is closed, and how close can it be? My second question would be about ECB's mandate. It's focused on the price stability, but some economists said it should also include an objective of reducing unemployment. Can you tell us if it's something you can think of and if it's something that could be good for the ECB? Thank you. Thank you. On the first issue, I responded before. I can't give you an update, a real-time report on how the negotiations are going, also because I'm here in Frankfurt, and the negotiations are not taking place here. But also because they are actually in a state of flux. But as I said before, there is a general will and strong determination that in the end an agreement will be found. This agreement should be a strong agreement. And the components that I've listed before are the ones for which, towards which, certainly the ECB is working, but I can say the same as far as the economic commission and the IMF are concerned. A strong growth, social fairness, fiscal sustainability, and addressing the financial stability concerns. On the second point, yes, we have a mandate. It's one mandate that is formulated as pursuing price stability, which the Governing Council, if I'm not mistaken, in 2003, you were there, no? Yes. I love it. In 2003, defined as a rate of inflation, which was close but below 2%. The monetary policy addresses, say, the cyclical component of the weakness in the economy. So for example, now, our monetary policy in pursuing price stability addresses also the cyclical component of the slack we have in the economy. So it does good to both things, price stability and unemployment. But we should not forget that the structural component of our unemployment is high and was high even before the crisis. If I'm not mistaken, was in the border of 9%. So monetary policy cannot address the structural component of the weakness in the economy, cannot address the reasons why potential growth is low. These issues should be addressed by structural policies. Thank you. Brian Blackstone. Brian Blackstone with Wall Street Journal. Are you surprised at all at the pace with which inflation has climbed back into positive territory given that it was minus 0.6% just four months ago? In light of the fact that inflation has come back, can you say anything about the potential two-sided nature of this September 2016 end date for QE? It could end sooner or it could end later, but that it could end sooner if we still get positive surprises on inflation. My second question going back to Greece is there's been five years of these crisis meetings, 11th hour negotiations. There's obviously a lot at stake for the global economy, especially with the IMF and the international community involved. How come the Europeans haven't been able to get a better handle on how to handle this crisis, how to handle these negotiations, given that you've involved the international community in the financing of Greece's rescue? Thank you. Thank you. The answer to the first question is no, we have not been surprised. Inflation came out higher than what market expectations were, but not higher than our expectations. This in a sense has quite important consequences. It strengthened the governing council in its decisions. Basically in its determination and its conviction that it has taken the right decision with the QE, with the size and the design of the QE, but not only the QE, but also the monetary policy measures that have been taken previously in the previous months. Now the second part of your question is really how do we assess whether we have reached our objective of inflation or not? And I've said several times that we're not going to be happy with the one point inflation data, but we'll have to look through the medium term and be convinced that the objective has been reached in a sustained fashion through time. On the other point, it's quite a complicated question to answer. Programs have been designed and they've been agreed. Some of these programs have been implemented. Some other parts have not been implemented. So that's the answer to your question. Why hasn't the eurozone or more generally Europe able to come up with a situation which could be considered as normal in this situation, as ordinary situation? Well, as I said, programs have been designed, have been agreed, and have been implemented. And only partly. Claudia, I was told. But looking at the staff estimates and with inflation picking up, it seems that you already dare where you want to be on prices, on inflation. So does the governing council at least discuss an exit strategy of unconventional policies? No, the answer is no. I mean, exit strategies are really a high class problem. And we are really far from that. So we are not discussing anything about that. But we are not there, by the way. I just wonder what makes you think and say that we are there in terms of inflation. We're still a long way to go. Alessandro Speziale? Alessandro Speziale, Bloomberg News. Another question on Greece. The current haircuts that are applied to Greek debt relate to a period when it was foreseen that Greece would return to market. How long do you think they are sustainable? And what would be the effect in this respect of the mispayment to the IMF, for example? Thank you. You're perfectly right. We've been considering this now for a while. We'll have to see again at the next meeting how things are. What is the state of negotiations or the state of markets? What's the, in other words, how the evolution, the current evolution affects the quality of the Greek debt? And that's the key, that's the key decision we have to take. On the rest, I don't want to speculate, really. What happens if? Thank you. Jack Ewing? Jack Ewing, New York Times. I think you said a few minutes ago something about you were prepared to add to your monetary policy measures, if I heard you correctly. You're making faces that maybe I heard you wrong, but I just was going to ask if you could tell us if does that mean that you would be willing to increase the size of your bond purchases? And if so, what would be the trigger to do that? What would you be looking for? Second question at the G7 Finance Minister and Central Bankers meeting last week, you heard a presentation from Robert Schiller who warned of a bubble in the stock market. And I wonder if that's a concern that's shared by the governing council or by you. Thank you. Thank you. Now we have, we assess that our present monetary policy stance is adequate to reach our objectives. In fact, the reaching of the objectives in terms of inflation and growth is predicated, is conditional on the full implementation of the monetary policy stance. As it has been designed, as it has been announced, as it has been implemented. What I said before is that if need be, if there were other factors which would, for example, create an unwanted tightening of monetary policy, or when we discussed growth, we said there are downside risks to growth and price stability, then we would have to review and reconsider the size, the timing, the design of the program. So it's only to say that if needed, we will add to that. But so far, we frankly see no reason to do that. On the second point, the answer is we, at the present time, we, by the way, we are fully aware, as I said before, that low interest rates for a protracted period of time tend to generate financial stability risks. We monitor quite closely all these developments. And we don't see so far the emergence of these risks. Even in one of these sectors that is most often quoted, like the housing market, we see selected local situations where one could actually think that price movements are wide. But there isn't any real financial stability risk that we can see in that market or elsewhere. I should also add the leverage, private sector leverage, because what you look at is lots of things. You don't look only about price increases. But you also want to see whether these increases in prices have been accompanied by increasing leverage. And we don't see that, at least in bank leverage. But having said that, I repeat what I said before, if there were to be financial stability risks in the stock market, for example, they would have to be addressed by the proper instruments, which is not a change in our monetary policy. Martin Wolsak, Dutch pension funds are heard by low interest rate environment, just like the asset managers we talked about. Do you think their regulator should allow them to diversify more as well? Well, it would be difficult for me to actually identify a set of pension funds in a specific country. What is quite clear, and I had that remark in mind, was for insurance companies that certain parts of the regulatory framework make a diversification more difficult. For example, it's not the only example, by the way, but the treatment that securitization receives in the present regulatory framework makes it difficult for companies to invest in assets that are potentially illiquid and make them liquid. That's one example. I mean, securitization is important to liquefy assets that are otherwise illiquid. Jean-Philippe Lacour. Here am I on the edge of this room, Mr. President. Maybe to sum up the Greek issue on a broader perspective and a part of a strong agreement that could be reached in the next days. Do you honestly see Greece in a position to have a viable economy in the future? And second question, again, on this mistake you annulled regarding the disclosure of a speech delivered by ECB member. The first reaction of ECB was to remove the rule of sending embargoed speeches. Do you find it fair or normal that the penalized people in this story are the journalists? Thank you. Now, the first question, yes, we see the Greek economy is a viable economy provided, like any other economy, the right policies are being undertaken. So things that are unsustainable in a certain situation because the policies that are being undertaken are wrong could become sustainable and economies that are not viable under a certain set of policies could become viable under a different set. So the judgment is certainly the economy is viable, but it has to have the right set of policies. In other words, policies that favor, certainly favor equity, but also promote growth. Or if you want, the favor growth, but also promote equity, that, as I said before, growth with social fairness and fiscal sustainability. On the second point, let me only say that we are revisiting all our rules, including this change that we have announced last week. So we'll discuss when our rules are out or being published and we'll discuss them again. Thank you. Mr. Kutamanos. Thank you. I've got two questions concerning Greece. The first one with regard to the Greek payment schedule. If Greece defaults technically before an agreement can be reached, what do the ECB rules stipulate? Would you be able to just raise the haircuts on Greek banks collateral or would you have to stop ELA altogether immediately? I mean, you said there must be a credible prospect of agreement, but I can't imagine that this is the only ECB rule with regard to the ELA. And the second question is, do you think a eurozone-wide guarantee on the Greek banking system would be a possible option if Greece would default? Thank you. Yeah, I mean, I don't want to speculate on the likelihood of these events. Certainly, we do this regularly, we do assess how the developments in the markets affect the quality of our collateral, namely the quality of the Greek bonds, Greek government bonds that have been posted as collateral. So where the conditions to change, we will certainly go through a series of things. Yes, we would have to revisit our previous decisions. We are a rule-based institution and we follow in the sense the rules, exactly. We know that rules, for example, forbid monetary financing and our ELA is devised and designed to supply credit to the private sector, not to finance the government. There is a collateral against these rules, which is, by the way, the rules for collateral for ELA are different from the rules of collateral for the monetary policy instruments. So these rules are being applied and they are being regularly reassessed as developments in the financial markets unfold. The, what was the second question? A guarantee? A eurozone-wide guarantee for the Greek banking system? Yes. So the eurozone-wide agreement on the Greek banking system would be a possible option if Greece defaulted? No, I'm not privy to these developments. We haven't discussed this as far as I know. But the more general issue is really, I think we should focus now at this contingency in finding a strong agreement. Anything else would then follow and I'm pretty sure it would follow easily. But so all our energies should now be focused on finding an agreement that is strong along the lines that I've illustrated before. Mark von Domenen, NRC. Thank you. Mr. President, in September the S&P bonds, the Greek S&P bonds held by the ECB will reach maturity. Does Greece have to fully pay them back itself or can this be arranged via the ESM like some Greek officials are suggesting? Thank you. Thank you. I don't, again, I don't want to speculate on this what the Greek leaders have said and I'm taking them at their word is that they will be timely and fully, they, the bonds will be timely and fully paid. And we stay with that statement now. Thank you. Arantia Inigues, please. Arantia Inigues, Spanish Press Agency, F.A. The President of the European Commission, Mr. Yanke, and the Greece Prime Minister, Mr. Separas, are meeting this evening in Brussels. Are you going to join them or is there another kind of parallel meeting where the ECB is going to take part? Thank you. Now, the answer is no. We are not joining that meeting. Thank you. Mr. Jost. Sebastian Jost, Mr. President, to go to another issue, given the fact that the decision of the European Court of Justice is coming closer regarding the OMT program, what are your expectations for that decision and to put it more specific, do you expect any consequences for the design of your current QE program? Well, you generally, I mean, people in the world generally don't comment on pronouncements by the judiciary or by courts. So if we don't comment on pronouncements, you can imagine how difficult it is to form an expectation on that. However, we do have the opinion of the, what's the general counsel? I think it has a specific term which I can't remember now. The general rapporteur and that is the only element upon which one can form an expectation. So and that wouldn't suggest a redesign of the OMT program, although it has other interesting suggestions for other functions that the ECB is currently performing. Mr. Zydra? Mr. President, maybe you could elaborate again on your decision not to tighten the collateral rules, a haircut rules for collateral used by Greek banks. I mean the situation, the financial situation in Greece has deteriorated considerably since December when you took a lighter stance on this issue. So the whole thing looks like you said you are a rule-based institution and it looks like you're taking political considerations, not willing to interfere in the ongoing political process. How would you comment that? I would comment that it's not true. Simply said, we are not either interfering or in any way taking a stance with respect to the current negotiations. We are a rules-based institution, but you have to understand that there are two different sets of rules. One is for collateral posted against monetary policy instruments and the other one is collateral posted against the ELA. You should remember that the ELA is given by the National Central Bank. So from this viewpoint, this set of rules is different. And so we will certainly continue discussing this. This difference is important, so much so that the majority required to change the governing council decisions about ELA is two thirds. Because when the ECB was founded, was created, the idea was that National Central Banks ought to retain a certain margin of discretionality, of discretion. So that is the situation. But we currently discuss and reassess and see whether financial market developments within that specific and different set of rules warrant a change in the collateral haircut. Yes, please. Michelle DeWard of the Netherlands, Banking Review. I have a question. It's a couple of years ago now that we had the outburst of the European crisis. According to you, what is the main lesson? Well, there are several main lessons that one can take, of course. But the first that comes to mind is that the, well, let me step back. The lessons that one draws from the crisis depend on what one views as the main factors, the main reasons for a crisis. One view is that the crisis originated in jurisdictions other than the European one. And it was imported. And so the issue is what was the main reason for the crisis in that jurisdiction. And here there is a variety of explanations, one of which is the two expansion and monetary policy. But another which has, in our view, I think in most members of the governing councils, view more weight, is the fact that financial regulation in that jurisdiction was basically was made much weaker in the early year 2000s, basically lowering levels on leverage, lowering or canceling in debtness levels. And a series of other, the subprime crisis is mostly due to lack of supervision. So we can go through that. So one lesson we learned is that we made stronger our financial system, we made stronger our banking system, and we increased more generally the resilience of the financial services industry. So we don't know where the next crisis will come from, but at least we ought to be reasonably confident that we've done everything we could to make our financial services industry more robust, stronger, more resilient. Mr. Duntje? Marijn Dankjutemens, News Hour, The Netherlands. Mr. President, you said earlier that you were not surprised that inflation was already going up a little bit because it was according to your models. Can you tell us when your models are saying that it is below 2% or close to? Oh, we foresee 1.8% inflation in 2017. So the path is this. This year we foresee inflation staying low for the remaining part of the year, and then picking up in 2016 reaching 1.5%, mostly because of base effects, namely the oil prices should not continue to decline. And so if you compare the latest, the data of the last part of last year with the data that we would have at the end of this year under the assumption that we would have no further declines, you have a base effect. So that is the, but also there are other forces that will close this, will drive the inflation rate back to the objective, one of which is obviously the closing of the output gap. So the increase in domestic demand, the closing in the output gap, and some sort of higher inflation rate domestically generated. Thank you. Yes, at the back. You're on the word seat, 24, Mr. Elements. You've emphasized the word a strong deal is needed several times now. What are the elements, in your opinion, of this strong deal? Does it mean Greece applying all reforms earlier agreed upon and no debt relief, for example? Sorry, what do you say? On Greece, if the elements of a strong deal, in your opinion, does it mean applying all reforms Greece earlier promised to do and no form of debt relief? No, strong means that it should be strong both in design and implementation. We should have the reforms that promote growth and have social fairness and are fiscally and at the same time produce a macroeconomic framework that is fiscally sustainable. Some of the things that have been discussed in the course of the previous months are clearly fiscally unsustainable. So that is one part of the strength. The other part of the strength, so the design, the second is implementation. Some of these reforms ought to be what we called in the negotiating language prior action. A strong program has prior action, meaning that certain things are done soon rather than late. And as I said before, the financing would come. Nobody, neither the institutions nor the Eurogroup members would conceive of a program, would define a strong program that is not financed adequately. So financing would certainly be there. Thank you. I think we have exhausted all the questions for today. And if I may, before I close the press conference today, I'd like to pay tribute to someone, to Marika DeFeo, a colleague whom many of you knew and who passed away recently. She'd covered the ECB from the beginning. She was a very strong and fierce European supporter. And our thoughts are with her family. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.
 I take the size of your attendance is inversely correlated on how things go, clearly.  Ladies and gentlemen, the vice president and I are very pleased to welcome you to our press  conference.  We will now report on the outcome of today's meeting of the Governing Council, which was  also attended by the commission vice president, Mr. Dombrowski.  Based on our regular economic and monetary analysis, and in line with our forward guidance,  we decided to keep the key ECB interest rates unchanged.  Regarding non-standard monetary policy measures, the asset purchase programs are proceeding  well.  As explained on previous occasions, our asset purchases of 60 billion euros per month are  intended to run until the end of September 2016, and in any case, until we see a sustained  adjustment in the path of inflation that is consistent with our aim of achieving inflation  rates below but close to 2% over the medium term.  When carrying out its assessment, the Governing Council will follow its monetary policy strategy  and concentrate on trends in inflation, looking through fluctuations in measured inflation  in either direction if judged to be transient and to have no implication for the medium  term outlook for price stability.  Our monetary policy measures have contributed to a broad-based easing in financial conditions,  recovering inflation expectations, and more favorable borrowing conditions for firms and  households.  The effects of these measures are working their way through to the economy and are contributing  to economic growth, a reduction in economic slack, and money and credit expansion.  The full implementation of all our monetary policy measures will provide the necessary  support to the euro area economy.  That lead to a sustained return of inflation rates towards levels below but close to 2%  in the medium term and underpin the firm anchoring of medium to long-term inflation expectations.  Let me now explain our assessment in greater detail, starting with the economic analysis.  In the first quarter of 2015, real GDP in the euro area rose by 0.4% quarter on quarter,  after 0.3% in the last quarter of 2014.  In recent quarters, domestic demand and, in particularly, private consumption were the  main drivers behind the ongoing recovery.  The latest survey data to May remain consistent with a continuation of the modest growth trend  in the second quarter.  Looking ahead, we expect the economic recovery to broaden.  Domestic demand should be further supported by our monetary policy measures and their  favorable impact on financial conditions, as well as by the progress made with fiscal  consolidation and structural reforms.  Moreover, the low level of the price of oil should continue to support households' real  disposable income and corporate profitability, and therefore private consumption and investment.  Furthermore, demand for euro area exports should benefit from improvements in price  competitiveness.  However, economic growth in the euro area is likely to continue to be dampened by the  necessary balance sheet adjustments in a number of sectors and the sluggish pace of implementation  of structural reforms.  This assessment is also broadly reflected in the June 2015 Euro System Staff macroeconomic  projections for the euro area, which foresee annual real GDP increasing by 1.5% in 2015,  1.9% in 2016, and 2% in 2017.  Compared with March 2015 ECB staff macroeconomic projections, the projections for real GDP growth  over the projection horizon remain virtually unchanged.  While remaining on the downside, the risks surrounding the economic outlook for the euro  area have become more balanced on account of our monetary policy decisions and oil price  and exchange rate developments.  Inflation bottomed out at the beginning of the year.  According to Eurostat's flash estimate, euro area annual HICP inflation was 0.3% in May  2015, up from 0% in April, and compared with minus 0.6% in January.  On the basis of the information available and current oil futures prices, annual HICP  inflation is expected to remain low in the months ahead and to rise towards the end of  the year, also on account of base effects associated with the fall in oil prices in late  2014.  Supported by the expected economic recovery, the impact of the lower euro exchange rate  and the assumption embedded in oil futures markets of somewhat higher oil prices in the  years ahead, inflation rates are expected to pick up further during 2016 and 2017.  This assessment is also broadly reflected in the June 2015 Euro System Staff macroeconomic  projections for the euro area, which foresee annual HICP inflation at 0.3% in 2015, 1.5%  in 2016, and 1.8% in 2017.  In comparison with the March 2015 ECB staff macroeconomic projections, the inflation projections  have been revised upwards for 2015 and remain unchanged for 2016 and 2017.  The Governing Council will continue to monitor closely the risks to the outlook for price  developments over the medium term.  In this context, we will focus in particular on the past through of our monetary policy  measures as well as on geopolitical exchange rate and energy price developments.  We acknowledge that the staff projections are conditional on the full implementation  of all our monetary policy measures in place.  We also take into account that the degree of forecast uncertainty tends to increase  with the length of the projection horizon.  Turning to the monetary analysis, recent data confirmed the increase in underlying growth  in broad money, M3.  The annual growth rate of M3 increased to 5.3% in April, up from 4.6% in March.  Annual growth in M3 continues to be supported by its most liquid components, with a narrow  monetary aggregate M1 growing at an annual rate of 10.5% in April.  Non-dynamics gradually improved further.  The annual rate of change of loans to non-financial corporations was minus 0.1% in April after  minus 0.2% in March, continuing its gradual recovery from a trough of minus 3.2% in February  2014.  Despite these improvements, the dynamics of loans to non-financial corporations remain  subdued.  They continued to reflect the lagged relationship with the business cycle, credit risk, credit  supply factors, and the ongoing adjustment of financial and non-financial sector balance  sheets.  The annual growth rate of loans to households increased further to 1.3% in April 2015 after  1.1% in March.  The monetary policy measures we have put in place will support further improvements both  in borrowing costs for firms and households and in credit flows across the Euro area.  To sum up, a cross-check of the outcome of the economic analysis with the signals coming  from the monetary analysis confirms the need to maintain a steady monetary policy course,  firmly implementing the Governing Council monetary policy decisions.  The full implementation of all our monetary policy measures will provide the necessary  support to the economic recovery in the Euro area and lead to a sustained return of inflation  rates towards levels below but close to 2% in the medium term.  Monetary policy is focused on maintaining price stability over the medium term and its  accommodative stance contributes to supporting economic activity.  However, in order to reap the full benefits from our monetary policy measures, other policy  areas must contribute decisively.  Given continued high structural unemployment and low potential output growth in the Euro  area, the ongoing cyclical recovery should be supported by effective structural policies.  In particular, in order to increase investment, boost job creation and raise productivity,  both the implementation of product and labour market reforms and actions to improve the business  environment for firms need to gain momentum in several countries.  A swift and effective implementation of these reforms in an environment of accommodative  monetary policy will not only lead to higher sustainable economic growth in the Euro area,  but will also raise expectations of permanently higher incomes.  Therefore, it will encourage both households to expand consumption and firms to increase  investment today, thus reinforcing the current cyclical economic recovery.  As concerns fiscal developments reflect in mainly the cyclical recovery and the low level  of interest rates, the aggregate Euro area general government deficit ratio is projected  to decline gradually from 2.1% of GDP this year to 1.5% in 2017.  The general government debt ratio is projected to decline gradually from 91.5% of GDP this  year to 88.4% in 2017.  Fiscal policies should support the economic recovery while remaining in compliance with  the stability and growth pact.  Full and consistent implementation of the pact is key for confidence in our fiscal framework.  We are now at your disposal for questions.  Claire Jones, Financial Times.  I was wondering if it would be possible for you to discuss the package agreed in Berlin  on Monday night between yourself and the other Greek creditors, specifically how the ECB  would react if Prime Minister Cyprus did not accept the package that is now in the process  of being tabled.  For my second question, in light of the delay in the publication of the remarks by Benoit  Couré last month, would it be possible for you to comment on the pros and cons of private  meetings between senior ECB officials and market participants?  Thanks.  Thank you.  Well, the first question, I mean, the answer is no, because basically negotiations, and  this, by the way, holds for also for all the other possible questions on this issue.  Negotiations are proceeding at this point in time, and so there is no point in me commenting  on different aspects of these negotiations and different proposals.  The both the Greek government and the institutions have now sets of proposals that they are confronting  with each other.  Let me say that the one general statement, I mean, the governing council of the ECB wants  Greece to stay in the Euro, but there should be a strong agreement.  A strong agreement is one that produces growth that has social fairness, but that is also  fiscally sustainable and addresses the remaining sources or factors of financial instability  in the financial sector.  So this would be the component of a strong agreement.  So that's what I want to say about that.  The other point, two considerations.  The first is that we are certainly aware of the prerequisite and the rules that are contained  in the code of ethics, the ethical code that governs the executive board members appearances  in different sites and on different occasions.  They basically amount to saying that we should avoid any situation or conflict of interest  and we should not divulge public information.  What happened on that occasion was basically a mistake.  The text of the speech was meant to go live immediately before the speech would take place  just before and instead went live the morning after.  So this is leading us now to review our rules, to revisit our rules, making them more explicit  and will shortly come out with a new set of rules for as far as speaking engagements are  concerned.  John Adonno?  You mentioned the issue of Greek debt sustainability or alluded to it and the importance of that.  Is it perhaps appropriate that the ambition in relation to the primary surplus targets  takes into account the recent downward developments in the Greek economy?  And secondly, under what circumstances might the ECB be prepared to extend the limit on  T-bills acceptance as collateral for emergency liquidity?  Well on the second question, you know what the condition should be.  That there should be a credible perspective for a successful conclusion of the current  review and that would imply by the member countries a disbursement.  That would be the condition for the governing council to consider because in any event there  is no automaticity for consider a lifting of the T-bills thresholds.  And we are not there.  On the first question, the answer is yes, yes definitely.  It would be the current downgraded perspectives, growth perspectives of the Greek economy should  be taken into account in determining what the appropriate budget surplus figures should  be.  Johanna Tricke?  Johanna Tricke, MNI.  Mr. Draghi, there is a slight change in language in the introductory statement this month compared  to your previous meeting as regarding growth.  While this statement only says you expect the economic recovery to broaden, last time  it said you expect it to broaden and strengthen.  So does that mean that we are running out of steam already?  So if you could clarify that please.  And then a second question again on Greece, even if you can't give us details about the  ongoing negotiations.  But should there be no deal by next week?  In light of the IMF's OK for Greece to repay the bundling its June repayment to the end  of the month, would a non-payment this Friday then have any consequences to the HACAD schedule  that you apply on ELA?  Thank you very much.  Yeah, there is a difference.  Yes.  Now, the first question quite rightly pointed out there is a difference because there is  a, let me say, recovery is on track exactly according to our projections.  And however, we had expected stronger figures, stronger than our projections originally.  And at some point, many, some indicators were showing this.  There has been a loss of some loss of momentum, modest I would say loss of momentum, mostly  due to weakening of the economies outside the euro area, emerging markets mostly.  And on the other hand, all survey indicators and other data show that domestic demand in  the euro area remains strong.  So we just wanted to point out this slight loss of momentum coming from the trade sector.  On the second point, I don't want to comment on that.  We will have to examine exactly what the conditions are.  The option of bundling the payments has been used by one country in the 70s, if I'm not  mistaken, and we'll see.  Thank you.  Alessandro Merli.  Alessandro Merli, with Solio 24.  There was a recent rise in yields in a number of government bonds sector in Europe, especially  in boons.  Could you give us your assessment of that?  Was this positive development that follows the recovery of the economy, or was it an  unjustified tightening of conditions?  And is there a fear or concern in the governing council that QE may be adding to volatility  in markets?  Thank you.  Well, yes, indeed, there was some reversal in general in financing conditions.  Of recent, there have been many explanations that have been given, one of which is what  you hinted at.  Namely, there is an improvement.  One could be there is an improvement in the perspectives of growth.  A second explanation is the higher inflation expectations.  A third explanation is actually a bunch of technical conditions present in the markets,  like, and here I'm going through quickly, them, there have been one directional investments  into long-term maturities, and the turnaround has been quite abrupt.  Second, there was a strong supply pressure in the sense that issuance had been quite  significant by various governments in the meantime.  The third explanation is that when shorter dated German bonds became eligible, which  they were not because of their negative yields, and they became more eligible later on, there  was less need to buy longer dated bonds, and that produces steepening of the curve.  The fourth technical condition is simply that volatility by itself generated further volatility  and further selling, and the fifth is poor market liquidity because of the absence of  certain significant investors during the period of time.  Now, it's very difficult to distinguish between these three sets of factors, sets of conditions.  So we won't speculate exactly on what explanation is the most likely.  But silly, one lesson is that we should get used to periods of higher volatility.  At very low levels of interest rates, asset prices tend to show higher volatility.  And in terms of the impact that this might have on our monetary policy stance, let me  tell you that the Covening Council was unanimous in its assessment that we should look through  these developments and maintain a steady monetary policy stance.  One question that we have to get used to, greater volatility, what are you planning  on doing against that greater volatility?  Are you planning on managing the yield curve going forward a bit more, or don't you care  about greater volatility?  And another question on greater volatility and at the low rates is the IMF is warning  that asset managers and insurers in the Eurozone could get actually in trouble because of that  policy.  So are you preparing the next financial crisis?  What would you do?  The answer to both questions is no, nothing.  But let me also qualify this.  We won't plan to change our monetary policy stance.  That will stay.  As you know, as I've said many times, we have mandate which is maintaining price stability  in the definition that we've discussed several times.  And we plan to keep our steady course, our course steady and unchanged.  And if anything, if necessary, we'll actually add to that.  To the second point, it's quite right.  A long period, a protracted period of very low interest rates causes a series of problems.  First of all, it may increase the financial stability risk, but also it causes problems  for insurance companies and for other important financial market actors.  Is this a good reason to change our monetary policy?  The answer is no.  If we were to do the wrong monetary policy for addressing the problems of these specific  sectors, we actually would do them a disservice.  We would undermine our price stability objective, we would create in the end a more difficult  situation for everybody.  But what's the answer?  The answer is that when we see financial stability risk, they should be addressed by the proper  instruments, which they are macro prudential instruments.  The second issue is typical of insurance companies.  Clearly, insurance companies try to respond to this situation in a variety of ways, which  I don't want to discuss because some of them have to do with their business models.  But certainly, it's quite clear that certain regulatory provisions make their task of diversifying  their investments into higher yield and potentially more liquid investments, they make their task  more difficult.  Thank you.  Mr. Draghi, can you tell us if you think that the negotiations with the Greek government  are going in the right direction?  If you think that an agreement is closed, and how close can it be?  My second question would be about ECB's mandate.  It's focused on the price stability, but some economists said it should also include an  objective of reducing unemployment.  Can you tell us if it's something you can think of and if it's something that could  be good for the ECB?  Thank you.  Thank you.  On the first issue, I responded before.  I can't give you an update, a real-time report on how the negotiations are going, also because  I'm here in Frankfurt, and the negotiations are not taking place here.  But also because they are actually in a state of flux.  But as I said before, there is a general will and strong determination that in the end an  agreement will be found.  This agreement should be a strong agreement.  And the components that I've listed before are the ones for which, towards which, certainly  the ECB is working, but I can say the same as far as the economic commission and the  IMF are concerned.  A strong growth, social fairness, fiscal sustainability, and addressing the financial stability concerns.  On the second point, yes, we have a mandate.  It's one mandate that is formulated as pursuing price stability, which the Governing Council,  if I'm not mistaken, in 2003, you were there, no?  Yes.  I love it.  In 2003, defined as a rate of inflation, which was close but below 2%.  The monetary policy addresses, say, the cyclical component of the weakness in the economy.  So for example, now, our monetary policy in pursuing price stability addresses also the  cyclical component of the slack we have in the economy.  So it does good to both things, price stability and unemployment.  But we should not forget that the structural component of our unemployment is high and  was high even before the crisis.  If I'm not mistaken, was in the border of 9%.  So monetary policy cannot address the structural component of the weakness in the economy, cannot  address the reasons why potential growth is low.  These issues should be addressed by structural policies.  Thank you.  Brian Blackstone.  Brian Blackstone with Wall Street Journal.  Are you surprised at all at the pace with which inflation has climbed back into positive  territory given that it was minus 0.6% just four months ago?  In light of the fact that inflation has come back, can you say anything about the potential  two-sided nature of this September 2016 end date for QE?  It could end sooner or it could end later, but that it could end sooner if we still get  positive surprises on inflation.  My second question going back to Greece is there's been five years of these crisis meetings,  11th hour negotiations.  There's obviously a lot at stake for the global economy, especially with the IMF and the international  community involved.  How come the Europeans haven't been able to get a better handle on how to handle this  crisis, how to handle these negotiations, given that you've involved the international  community in the financing of Greece's rescue?  Thank you.  Thank you.  The answer to the first question is no, we have not been surprised.  Inflation came out higher than what market expectations were, but not higher than our  expectations.  This in a sense has quite important consequences.  It strengthened the governing council in its decisions.  Basically in its determination and its conviction that it has taken the right decision with  the QE, with the size and the design of the QE, but not only the QE, but also the monetary  policy measures that have been taken previously in the previous months.  Now the second part of your question is really how do we assess whether we have reached our  objective of inflation or not?  And I've said several times that we're not going to be happy with the one point inflation  data, but we'll have to look through the medium term and be convinced that the objective has  been reached in a sustained fashion through time.  On the other point, it's quite a complicated question to answer.  Programs have been designed and they've been agreed.  Some of these programs have been implemented.  Some other parts have not been implemented.  So that's the answer to your question.  Why hasn't the eurozone or more generally Europe able to come up with a situation which  could be considered as normal in this situation, as ordinary situation?  Well, as I said, programs have been designed, have been agreed, and have been implemented.  And only partly.  Claudia, I was told.  But looking at the staff estimates and with inflation picking up, it seems that you already  dare where you want to be on prices, on inflation.  So does the governing council at least discuss an exit strategy of unconventional policies?  No, the answer is no.  I mean, exit strategies are really a high class problem.  And we are really far from that.  So we are not discussing anything about that.  But we are not there, by the way.  I just wonder what makes you think and say that we are there in terms of inflation.  We're still a long way to go.  Alessandro Speziale?  Alessandro Speziale, Bloomberg News.  Another question on Greece.  The current haircuts that are applied to Greek debt relate to a period when it was foreseen  that Greece would return to market.  How long do you think they are sustainable?  And what would be the effect in this respect of the mispayment to the IMF, for example?  Thank you.  You're perfectly right.  We've been considering this now for a while.  We'll have to see again at the next meeting how things are.  What is the state of negotiations or the state of markets?  What's the, in other words, how the evolution, the current evolution affects the quality  of the Greek debt?  And that's the key, that's the key decision we have to take.  On the rest, I don't want to speculate, really.  What happens if?  Thank you.  Jack Ewing?  Jack Ewing, New York Times.  I think you said a few minutes ago something about you were prepared to add to your monetary  policy measures, if I heard you correctly.  You're making faces that maybe I heard you wrong, but I just was going to ask if you  could tell us if does that mean that you would be willing to increase the size of your bond  purchases?  And if so, what would be the trigger to do that?  What would you be looking for?  Second question at the G7 Finance Minister and Central Bankers meeting last week, you  heard a presentation from Robert Schiller who warned of a bubble in the stock market.  And I wonder if that's a concern that's shared by the governing council or by you.  Thank you.  Thank you.  Now we have, we assess that our present monetary policy stance is adequate to reach our objectives.  In fact, the reaching of the objectives in terms of inflation and growth is predicated,  is conditional on the full implementation of the monetary policy stance.  As it has been designed, as it has been announced, as it has been implemented.  What I said before is that if need be, if there were other factors which would, for  example, create an unwanted tightening of monetary policy, or when we discussed growth,  we said there are downside risks to growth and price stability, then we would have to  review and reconsider the size, the timing, the design of the program.  So it's only to say that if needed, we will add to that.  But so far, we frankly see no reason to do that.  On the second point, the answer is we, at the present time, we, by the way, we are  fully aware, as I said before, that low interest rates for a protracted period of time tend  to generate financial stability risks.  We monitor quite closely all these developments.  And we don't see so far the emergence of these risks.  Even in one of these sectors that is most often quoted, like the housing market, we  see selected local situations where one could actually think that price movements are wide.  But there isn't any real financial stability risk that we can see in that market or elsewhere.  I should also add the leverage, private sector leverage, because what you look at is lots  of things.  You don't look only about price increases.  But you also want to see whether these increases in prices have been accompanied by increasing  leverage.  And we don't see that, at least in bank leverage.  But having said that, I repeat what I said before, if there were to be financial stability  risks in the stock market, for example, they would have to be addressed by the proper instruments,  which is not a change in our monetary policy.  Martin Wolsak, Dutch pension funds are heard by low interest rate environment, just like  the asset managers we talked about.  Do you think their regulator should allow them to diversify more as well?  Well, it would be difficult for me to actually identify a set of pension funds in a specific  country.  What is quite clear, and I had that remark in mind, was for insurance companies that  certain parts of the regulatory framework make a diversification more difficult.  For example, it's not the only example, by the way, but the treatment that securitization  receives in the present regulatory framework makes it difficult for companies to invest  in assets that are potentially illiquid and make them liquid.  That's one example.  I mean, securitization is important to liquefy assets that are otherwise illiquid.  Jean-Philippe Lacour.  Here am I on the edge of this room, Mr. President.  Maybe to sum up the Greek issue on a broader perspective and a part of a strong agreement  that could be reached in the next days.  Do you honestly see Greece in a position to have a viable economy in the future?  And second question, again, on this mistake you annulled regarding the disclosure of a  speech delivered by ECB member.  The first reaction of ECB was to remove the rule of sending embargoed speeches.  Do you find it fair or normal that the penalized people in this story are the journalists?  Thank you.  Now, the first question, yes, we see the Greek economy is a viable economy provided, like  any other economy, the right policies are being undertaken.  So things that are unsustainable in a certain situation because the policies that are being  undertaken are wrong could become sustainable and economies that are not viable under a  certain set of policies could become viable under a different set.  So the judgment is certainly the economy is viable, but it has to have the right set of  policies.  In other words, policies that favor, certainly favor equity, but also promote growth.  Or if you want, the favor growth, but also promote equity, that, as I said before, growth  with social fairness and fiscal sustainability.  On the second point, let me only say that we are revisiting all our rules, including  this change that we have announced last week.  So we'll discuss when our rules are out or being published and we'll discuss them again.  Thank you.  Mr. Kutamanos.  Thank you.  I've got two questions concerning Greece.  The first one with regard to the Greek payment schedule.  If Greece defaults technically before an agreement can be reached, what do the ECB rules stipulate?  Would you be able to just raise the haircuts on Greek banks collateral or would you have  to stop ELA altogether immediately?  I mean, you said there must be a credible prospect of agreement, but I can't imagine  that this is the only ECB rule with regard to the ELA.  And the second question is, do you think a eurozone-wide guarantee on the Greek banking  system would be a possible option if Greece would default?  Thank you.  Yeah, I mean, I don't want to speculate on the likelihood of these events.  Certainly, we do this regularly, we do assess how the developments in the markets affect  the quality of our collateral, namely the quality of the Greek bonds, Greek government  bonds that have been posted as collateral.  So where the conditions to change, we will certainly go through a series of things.  Yes, we would have to revisit our previous decisions.  We are a rule-based institution and we follow in the sense the rules, exactly.  We know that rules, for example, forbid monetary financing and our ELA is devised and designed  to supply credit to the private sector, not to finance the government.  There is a collateral against these rules, which is, by the way, the rules for collateral  for ELA are different from the rules of collateral for the monetary policy instruments.  So these rules are being applied and they are being regularly reassessed as developments  in the financial markets unfold.  The, what was the second question?  A guarantee?  A eurozone-wide guarantee for the Greek banking system?  Yes.  So the eurozone-wide agreement on the Greek banking system would be a possible option  if Greece defaulted?  No, I'm not privy to these developments.  We haven't discussed this as far as I know.  But the more general issue is really, I think we should focus now at this contingency in  finding a strong agreement.  Anything else would then follow and I'm pretty sure it would follow easily.  But so all our energies should now be focused on finding an agreement that is strong along  the lines that I've illustrated before.  Mark von Domenen, NRC.  Thank you.  Mr. President, in September the S&P bonds, the Greek S&P bonds held by the ECB will  reach maturity.  Does Greece have to fully pay them back itself or can this be arranged via the ESM like some  Greek officials are suggesting?  Thank you.  Thank you.  I don't, again, I don't want to speculate on this what the Greek leaders have said and  I'm taking them at their word is that they will be timely and fully, they, the bonds  will be timely and fully paid.  And we stay with that statement now.  Thank you.  Arantia Inigues, please.  Arantia Inigues, Spanish Press Agency, F.A.  The President of the European Commission, Mr. Yanke, and the Greece Prime Minister, Mr.  Separas, are meeting this evening in Brussels.  Are you going to join them or is there another kind of parallel meeting where the ECB is  going to take part?  Thank you.  Now, the answer is no.  We are not joining that meeting.  Thank you.  Mr. Jost.  Sebastian Jost, Mr. President, to go to another issue, given the fact that the decision of  the European Court of Justice is coming closer regarding the OMT program, what are your expectations  for that decision and to put it more specific, do you expect any consequences for the design  of your current QE program?  Well, you generally, I mean, people in the world generally don't comment on pronouncements  by the judiciary or by courts.  So if we don't comment on pronouncements, you can imagine how difficult it is to form  an expectation on that.  However, we do have the opinion of the, what's the general counsel?  I think it has a specific term which I can't remember now.  The general rapporteur and that is the only element upon which one can form an expectation.  So and that wouldn't suggest a redesign of the OMT program, although it has other interesting  suggestions for other functions that the ECB is currently performing.  Mr. Zydra?  Mr. President, maybe you could elaborate again on your decision not to tighten the collateral  rules, a haircut rules for collateral used by Greek banks.  I mean the situation, the financial situation in Greece has deteriorated considerably since  December when you took a lighter stance on this issue.  So the whole thing looks like you said you are a rule-based institution and it looks  like you're taking political considerations, not willing to interfere in the ongoing political  process.  How would you comment that?  I would comment that it's not true.  Simply said, we are not either interfering or in any way taking a stance with respect  to the current negotiations.  We are a rules-based institution, but you have to understand that there are two different  sets of rules.  One is for collateral posted against monetary policy instruments and the other one is collateral  posted against the ELA.  You should remember that the ELA is given by the National Central Bank.  So from this viewpoint, this set of rules is different.  And so we will certainly continue discussing this.  This difference is important, so much so that the majority required to change the governing  council decisions about ELA is two thirds.  Because when the ECB was founded, was created, the idea was that National Central Banks ought  to retain a certain margin of discretionality, of discretion.  So that is the situation.  But we currently discuss and reassess and see whether financial market developments within  that specific and different set of rules warrant a change in the collateral haircut.  Yes, please.  Michelle DeWard of the Netherlands, Banking Review.  I have a question.  It's a couple of years ago now that we had the outburst of the European crisis.  According to you, what is the main lesson?  Well, there are several main lessons that one can take, of course.  But the first that comes to mind is that the, well, let me step back.  The lessons that one draws from the crisis depend on what one views as the main factors,  the main reasons for a crisis.  One view is that the crisis originated in jurisdictions other than the European one.  And it was imported.  And so the issue is what was the main reason for the crisis in that jurisdiction.  And here there is a variety of explanations, one of which is the two expansion and monetary  policy.  But another which has, in our view, I think in most members of the governing councils,  view more weight, is the fact that financial regulation in that jurisdiction was basically  was made much weaker in the early year 2000s, basically lowering levels on leverage, lowering  or canceling in debtness levels.  And a series of other, the subprime crisis is mostly due to lack of supervision.  So we can go through that.  So one lesson we learned is that we made stronger our financial system, we made stronger our  banking system, and we increased more generally the resilience of the financial services industry.  So we don't know where the next crisis will come from, but at least we ought to be reasonably  confident that we've done everything we could to make our financial services industry more  robust, stronger, more resilient.  Mr. Duntje?  Marijn Dankjutemens, News Hour, The Netherlands.  Mr. President, you said earlier that you were not surprised that inflation was already going  up a little bit because it was according to your models.  Can you tell us when your models are saying that it is below 2% or close to?  Oh, we foresee 1.8% inflation in 2017.  So the path is this.  This year we foresee inflation staying low for the remaining part of the year, and then  picking up in 2016 reaching 1.5%, mostly because of base effects, namely the oil prices should  not continue to decline.  And so if you compare the latest, the data of the last part of last year with the data  that we would have at the end of this year under the assumption that we would have no  further declines, you have a base effect.  So that is the, but also there are other forces that will close this, will drive the inflation  rate back to the objective, one of which is obviously the closing of the output gap.  So the increase in domestic demand, the closing in the output gap, and some sort of higher  inflation rate domestically generated.  Thank you.  Yes, at the back.  You're on the word seat, 24, Mr. Elements.  You've emphasized the word a strong deal is needed several times now.  What are the elements, in your opinion, of this strong deal?  Does it mean Greece applying all reforms earlier agreed upon and no debt relief, for example?  Sorry, what do you say?  On Greece, if the elements of a strong deal, in your opinion, does it mean applying all  reforms Greece earlier promised to do and no form of debt relief?  No, strong means that it should be strong both in design and implementation.  We should have the reforms that promote growth and have social fairness and are fiscally  and at the same time produce a macroeconomic framework that is fiscally sustainable.  Some of the things that have been discussed in the course of the previous months are clearly  fiscally unsustainable.  So that is one part of the strength.  The other part of the strength, so the design, the second is implementation.  Some of these reforms ought to be what we called in the negotiating language prior action.  A strong program has prior action, meaning that certain things are done soon rather than  late.  And as I said before, the financing would come.  Nobody, neither the institutions nor the Eurogroup members would conceive of a program, would  define a strong program that is not financed adequately.  So financing would certainly be there.  Thank you.  I think we have exhausted all the questions for today.  And if I may, before I close the press conference today, I'd like to pay tribute to someone,  to Marika DeFeo, a colleague whom many of you knew and who passed away recently.  She'd covered the ECB from the beginning.  She was a very strong and fierce European supporter.  And our thoughts are with her family.  Thank you.  Thank you.  Thank you.  Thank you.  Thank you.  Thank you.  Thank you.  Thank you.  Thank you.  Thank you.  Thank you.  Thank you.  Thank you.  Thank you.  Thank you.
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I take the size of your attendance is inversely correlated on how things go, clearly. Ladies and gentlemen, the vice president and I are very pleased to welcome you to our press conference. We will now report on the outcome of today's meeting of the Governing Council, which was also attended by the commission vice president, Mr. Dombrowski. Based on our regular economic and monetary analysis, and in line with our forward guidance, we decided to keep the key ECB interest rates unchanged. Regarding non-standard monetary policy measures, the asset purchase programs are proceeding well. As explained on previous occasions, our asset purchases of 60 billion euros per month are intended to run until the end of September 2016, and in any case, until we see a sustained adjustment in the path of inflation that is consistent with our aim of achieving inflation rates below but close to 2% over the medium term. When carrying out its assessment, the Governing Council will follow its monetary policy strategy and concentrate on trends in inflation, looking through fluctuations in measured inflation in either direction if judged to be transient and to have no implication for the medium term outlook for price stability. Our monetary policy measures have contributed to a broad-based easing in financial conditions, recovering inflation expectations, and more favorable borrowing conditions for firms and households. The effects of these measures are working their way through to the economy and are contributing to economic growth, a reduction in economic slack, and money and credit expansion. The full implementation of all our monetary policy measures will provide the necessary support to the euro area economy. That lead to a sustained return of inflation rates towards levels below but close to 2% in the medium term and underpin the firm anchoring of medium to long-term inflation expectations. Let me now explain our assessment in greater detail, starting with the economic analysis. In the first quarter of 2015, real GDP in the euro area rose by 0.4% quarter on quarter, after 0.3% in the last quarter of 2014. In recent quarters, domestic demand and, in particularly, private consumption were the main drivers behind the ongoing recovery. The latest survey data to May remain consistent with a continuation of the modest growth trend in the second quarter. Looking ahead, we expect the economic recovery to broaden. Domestic demand should be further supported by our monetary policy measures and their favorable impact on financial conditions, as well as by the progress made with fiscal consolidation and structural reforms. Moreover, the low level of the price of oil should continue to support households' real disposable income and corporate profitability, and therefore private consumption and investment. Furthermore, demand for euro area exports should benefit from improvements in price competitiveness. However, economic growth in the euro area is likely to continue to be dampened by the necessary balance sheet adjustments in a number of sectors and the sluggish pace of implementation of structural reforms. This assessment is also broadly reflected in the June 2015 Euro System Staff macroeconomic projections for the euro area, which foresee annual real GDP increasing by 1.5% in 2015, 1.9% in 2016, and 2% in 2017. Compared with March 2015 ECB staff macroeconomic projections, the projections for real GDP growth over the projection horizon remain virtually unchanged. While remaining on the downside, the risks surrounding the economic outlook for the euro area have become more balanced on account of our monetary policy decisions and oil price and exchange rate developments. Inflation bottomed out at the beginning of the year. According to Eurostat's flash estimate, euro area annual HICP inflation was 0.3% in May 2015, up from 0% in April, and compared with minus 0.6% in January. On the basis of the information available and current oil futures prices, annual HICP inflation is expected to remain low in the months ahead and to rise towards the end of the year, also on account of base effects associated with the fall in oil prices in late 2014. Supported by the expected economic recovery, the impact of the lower euro exchange rate and the assumption embedded in oil futures markets of somewhat higher oil prices in the years ahead, inflation rates are expected to pick up further during 2016 and 2017. This assessment is also broadly reflected in the June 2015 Euro System Staff macroeconomic projections for the euro area, which foresee annual HICP inflation at 0.3% in 2015, 1.5% in 2016, and 1.8% in 2017. In comparison with the March 2015 ECB staff macroeconomic projections, the inflation projections have been revised upwards for 2015 and remain unchanged for 2016 and 2017. The Governing Council will continue to monitor closely the risks to the outlook for price developments over the medium term. In this context, we will focus in particular on the past through of our monetary policy measures as well as on geopolitical exchange rate and energy price developments. We acknowledge that the staff projections are conditional on the full implementation of all our monetary policy measures in place. We also take into account that the degree of forecast uncertainty tends to increase with the length of the projection horizon. Turning to the monetary analysis, recent data confirmed the increase in underlying growth in broad money, M3. The annual growth rate of M3 increased to 5.3% in April, up from 4.6% in March. Annual growth in M3 continues to be supported by its most liquid components, with a narrow monetary aggregate M1 growing at an annual rate of 10.5% in April. Non-dynamics gradually improved further. The annual rate of change of loans to non-financial corporations was minus 0.1% in April after minus 0.2% in March, continuing its gradual recovery from a trough of minus 3.2% in February 2014. Despite these improvements, the dynamics of loans to non-financial corporations remain subdued. They continued to reflect the lagged relationship with the business cycle, credit risk, credit supply factors, and the ongoing adjustment of financial and non-financial sector balance sheets. The annual growth rate of loans to households increased further to 1.3% in April 2015 after 1.1% in March. The monetary policy measures we have put in place will support further improvements both in borrowing costs for firms and households and in credit flows across the Euro area. To sum up, a cross-check of the outcome of the economic analysis with the signals coming from the monetary analysis confirms the need to maintain a steady monetary policy course, firmly implementing the Governing Council monetary policy decisions. The full implementation of all our monetary policy measures will provide the necessary support to the economic recovery in the Euro area and lead to a sustained return of inflation rates towards levels below but close to 2% in the medium term. Monetary policy is focused on maintaining price stability over the medium term and its accommodative stance contributes to supporting economic activity. However, in order to reap the full benefits from our monetary policy measures, other policy areas must contribute decisively. Given continued high structural unemployment and low potential output growth in the Euro area, the ongoing cyclical recovery should be supported by effective structural policies. In particular, in order to increase investment, boost job creation and raise productivity, both the implementation of product and labour market reforms and actions to improve the business environment for firms need to gain momentum in several countries. A swift and effective implementation of these reforms in an environment of accommodative monetary policy will not only lead to higher sustainable economic growth in the Euro area, but will also raise expectations of permanently higher incomes. Therefore, it will encourage both households to expand consumption and firms to increase investment today, thus reinforcing the current cyclical economic recovery. As concerns fiscal developments reflect in mainly the cyclical recovery and the low level of interest rates, the aggregate Euro area general government deficit ratio is projected to decline gradually from 2.1% of GDP this year to 1.5% in 2017. The general government debt ratio is projected to decline gradually from 91.5% of GDP this year to 88.4% in 2017. Fiscal policies should support the economic recovery while remaining in compliance with the stability and growth pact. Full and consistent implementation of the pact is key for confidence in our fiscal framework. We are now at your disposal for questions. Claire Jones, Financial Times. I was wondering if it would be possible for you to discuss the package agreed in Berlin on Monday night between yourself and the other Greek creditors, specifically how the ECB would react if Prime Minister Cyprus did not accept the package that is now in the process of being tabled. For my second question, in light of the delay in the publication of the remarks by Benoit Couré last month, would it be possible for you to comment on the pros and cons of private meetings between senior ECB officials and market participants? Thanks. Thank you. Well, the first question, I mean, the answer is no, because basically negotiations, and this, by the way, holds for also for all the other possible questions on this issue. Negotiations are proceeding at this point in time, and so there is no point in me commenting on different aspects of these negotiations and different proposals. The both the Greek government and the institutions have now sets of proposals that they are confronting with each other. Let me say that the one general statement, I mean, the governing council of the ECB wants Greece to stay in the Euro, but there should be a strong agreement. A strong agreement is one that produces growth that has social fairness, but that is also fiscally sustainable and addresses the remaining sources or factors of financial instability in the financial sector. So this would be the component of a strong agreement. So that's what I want to say about that. The other point, two considerations. The first is that we are certainly aware of the prerequisite and the rules that are contained in the code of ethics, the ethical code that governs the executive board members appearances in different sites and on different occasions. They basically amount to saying that we should avoid any situation or conflict of interest and we should not divulge public information. What happened on that occasion was basically a mistake. The text of the speech was meant to go live immediately before the speech would take place just before and instead went live the morning after. So this is leading us now to review our rules, to revisit our rules, making them more explicit and will shortly come out with a new set of rules for as far as speaking engagements are concerned. John Adonno? You mentioned the issue of Greek debt sustainability or alluded to it and the importance of that. Is it perhaps appropriate that the ambition in relation to the primary surplus targets takes into account the recent downward developments in the Greek economy? And secondly, under what circumstances might the ECB be prepared to extend the limit on T-bills acceptance as collateral for emergency liquidity? Well on the second question, you know what the condition should be. That there should be a credible perspective for a successful conclusion of the current review and that would imply by the member countries a disbursement. That would be the condition for the governing council to consider because in any event there is no automaticity for consider a lifting of the T-bills thresholds. And we are not there. On the first question, the answer is yes, yes definitely. It would be the current downgraded perspectives, growth perspectives of the Greek economy should be taken into account in determining what the appropriate budget surplus figures should be. Johanna Tricke? Johanna Tricke, MNI. Mr. Draghi, there is a slight change in language in the introductory statement this month compared to your previous meeting as regarding growth. While this statement only says you expect the economic recovery to broaden, last time it said you expect it to broaden and strengthen. So does that mean that we are running out of steam already? So if you could clarify that please. And then a second question again on Greece, even if you can't give us details about the ongoing negotiations. But should there be no deal by next week? In light of the IMF's OK for Greece to repay the bundling its June repayment to the end of the month, would a non-payment this Friday then have any consequences to the HACAD schedule that you apply on ELA? Thank you very much. Yeah, there is a difference. Yes. Now, the first question quite rightly pointed out there is a difference because there is a, let me say, recovery is on track exactly according to our projections. And however, we had expected stronger figures, stronger than our projections originally. And at some point, many, some indicators were showing this. There has been a loss of some loss of momentum, modest I would say loss of momentum, mostly due to weakening of the economies outside the euro area, emerging markets mostly. And on the other hand, all survey indicators and other data show that domestic demand in the euro area remains strong. So we just wanted to point out this slight loss of momentum coming from the trade sector. On the second point, I don't want to comment on that. We will have to examine exactly what the conditions are. The option of bundling the payments has been used by one country in the 70s, if I'm not mistaken, and we'll see. Thank you. Alessandro Merli. Alessandro Merli, with Solio 24. There was a recent rise in yields in a number of government bonds sector in Europe, especially in boons. Could you give us your assessment of that? Was this positive development that follows the recovery of the economy, or was it an unjustified tightening of conditions? And is there a fear or concern in the governing council that QE may be adding to volatility in markets? Thank you. Well, yes, indeed, there was some reversal in general in financing conditions. Of recent, there have been many explanations that have been given, one of which is what you hinted at. Namely, there is an improvement. One could be there is an improvement in the perspectives of growth. A second explanation is the higher inflation expectations. A third explanation is actually a bunch of technical conditions present in the markets, like, and here I'm going through quickly, them, there have been one directional investments into long-term maturities, and the turnaround has been quite abrupt. Second, there was a strong supply pressure in the sense that issuance had been quite significant by various governments in the meantime. The third explanation is that when shorter dated German bonds became eligible, which they were not because of their negative yields, and they became more eligible later on, there was less need to buy longer dated bonds, and that produces steepening of the curve. The fourth technical condition is simply that volatility by itself generated further volatility and further selling, and the fifth is poor market liquidity because of the absence of certain significant investors during the period of time. Now, it's very difficult to distinguish between these three sets of factors, sets of conditions. So we won't speculate exactly on what explanation is the most likely. But silly, one lesson is that we should get used to periods of higher volatility. At very low levels of interest rates, asset prices tend to show higher volatility. And in terms of the impact that this might have on our monetary policy stance, let me tell you that the Covening Council was unanimous in its assessment that we should look through these developments and maintain a steady monetary policy stance. One question that we have to get used to, greater volatility, what are you planning on doing against that greater volatility? Are you planning on managing the yield curve going forward a bit more, or don't you care about greater volatility? And another question on greater volatility and at the low rates is the IMF is warning that asset managers and insurers in the Eurozone could get actually in trouble because of that policy. So are you preparing the next financial crisis? What would you do? The answer to both questions is no, nothing. But let me also qualify this. We won't plan to change our monetary policy stance. That will stay. As you know, as I've said many times, we have mandate which is maintaining price stability in the definition that we've discussed several times. And we plan to keep our steady course, our course steady and unchanged. And if anything, if necessary, we'll actually add to that. To the second point, it's quite right. A long period, a protracted period of very low interest rates causes a series of problems. First of all, it may increase the financial stability risk, but also it causes problems for insurance companies and for other important financial market actors. Is this a good reason to change our monetary policy? The answer is no. If we were to do the wrong monetary policy for addressing the problems of these specific sectors, we actually would do them a disservice. We would undermine our price stability objective, we would create in the end a more difficult situation for everybody. But what's the answer? The answer is that when we see financial stability risk, they should be addressed by the proper instruments, which they are macro prudential instruments. The second issue is typical of insurance companies. Clearly, insurance companies try to respond to this situation in a variety of ways, which I don't want to discuss because some of them have to do with their business models. But certainly, it's quite clear that certain regulatory provisions make their task of diversifying their investments into higher yield and potentially more liquid investments, they make their task more difficult. Thank you. Mr. Draghi, can you tell us if you think that the negotiations with the Greek government are going in the right direction? If you think that an agreement is closed, and how close can it be? My second question would be about ECB's mandate. It's focused on the price stability, but some economists said it should also include an objective of reducing unemployment. Can you tell us if it's something you can think of and if it's something that could be good for the ECB? Thank you. Thank you. On the first issue, I responded before. I can't give you an update, a real-time report on how the negotiations are going, also because I'm here in Frankfurt, and the negotiations are not taking place here. But also because they are actually in a state of flux. But as I said before, there is a general will and strong determination that in the end an agreement will be found. This agreement should be a strong agreement. And the components that I've listed before are the ones for which, towards which, certainly the ECB is working, but I can say the same as far as the economic commission and the IMF are concerned. A strong growth, social fairness, fiscal sustainability, and addressing the financial stability concerns. On the second point, yes, we have a mandate. It's one mandate that is formulated as pursuing price stability, which the Governing Council, if I'm not mistaken, in 2003, you were there, no? Yes. I love it. In 2003, defined as a rate of inflation, which was close but below 2%. The monetary policy addresses, say, the cyclical component of the weakness in the economy. So for example, now, our monetary policy in pursuing price stability addresses also the cyclical component of the slack we have in the economy. So it does good to both things, price stability and unemployment. But we should not forget that the structural component of our unemployment is high and was high even before the crisis. If I'm not mistaken, was in the border of 9%. So monetary policy cannot address the structural component of the weakness in the economy, cannot address the reasons why potential growth is low. These issues should be addressed by structural policies. Thank you. Brian Blackstone. Brian Blackstone with Wall Street Journal. Are you surprised at all at the pace with which inflation has climbed back into positive territory given that it was minus 0.6% just four months ago? In light of the fact that inflation has come back, can you say anything about the potential two-sided nature of this September 2016 end date for QE? It could end sooner or it could end later, but that it could end sooner if we still get positive surprises on inflation. My second question going back to Greece is there's been five years of these crisis meetings, 11th hour negotiations. There's obviously a lot at stake for the global economy, especially with the IMF and the international community involved. How come the Europeans haven't been able to get a better handle on how to handle this crisis, how to handle these negotiations, given that you've involved the international community in the financing of Greece's rescue? Thank you. Thank you. The answer to the first question is no, we have not been surprised. Inflation came out higher than what market expectations were, but not higher than our expectations. This in a sense has quite important consequences. It strengthened the governing council in its decisions. Basically in its determination and its conviction that it has taken the right decision with the QE, with the size and the design of the QE, but not only the QE, but also the monetary policy measures that have been taken previously in the previous months. Now the second part of your question is really how do we assess whether we have reached our objective of inflation or not? And I've said several times that we're not going to be happy with the one point inflation data, but we'll have to look through the medium term and be convinced that the objective has been reached in a sustained fashion through time. On the other point, it's quite a complicated question to answer. Programs have been designed and they've been agreed. Some of these programs have been implemented. Some other parts have not been implemented. So that's the answer to your question. Why hasn't the eurozone or more generally Europe able to come up with a situation which could be considered as normal in this situation, as ordinary situation? Well, as I said, programs have been designed, have been agreed, and have been implemented. And only partly. Claudia, I was told. But looking at the staff estimates and with inflation picking up, it seems that you already dare where you want to be on prices, on inflation. So does the governing council at least discuss an exit strategy of unconventional policies? No, the answer is no. I mean, exit strategies are really a high class problem. And we are really far from that. So we are not discussing anything about that. But we are not there, by the way. I just wonder what makes you think and say that we are there in terms of inflation. We're still a long way to go. Alessandro Speziale? Alessandro Speziale, Bloomberg News. Another question on Greece. The current haircuts that are applied to Greek debt relate to a period when it was foreseen that Greece would return to market. How long do you think they are sustainable? And what would be the effect in this respect of the mispayment to the IMF, for example? Thank you. You're perfectly right. We've been considering this now for a while. We'll have to see again at the next meeting how things are. What is the state of negotiations or the state of markets? What's the, in other words, how the evolution, the current evolution affects the quality of the Greek debt? And that's the key, that's the key decision we have to take. On the rest, I don't want to speculate, really. What happens if? Thank you. Jack Ewing? Jack Ewing, New York Times. I think you said a few minutes ago something about you were prepared to add to your monetary policy measures, if I heard you correctly. You're making faces that maybe I heard you wrong, but I just was going to ask if you could tell us if does that mean that you would be willing to increase the size of your bond purchases? And if so, what would be the trigger to do that? What would you be looking for? Second question at the G7 Finance Minister and Central Bankers meeting last week, you heard a presentation from Robert Schiller who warned of a bubble in the stock market. And I wonder if that's a concern that's shared by the governing council or by you. Thank you. Thank you. Now we have, we assess that our present monetary policy stance is adequate to reach our objectives. In fact, the reaching of the objectives in terms of inflation and growth is predicated, is conditional on the full implementation of the monetary policy stance. As it has been designed, as it has been announced, as it has been implemented. What I said before is that if need be, if there were other factors which would, for example, create an unwanted tightening of monetary policy, or when we discussed growth, we said there are downside risks to growth and price stability, then we would have to review and reconsider the size, the timing, the design of the program. So it's only to say that if needed, we will add to that. But so far, we frankly see no reason to do that. On the second point, the answer is we, at the present time, we, by the way, we are fully aware, as I said before, that low interest rates for a protracted period of time tend to generate financial stability risks. We monitor quite closely all these developments. And we don't see so far the emergence of these risks. Even in one of these sectors that is most often quoted, like the housing market, we see selected local situations where one could actually think that price movements are wide. But there isn't any real financial stability risk that we can see in that market or elsewhere. I should also add the leverage, private sector leverage, because what you look at is lots of things. You don't look only about price increases. But you also want to see whether these increases in prices have been accompanied by increasing leverage. And we don't see that, at least in bank leverage. But having said that, I repeat what I said before, if there were to be financial stability risks in the stock market, for example, they would have to be addressed by the proper instruments, which is not a change in our monetary policy. Martin Wolsak, Dutch pension funds are heard by low interest rate environment, just like the asset managers we talked about. Do you think their regulator should allow them to diversify more as well? Well, it would be difficult for me to actually identify a set of pension funds in a specific country. What is quite clear, and I had that remark in mind, was for insurance companies that certain parts of the regulatory framework make a diversification more difficult. For example, it's not the only example, by the way, but the treatment that securitization receives in the present regulatory framework makes it difficult for companies to invest in assets that are potentially illiquid and make them liquid. That's one example. I mean, securitization is important to liquefy assets that are otherwise illiquid. Jean-Philippe Lacour. Here am I on the edge of this room, Mr. President. Maybe to sum up the Greek issue on a broader perspective and a part of a strong agreement that could be reached in the next days. Do you honestly see Greece in a position to have a viable economy in the future? And second question, again, on this mistake you annulled regarding the disclosure of a speech delivered by ECB member. The first reaction of ECB was to remove the rule of sending embargoed speeches. Do you find it fair or normal that the penalized people in this story are the journalists? Thank you. Now, the first question, yes, we see the Greek economy is a viable economy provided, like any other economy, the right policies are being undertaken. So things that are unsustainable in a certain situation because the policies that are being undertaken are wrong could become sustainable and economies that are not viable under a certain set of policies could become viable under a different set. So the judgment is certainly the economy is viable, but it has to have the right set of policies. In other words, policies that favor, certainly favor equity, but also promote growth. Or if you want, the favor growth, but also promote equity, that, as I said before, growth with social fairness and fiscal sustainability. On the second point, let me only say that we are revisiting all our rules, including this change that we have announced last week. So we'll discuss when our rules are out or being published and we'll discuss them again. Thank you. Mr. Kutamanos. Thank you. I've got two questions concerning Greece. The first one with regard to the Greek payment schedule. If Greece defaults technically before an agreement can be reached, what do the ECB rules stipulate? Would you be able to just raise the haircuts on Greek banks collateral or would you have to stop ELA altogether immediately? I mean, you said there must be a credible prospect of agreement, but I can't imagine that this is the only ECB rule with regard to the ELA. And the second question is, do you think a eurozone-wide guarantee on the Greek banking system would be a possible option if Greece would default? Thank you. Yeah, I mean, I don't want to speculate on the likelihood of these events. Certainly, we do this regularly, we do assess how the developments in the markets affect the quality of our collateral, namely the quality of the Greek bonds, Greek government bonds that have been posted as collateral. So where the conditions to change, we will certainly go through a series of things. Yes, we would have to revisit our previous decisions. We are a rule-based institution and we follow in the sense the rules, exactly. We know that rules, for example, forbid monetary financing and our ELA is devised and designed to supply credit to the private sector, not to finance the government. There is a collateral against these rules, which is, by the way, the rules for collateral for ELA are different from the rules of collateral for the monetary policy instruments. So these rules are being applied and they are being regularly reassessed as developments in the financial markets unfold. The, what was the second question? A guarantee? A eurozone-wide guarantee for the Greek banking system? Yes. So the eurozone-wide agreement on the Greek banking system would be a possible option if Greece defaulted? No, I'm not privy to these developments. We haven't discussed this as far as I know. But the more general issue is really, I think we should focus now at this contingency in finding a strong agreement. Anything else would then follow and I'm pretty sure it would follow easily. But so all our energies should now be focused on finding an agreement that is strong along the lines that I've illustrated before. Mark von Domenen, NRC. Thank you. Mr. President, in September the S&P bonds, the Greek S&P bonds held by the ECB will reach maturity. Does Greece have to fully pay them back itself or can this be arranged via the ESM like some Greek officials are suggesting? Thank you. Thank you. I don't, again, I don't want to speculate on this what the Greek leaders have said and I'm taking them at their word is that they will be timely and fully, they, the bonds will be timely and fully paid. And we stay with that statement now. Thank you. Arantia Inigues, please. Arantia Inigues, Spanish Press Agency, F.A. The President of the European Commission, Mr. Yanke, and the Greece Prime Minister, Mr. Separas, are meeting this evening in Brussels. Are you going to join them or is there another kind of parallel meeting where the ECB is going to take part? Thank you. Now, the answer is no. We are not joining that meeting. Thank you. Mr. Jost. Sebastian Jost, Mr. President, to go to another issue, given the fact that the decision of the European Court of Justice is coming closer regarding the OMT program, what are your expectations for that decision and to put it more specific, do you expect any consequences for the design of your current QE program? Well, you generally, I mean, people in the world generally don't comment on pronouncements by the judiciary or by courts. So if we don't comment on pronouncements, you can imagine how difficult it is to form an expectation on that. However, we do have the opinion of the, what's the general counsel? I think it has a specific term which I can't remember now. The general rapporteur and that is the only element upon which one can form an expectation. So and that wouldn't suggest a redesign of the OMT program, although it has other interesting suggestions for other functions that the ECB is currently performing. Mr. Zydra? Mr. President, maybe you could elaborate again on your decision not to tighten the collateral rules, a haircut rules for collateral used by Greek banks. I mean the situation, the financial situation in Greece has deteriorated considerably since December when you took a lighter stance on this issue. So the whole thing looks like you said you are a rule-based institution and it looks like you're taking political considerations, not willing to interfere in the ongoing political process. How would you comment that? I would comment that it's not true. Simply said, we are not either interfering or in any way taking a stance with respect to the current negotiations. We are a rules-based institution, but you have to understand that there are two different sets of rules. One is for collateral posted against monetary policy instruments and the other one is collateral posted against the ELA. You should remember that the ELA is given by the National Central Bank. So from this viewpoint, this set of rules is different. And so we will certainly continue discussing this. This difference is important, so much so that the majority required to change the governing council decisions about ELA is two thirds. Because when the ECB was founded, was created, the idea was that National Central Banks ought to retain a certain margin of discretionality, of discretion. So that is the situation. But we currently discuss and reassess and see whether financial market developments within that specific and different set of rules warrant a change in the collateral haircut. Yes, please. Michelle DeWard of the Netherlands, Banking Review. I have a question. It's a couple of years ago now that we had the outburst of the European crisis. According to you, what is the main lesson? Well, there are several main lessons that one can take, of course. But the first that comes to mind is that the, well, let me step back. The lessons that one draws from the crisis depend on what one views as the main factors, the main reasons for a crisis. One view is that the crisis originated in jurisdictions other than the European one. And it was imported. And so the issue is what was the main reason for the crisis in that jurisdiction. And here there is a variety of explanations, one of which is the two expansion and monetary policy. But another which has, in our view, I think in most members of the governing councils, view more weight, is the fact that financial regulation in that jurisdiction was basically was made much weaker in the early year 2000s, basically lowering levels on leverage, lowering or canceling in debtness levels. And a series of other, the subprime crisis is mostly due to lack of supervision. So we can go through that. So one lesson we learned is that we made stronger our financial system, we made stronger our banking system, and we increased more generally the resilience of the financial services industry. So we don't know where the next crisis will come from, but at least we ought to be reasonably confident that we've done everything we could to make our financial services industry more robust, stronger, more resilient. Mr. Duntje? Marijn Dankjutemens, News Hour, The Netherlands. Mr. President, you said earlier that you were not surprised that inflation was already going up a little bit because it was according to your models. Can you tell us when your models are saying that it is below 2% or close to? Oh, we foresee 1.8% inflation in 2017. So the path is this. This year we foresee inflation staying low for the remaining part of the year, and then picking up in 2016 reaching 1.5%, mostly because of base effects, namely the oil prices should not continue to decline. And so if you compare the latest, the data of the last part of last year with the data that we would have at the end of this year under the assumption that we would have no further declines, you have a base effect. So that is the, but also there are other forces that will close this, will drive the inflation rate back to the objective, one of which is obviously the closing of the output gap. So the increase in domestic demand, the closing in the output gap, and some sort of higher inflation rate domestically generated. Thank you. Yes, at the back. You're on the word seat, 24, Mr. Elements. You've emphasized the word a strong deal is needed several times now. What are the elements, in your opinion, of this strong deal? Does it mean Greece applying all reforms earlier agreed upon and no debt relief, for example? Sorry, what do you say? On Greece, if the elements of a strong deal, in your opinion, does it mean applying all reforms Greece earlier promised to do and no form of debt relief? No, strong means that it should be strong both in design and implementation. We should have the reforms that promote growth and have social fairness and are fiscally and at the same time produce a macroeconomic framework that is fiscally sustainable. Some of the things that have been discussed in the course of the previous months are clearly fiscally unsustainable. So that is one part of the strength. The other part of the strength, so the design, the second is implementation. Some of these reforms ought to be what we called in the negotiating language prior action. A strong program has prior action, meaning that certain things are done soon rather than late. And as I said before, the financing would come. Nobody, neither the institutions nor the Eurogroup members would conceive of a program, would define a strong program that is not financed adequately. So financing would certainly be there. Thank you. I think we have exhausted all the questions for today. And if I may, before I close the press conference today, I'd like to pay tribute to someone, to Marika DeFeo, a colleague whom many of you knew and who passed away recently. She'd covered the ECB from the beginning. She was a very strong and fierce European supporter. And our thoughts are with her family. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.
We will now report on the outcome of today's meeting of the Governing Council, which was also consumption were the main drivers behind the reflected in the June 2015 Euro System Staff and remain unchanged for 2016 and 2017. The low levels of interest rates, asset prices tend that the ECB is currently performing. Mr. Zydra?