Reuters Insider - STREAM: ECB's Draghi monthly news conference

SRM Energy

13/01/2014 14:56

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 Source:             Thomson Reuters                                   
                                                                       
 Description:        President Mario Draghi holds a news conference    
                     following the rate setting meeting of the European 
                     Central Bank.                                     
 
 
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Transcript (May be auto-generated)

 First and foremost, happy new year to all of you, friends. And now I can proceed
with our statement, the introductory statement. Ladies and gentlemen, the Vice 
President and I are very pleased to welcome you to our press conference. Let me 
wish you all a happy new year, which as I've done. I would also like to take 
this opportunity to welcome Latvia as the 19th country to adopt the Euro as its 
currency. 

Accordingly, Mr. Rimsevics, the governor of Latvijas Bank, became a member of 
the Governing Council on January 1, 2014. We will now report on the outcome of 
today's meeting of the Governing Council. Based on our regular economic and 
monetary analyses, we decided to keep the key ECB interest rates unchanged. 
Incoming information and analysis have continued to confirm our previous 
assessment. Underlying price pressures in the Euro area are expected to remain 
subdued over the medium term. In keeping with this picture, monetary and credit 
dynamics remain subdued. At the same time, inflation expectations for the Euro 
area over the - over the medium to long term are firmly anchored in line with 
our aim of maintaining inflation rates below, but close to, 2%. Such a 
constellation continues to suggest that we may experience a prolonged period of 
low inflation, to be followed by a gradual upward movement towards inflation 
rates below, but close to, 2% later on. Against this background, the Governing 
Council strongly emphasizes that it will maintain an accommodative stance of 
monetary policy for as long as necessary, which will assist the gradual economic
recovery in the Euro area. Accordingly, we firmly - we firmly reiterate our 
forward guidance that we continue to expect the key ECB interest rates to remain
at present or lower levels for an extended period of time. As previously stated,
this expectation is based on an overall subdued outlook for inflation extending 
into the medium term, given the broad-based weakness of the economy and subdued 
monetary dynamics. With regard to money market conditions and their potential 
impact on our monetary policy stance, we are monitoring - we are monitoring 
developments closely and are ready to consider all available instruments. 
Overall, we remain determined to maintain the high degree of monetary 
accommodation and to take further decisive action, if required. Let me now 
explain our assessment in greater detail, starting with the economic analysis. 
Real GDP in the Euro area rose by 0.1% quarter on quarter in the third quarter 
of 2013, following an increase of 0.3% in the second quarter. While developments
in industrial production data for October point to a weak start to the fourth 
quarter, survey-based confidence indicators up to December have improved further
from low levels, overall indicating a continuation of the gradual recovery in 
economic activity. Looking at 2014 and 2015, output is expected to recover at a 
slow pace, in particular owing to some improvement in domestic demand supported 
by the accommodative monetary policy stance. Euro area economic activity should,
in addition, benefit from a gradual strengthening of demand for exports. 
Furthermore, the overall improvements in financial markets since - seen since 
the summer of 2012 appear to be working their way through to the real economy, 
as should the progress made in fiscal consolidation. In addition, real incomes 
have benefited recently from lower energy price inflation. At the same time, 
unemployment in the Euro area remains high, and the necessary balance sheet 
adjustments in the public and the private sector will continue to weigh on 
economic activity. The risks surrounding the economic outlook for the Euro area 
continue to be on the downside. Developments in global money and financial 
market conditions and related uncertainties may have the potential to negatively
affect economic conditions. Other downside risks include higher commodity 
prices, weaker than expected domestic demand and export growth, and slow or 
insufficient implementation of structural reforms in Euro area countries. 
According to Eurostat's flash estimate, Euro area annual HICP inflation was 0.8%
in December 2013, compared with 0.9% in November. This outcome was broadly as 
expected and reflected lower services price inflation. On the basis of 
prevailing futures prices for energy, annual inflation rates are expected to 
remain at around current levels in the coming months. Over the medium term, 
underlying price pressures in the euro area are expected to remain subdued. At 
the same time, inflation expectations for the Euro area over the medium to long 
term continue to be firmly anchored in line with our aim to maintaining - of 
maintaining inflation rates below, but close to, 2%. The risks to the outlook 
for price developments continue to be seen as broadly balanced over the medium 
term, with upside risks relating to higher commodity prices and stronger than 
expected increases in administered prices and indirect taxes, and downside risks
stemming from weaker than expected economic activity. Turning to the monetary 
analysis, data for November support the assessment of continued subdued 
underlying growth in broad money and credit. Annual growth in M3 was broadly 
unchanged at 1.5% in November, after 1.4% in October, following two consecutive 
declines in September and August. Annual growth in M1 remained strong at 6.5%, 
reflecting a preference for liquidity, although it was below the peak of 8.7% 
observed in April 2013. As in previous months, the main factor supporting annual
M3 growth was an increase in the MFI net external asset position, which 
continued to reflect the increased interest of international investors in Euro 
area assets. The annual rate of change of loans to the private sector remained 
weak. The annual growth rate of loans to households stood at 0.3% in November, 
broadly unchanged since the beginning of 2013, but the annual rate of change of 
loans to non-financial corporations was -3.1% in November, following -3.0% in 
October. Overall, weak loan dynamics for non-financial corporations continue to 
reflect their lagged relationship with the business cycle, credit risk, and the 
ongoing adjustment of financial and non-financial sector balance sheets. Since 
the summer of 2012, substantial progress has been made in improving the funding 
conditions of banks. In order to ensure an adequate transmission of monetary 
policy to the financing conditions in Euro area countries, it is essential that 
the fragmentation of Euro area credit markets declines further and that the 
resilience of banks is strengthened where needed. The forthcoming comprehensive 
assessment by the ECB will further support this confidence-building process. It 
will enhance the quality of information available on the condition of banks and 
result in the identification and implementation of necessary corrective actions.
A timely implementation of further steps to establish a banking union will help 
to restore confidence in the financial system. To sum up, the economic analysis 
indicates that we may experience a prolonged period of low inflation, to be 
followed by a gradual upward movement towards inflation rates below, but close 
to, 2% later on. A cross-check with the signals from the monetary analysis 
confirms this picture. As regards fiscal policies, it is important not to 
unravel past efforts, but to sustain fiscal consolidation over the medium term. 
Fiscal strategies should be in line with the fiscal compact and should ensure a 
growth-friendly composition of consolidation which combines improving the 
quality and efficiency of public services with minimizing distortionary effects 
of taxation. When accompanied by the decisive implementation of structural 
reforms, this will further support the gradual economic recovery in the Euro 
area and have a positive impact on public finances. Reforms in the product and 
labor markets and a rigorous enactment of single market policies warrant 
particular focus to improve the outlook for economic growth and to foster job 
creation in an environment of high unemployment. We are now at your disposal for
questions. 

Johanna Treeck, Market News. Johanna Treeck, MNI. Thank you very much. Mr. 
Draghi, I noticed that in your introductory statement you sort of changed the 
language a bit to emphasize more the accommodation - accommodative nature of 
your monetary policy stance. You say you emphasize this accommodative nature and
you firmly reiterate your forward guidance. Might this change in language signal
that you consider the recent rise in money market rates as unwarranted? 

Or if not, could you perhaps explain to us what might have prompted that change?
Second question is on liquidity operations. Some of your colleagues recently 
appear to have suggested that it might be difficult to devise an operation that 
would target funds to the real economy. And I was just wondering where the 
debate stands on that issue at the moment. Thank you very much. Thank you. Yes, 
you're right. We used firmer words for indicating the strengthening of our 
forward guidance, which basically means that we reiterate our decisiveness to 
act if needed. And there are two – we don't think – we think the present 
market developments are okay, but we think that there are two contingencies that
could lead us to act. One is an unwarranted tightening of the short-term money 
markets, and the other one is a worsening of our medium-term outlook for 
inflation. So that is what basically this firmer language is addressing. On the 
second point about that, you – I mean, the developments of excess liquidity 
have attracted a lot of attention. But let me reiterate once again that it's 
very, very difficult to draw, to derive, to infer a relationship between – a 
stable relationship between the excess liquidity figures and the EONIA rates. 
Let me give you some figures here. If we compare the December 31 figure, we had 
an excess liquidity of 274 billion, and the EONIA was 22 basis points. If we 
take the 6th of January – so one week later – 2014, excess liquidity, we 
have 276 billion of excess liquidity and EONIA which is only 9.9 basis points. 
Now, of course, this one can say it's related to ERN technical market – 
technical developments, but if you look at a somewhat broader comparison, you 
reach the same outcome, the same conclusion. If you look at the excess liquidity
in – on the 19th of December 2011, you see the excess liquidity's 300 billion 
and the EONIA is 30 basis points. Then we move to the 15th of May 2013, the 
excess liquidity is 303 billion, so roughly the same amount, but the EONIA is 
only 8 basis points. So it's very, very difficult to draw the conclusion that 
there is a stable relationship between the two magnitudes. Thank you. 
 inuaudible  We have– as usual, we have discussed all the possible instruments
just to cope with these two broad contingencies, and our discussion continues 
and is being carried on as usual. Thank you. Brian Blackstone, Wall Street 
Journal. I'm Brian Blackstone with the Wall Street Journal. 

If I could just press you on that last point you made, when you talk about this 
readiness to act and all available tools, can you give us a sense of what these 
tools are, whether they're traditional interest rate cuts, deposit rates, the 
LTROs, quantitative easing? What's in your toolkit and that if these conditions 
that you laid out were to be met and more easing was to be required? And my 
second question is on banking union. How concerned are you about the adequacy of
the public backstops for the resolution of any problem banks or if there are 
holes in the asset quality review? And if the money's not there, does this– is
there a risk that this maybe undermines confidence, rather than be a 
confidence-building exercise as you hope? Thank you. Okay. Well, thank you. On 
the first point, we have several instruments that we can use, and their choice 
will depend– their choice will depend on what contingency will actually 
happen. Some of these instruments would address more easily development in the 
short-term money markets. Others would address, would be meant to address 
broader worsening of our medium-term outlook. So it's– I think at this point 
in time, it's pointless to speculate which instrument we would use. But let me 
be absolutely clear on some– on a more general point. We have a mandate to 
maintain price stability in both directions. So for the Governing Council, all 
instruments, all eligible instruments that are allowed by the treaty would be 
eligible. All instruments that would be allowed by the treaty would be eligible.

So let me make this point quite, quite clear. On the second question, it's– 
now, I'm not sure I understand. Are you referring to the public backstops 
related to the outcomes of the asset quality review? Or are you referring to the
SRM?  inaudible  Okay. I'll take your yes as first answer. But I– on the first
point, I'm just asking you a question. What leads you to think that there aren't
such backstops in place? There has been a solemn commitment by the leaders 
confirmed by the ECOFIN, confirmed by the Eurogroup. So all governments are 
basically committed to provide these public backstops, which would enter into 
place according to the established regulations, which means basically that all 
the list of creditors will have to be bailed in, and so on and so forth, so the 
rules on state aid would have to be complied with. And on this, I think there is
an explicit commitment that I frankly have no reason to doubt of. Thank you. 

Jeff Black, Bloomberg? Afternoon. Jeff Black from Bloomberg. President Draghi, 
given the ongoing weakness in lending that you mentioned in your introductory 
statement, would you say that the need to undertake the AQR has delayed the 
recovery in lending because of banks seeing the need to tidy up their balance 
sheets? And if you do recognize that, then is there anything that you can do to 
mitigate that or would you intend to try and mitigate that? And my second 
question is about the member of the executive board that will eventually take up
a position as the vice chair of the supervisory board. 

Now, you've stressed in the past the need to have separation here, so I'd be 
interested if you could explain what role that board member will play in 
Governing Council debates on monetary policy, if they'll exercise that person's 
vote or if they will abstain from activity on the monetary side. Thank you. 
Thank you. I will answer first the second question. I will quote you– I will 
quote from the statute of the ESCB and the statute of the ECB. It does say, 
"Each member of the Governing Council shall have one vote". So this is part and 
parcel of the treaty cannot be changed. Having said that, we'll certainly make 
sure – and we are actually making sure already that there are enough degrees 
of separation so as to establish absolutely that the two decision sets are being
kept separate. So that is what we are doing, separation within the treaty. 

The other point is the weakness in lending and whether AQR has actually sort of 
increased this or– generally speaking, one certainly might have some 
short-term deleveraging by the banking system in order to be prepared for the 
AQR. However, one has to counterbalance this with two other considerations. One 
is the long-term greater health of the banking system. When I'm saying long 
term, I'm not saying years. We're talking about at the end of this year, when 
the AQR will be finished, the banks are actually undertaking corrective action 
even before – as you yourself suggested – before the AQR is actually taking 
place, so by the end of this year, we'll certainly have a stronger banking 
system, and certainly more transparent, and certainly markets will be able to 
understand better what is in the banks' balance sheets, and that's the second 
point. One has to counterbalance the short-term implications with the fact that,
as you can see, the capital markets have reopened for banks. And here I would 
like to sort of point, to draw your attention on one very interesting piece of 
data. You know that after the Lehman crisis, the spread between corporate 
issuance, known financial corporate issuance, and financial or banking issuance 
went up a lot and stayed up for quite a long time. Now, our figures show that 
it's disappeared. I think to me this is a very important signal of some 
improvement in financial markets. So that's – the spread has gone – I think 
it's gone to zero, by and large. So, finally, let me make a general 
consideration. I don't think we want to repeat the mistake made by other 
countries in not repairing the banking system when it's time to do so. We've 
seen that an unhealthy banking system slows down transmission of monetary 
policy, hampers credit, and to have a fragile banking system. I'm not saying we 
have it, by the way; I'm saying that it's very important to think and address 
this concern, if– and so it's very important to avoid a credit crunch. That's 
why we want to do it. And I think– so it's true. Your short-term implications 
are there, may be there, but you want to counterbalance this with all these 
considerations. And I think in the end, the scale is very much on the side of 
taking action. Thank you. Claire Jones, Financial Times. The fall in core 
inflation to a record low in December has prompted some calls from some analysts
for more action from the ECB straight away. Were the views of analysts shared by
any members of the Governing Council today in calling for more action 
immediately? And, second, you mentioned in the answer to one of your questions 
that any tool– all eligible instruments allowed by the treaty would be 
eligible, if necessary. 

Can you just confirm whether or not that includes outright asset purchases or 
not? Well, on the second question, I think the answer is what I said before. And
as I said before, I don't want to go into the specifics. I want to be absolutely
clear that we have a mandate which is to ensure price stability in both 
directions, and the Governing Council is ready to use all the instruments that 
are allowed by the treaty. On your first question, the point - I mean, we were 
all aware that the decline in the inflation rate in December was due - was first
of all, was expected and it was caused by a technical adjustment in the 
statistics of the services inflation in Germany, which basically produced a much
flatter seasonal adjustment, and it meant that the December data came out lower 
than the 0.9. But fortunately, this is a one-off event, so the January data will
not be distorted by this. Thank you. Thank you. 

Mr. Draghi, after three-years crisis, bond market in Europe seems now to be in 
better shape or at least work more normally, especially in the south of 
Eurozone. There is still a lot to do, but how do you see this evolution and what
do you expect for the coming months? Thank you. Well, there are many reasons, 
some of which we're actually still exploring. But there is no doubt that the 
financial markets have been gradually easing since July 2012. This is due 
certainly to the ECB action, but also equally important to the action by 
governments both in fiscal consolidation, but also in some countries, 
especially, which are, by the way, the ones who are seeing now the greatest 
benefit, also in undertaking the needed structural reforms. And, third, we have 
to look at what happened since then to the general Euro governance. The progress
that's been made on the banking union, I know that in the - many commentaries 
always look at the glass as half-empty. But it's not true. I mean, if you just 
have some historical perspective, I mean, you look how the Euro area governance 
was a year-and-a-half, two years ago, and you compare what it is today, there 
has been an extraordinary, very significant step forward. I think these three 
factors explain some of the improvements, but also frankly, there are also other
factors that will still have to be analyzed. Thank you. 

Eva Taylor, Reuters. President Draghi, you said recently in an interview that we
must take care not to get stuck in a period of inflation below 1% and that was 
slipping into a danger zone. And in the introductory statement, you noted that 
inflation will be staying around current levels for the coming months. How long 
can you stay - can you stand being in this period or in this below 1%, 
basically, before you have to do something? My second question is about money 
markets. 

You just talked about the nexus between excess liquidity at money market rates. 
And we're seeing that some money market rates are now at a higher level than 
they were last summer when you say they were unwarranted. Could you maybe 
explain a little bit what's driving them at the moment? Thank you. Thank you. On
the first point, as I said, inflationary pressures are going to remain subdued 
for quite - now they're projected to be subdued, to stay subdued on the low 
level of 2% for at least two years. But we have to look at that from the medium 
term and so far, this is quite in line with our baseline scenario. We will act 
when we will have reason to think that our medium-term assessment for inflation 
is changing for the worse. And as I said before, we stand ready to act and we 
stand ready to use all the needed instruments that are allowed by the treaty. So
we have our mandate. We are acting within our mandate. We have to use the 
instruments that are allowed by the treaty. 

So on the second point, short-term money market rates depend on a variety of 
factors. Our forward guidance, strengthened by the decision that we took in 
November, has produced quite a successful, I would say, stabilization of the 
interest rates curves in the short term. We have - and certainly has reduced 
uncertainty about the interest rates, volatility of interest rates, and also 
uncertainty about monetary policy action. We have clarified our reaction 
function, but we have to keep in mind that there are all kinds of influences on 
these rates, some of which have to do with our own Eurozone economy, and some of
which have to do with external factors. Our view is that after the forward 
guidance been issued and has been strengthened by our November decision, the 
factors that have to do with our own economies are now predominant. 

In other words, to some extent, the Euro area is fairly insulated to some extent
from outer developments. And I think that's what we are seeing now. And the 
overall situation is very different for what it was in July. (inaudible) Yeah, 
and you say that, yeah. Thank you. Geoff Cutmore, CNBC. Thank you very much for 
the opportunity to ask a question. And it would be remiss of us not to also wish
you and the Governing Council a very happy new year in return. 

Thank you. So let us make sure we do that. My question relates to the bond 
markets once again. This week, we've seen the Irish come back to the market and 
the refunding exercise be very successful. So does that, do you think, stand up 
some of the comments that we've heard from commission politicians who've said 
that we can now declare victory on the Eurozone crisis? Or given some of the 
data points that we've discussed, like the 12% unemployment for the Eurozone, 
the high youth unemployment, and so on and so forth, is it premature for us to 
describe this crisis as now being over? And can we actually declare victory, as 
some have said, politicians, obviously, who are trying to reach out to a broad 
platform? But your views on this would be very welcome, sir. Thank you. I'd be 
very cautious about saying that, be very, very cautious. Unemployment stands at 
12 and more percent. The only positive news about unemployment is that we see 
this high - unacceptably high unemployment rate stabilizing. In other words, 
it's not going up each and every month, but it's still more than 12%. The 
recovery is there, but it's weak. It's modest. And as I said many times, it's 
fragile, meaning that there are several risks from financial to economic to 
geopolitical to political risks that could undermine easily this recovery. It's 
a recovery that, fortunately, from being based exclusively on export growth is 
now gradually, gradually, very gradually extending into domestic demand. And we 
can see that. But it's still, I would say, premature to declare any victory. And
I think that's why we are using, as someone observed at the very beginning, why 
we're using an even firmer language for our forward guidance. So I think if you 
look at the drivers of this recovery, the drivers of this recovery are, on the 
one hand, export growth, and we think that global demand may continue to be what
it is and, if anything, a little stronger. On the domestic demand side, let's 
ask, what are the factors that actually are helping this recovery to spread on 
the domestic demand side? One is certainly our very accommodative monetary 
policy stance, which finally now, as I've said many, many times, is finding its 
way through the economy. That is one thing that's happening. This is - a second 
effect, which relates to what you said about the bond markets, confidence, 
confidence is gradually coming back. There is also some less of a fiscal drag 
than there was last year, and that's a third effect. And then, finally there is 
also an effect due exactly to the very low price - well, to the very low 
inflation rate, which is supporting real disposable income. Now, if you examine 
these four factors, you see how easy it is to change each one of them into the 
opposite - I mean, the monetary policy stance, certainly not. It's a policy 
decision. But the confidence - confidence has returned, but - I mean, six months
ago, we wouldn't have said that. Even three months ago, we wouldn't have been 
that explicit. So we want to see confidence staying for a relatively long time 
before we can say we can declare victory. And so I would say, things are 
slightly better. 

Our baseline scenario is being confirmed. Thank you. Mr. Draghi, to make it very
clearly, would you say today that deflation risks are not higher than they were 
on November when the ECB promptly decided to cut rates after the very low 
inflation rate of October? And secondly, the ECB issued a statement on SEPA 
migration. when we, yes, read between the lines, it seems that ECB is a kind 
upset about the possibility to delay the, yes, end of migration. So could you 
may be more elaborate on this? Thank you. Thank you. On the first question, I 
really kind of answered before. The data point that's come out in December was 
essentially due to this technical - I think someone called it quirk and in the 
statistics of the services inflation in Germany. On the second question is, 
well, I'm not sure what between the lines means. I would say it is the- it is 
commission's initiative and it's the commission view. 

Thank you. Okay. Sebastian Jost, Die Welt. Thank you. Mr. President. First, a 
short question. Is there any news regarding the protocols of the Governing 
Council meetings? And second question, to come back to the SEPA migration issue,
could you elaborate a little more why the Eurosystem seems obviously to be 
skeptical about postponing the deadline for the migration? Is it just not 
necessary from your point of view? Or is it a sort of problematic or even 
dangerous? Perhaps you can say a little more about that. Thank you. Thank you. 
On the second question, what we were observing of recent is that, finally, the 
migration was picking up. And I can give you the- some figures. First of all, 
there have been significant efforts by the majority of the stakeholders, all 
stakeholders in the Euro area, and for example, November migration figures for 
the Euro area show a significant increase in SEPA direct debits to 26% of total 
transactions, more than double the October, where they had increased by 11.5%, 
and almost four times the September figure, when it was only 7%. So we- based on
the feedback we get from the industry, and from the markets, we do expect this 
growth rate to continue as we speak. As of credit transfers, 64% of transactions
in November were already SEPA-compliant, and they were up from 60% in October. 
So that's why, in a sense, we want to see this migration completed. We think 
it's a benefit for the consumers, first and foremost, and in a sense, 
indirectly, also for the banks. On the minutes, we still are reflecting on it. 

The executive board will present soon a first proposal, which I kind of used the
wrong word. Not minutes. I think accounts. You said protocols is just- and we 
will discuss this. As I've said some times, many times, in a sense, it's not an 
easy issue. It's complicated by the fact that the ECB wants to be- we think we 
are transparent already, but we want to be even more transparent, given some 
more rich, richer information about our deliberations, about our discussion. At 
the same time, we have to keep in mind that we are not a one-country 
environment. And this implies that we have to be the jealous guardians of the 
independence of our Governing Council members. 

Thank you. David Jolly, New York Times? Hi there. David Jolly from the New York 
Times. Jack Lew, the U.S. Treasury Secretary, was just in Paris, Berlin and 
Lisbon this week. I attended his press conference in Paris, and he said that the
United States was looking for a growth agenda that has to be rooted in 
investment and demand, and it was clear that some countries have more capacity 
to stimulate growth and demand than others do. I have a suspicion he was talking
about Germany. Is that a view shared by the ECB, that there are countries here, 
maybe some with current account surpluses, that need to step up and stimulate 
demand? Well, let me make just two points on this. In a speech I gave in Berlin 
about a month ago, I quoted your President Abraham Lincoln. He said, he famously
said, "You cannot make the weak stronger by making the strong weaker." So you 
want to promote growth, but you're not doing it, weakening the country that is 
best performing in the Euro area. All the Euro area members benefit from this 
performance. If there are, as there are, structural investments, infrastructure 
investments to be done, they ought to be carried out, regardless, in a sense, of
what is the consequence. They ought to be carried out. So the policy advice is 
really continue your successful performance and take care of the weaknesses in 
investments where it's needed. But I never, I never understood very well the 
idea that making Germany weaker you would benefit other countries in the 
Eurozone or undermining the fundamentals upon which the strength is based, one 
would make the other countries stronger. Thank you. -- Mr. President, you have 
given us an account about the effectivity of the measurements being taken- I'm 
sorry. Activity of- About the effectivity of the activities- not, about 
effectivity about the measures you've taken within this crisis. Could you give 
us, please, also an outlook and your account where you see the main risks in the
risks in the forthcoming months that could undermine this effectivity? And, 
secondly, could you- I'm sorry. Could undermine this creativity? No, this 
effectivity. Effectiveness. I mean, you've shown us that- This- oh, 
effectiveness. -how effective, how effective- Effectiveness. Sorry. You've shown
how effective the measures were. Could you just tell us, please, where you see 
the main risks that could undermine this way? And, secondly, please, just to 
clarify, in the last months, you've always told us that the ECB council 
currently sees no deflationary pressures. Now we see rather negative outlook for
the coming months. Is this still a stance the ECB council has? Thank you. You're
welcome. Now, there are as I said in the introductory statement and as, 
unfortunately, I've been saying now for months, there are downside risks to the 
economic recovery. And the downside risks stem from all the uncertainties, 
financial, political, commodity prices, all the uncertainties that could 
undermine the main factors driving the recovery, loss of confidence, crisis, 
even political crisis. So this, this could all, in a sense, undermine the 
success of this very- which isn't there yet, as I've just said, the- of this 
very modest recovery. On the inflation side, I should say, this is our baseline 
scenario. We don't see right now, we don't see deflation. But as- if you have 
low inflation for a very protracted period of time, it's quite clear that the, 
we will be, we should be extremely aware of the potential downside risks. Right 
now, we see limited upside risks and limited downside risks for the inflation 
path. And let me also add that when we define inflation as a broad-based, 
self-fulfilling, self-feeding fall in prices, we don't see that in the Euro 
area. And even when we look at individual countries, we may see, actually, 
negative inflation rates in one or two countries, but when we should also ask 
the question, how much of this is due to the necessary rebalancing of an economy
that had lost competitiveness and had gone into a financial and budgetary 
crisis? And how much is it due to actual true deflation? So, by and large, we 
don't see a deflation in the Japanese sense of the 1990s. 

We also ask ourselves, and perhaps we've gone through this on another occasion, 
but we also asked ourselves, how- are we close to Japan? And the answer we gave 
ourselves is, no, we are not. We are not in a Japanese scenario for a variety of
reasons, the first one of which is the most important, is that the ECB has taken
decisive action at a very early stage of this crisis. The second, also, is that 
the condition of the balance sheets of the banking sector and the corporate 
sector is not as bad as it was in the 1990s there. The third reason is that we 
are now proceeding fast to make the AQR, namely to repair, which would lead to 
repair our banking system. And the final reason is that if we look back how 
inflation, long-term inflation expectations were actually behaving in Japan at 
that time, we would find out that they were actually not firmly anchored. That's
why it's so important that our inflation expectations remain firmly anchored, 
because they tell people that in a certain amount of time, over the medium term,
the inflation will go back to our objective, namely close, but below 2%. Thank 
you. Codra Glor, SVT. Hello. I'm Codra Glor from Swedish Television. I'm 
wondering, can the ECB ever run out of money? Well, technically, no. We are- we 
don't, we don't- we cannot run out of money. So we have ample resources for 
coping with all our emergencies. So I think this is the only answer I can give 
you. 

Mark Schrors, Borsen-Zeitung? Yeah, Mark Schrors, Borsen-Zeitung. Thank you. My 
first question is on inflation. You said that the small decrease in December was
broadly as expected and that you expect annual inflation rates to remain at 
around current levels. Does this also include that you would not be surprised, 
if annual inflation- No, I'm sorry. Does it also include that you would not- 
That you would not be surprised if inflation, annual inflation rates fall a 
little bit further in coming months, as some economists expect? Or would you 
expect annual inflation rates to get up a little bit, at least, in the coming 
months? Do you understand? So, basically, the question is whether, if annual 
inflation rates decreases further, does this mean that it would change your 
medium-term inflation projections? Yeah. And the second question, if I may, is 
on your relationship with the Germans and the German public or the ECB and the 
Germans. In an interview, you said that in Germany there was a perverse angst to
that things were turning back. I just wanted to know, do you really think that 
this was helpful to increase the understanding and support in Germany for the 
ECB policy? Thank you. Yes, thank you. Thank you. Now, first, let me answer the 
first question. We have baseline scenario which was given in the last 
macroeconomic projections by the ECB staff. And that's where the inflation 
figures for the next two years are. We don't expect anything different other 
than our baseline scenarios. Otherwise, you wouldn't call it a baseline 
scenario. On the other point, is- let me say a couple of things. First of all, 
if I can find the actual definition of perverse in English, I'd be very glad. 
But as usual, the- anyway, there is a difference between perverse and perverted.
And I think there was a misunderstanding there. Second point, a more serious, 
there were two issues in this interview. And I- let me read this. 

Are you saying that the Euro crisis is over? That's the question. The answer is 
no, but the fears felt by some sectors of the public in Germany have not been 
confirmed. What haven't we been accused of? When we offered European banks 
additional liquidity two years ago, it was said there would be a high rate of 
inflation. Nothing has happened. When I made my comment in London, there was 
talk of a violation of the central bank's mandate. 

But we had made clear from the beginning that we are moving within our mandate. 
Each time it was said, for goodness's sake, this Italian is ruining Germany. 
There was this perverse angst- not perverted angst- that things were turning 
bad, but the opposite has happened. Inflation is low, and uncertainty reduced. 
This is the sentence that I pronounced. Now, there are- so the angst is not- is 
referred to inflation angst. It's been also commented there is another angst 
which actually is very serious and very real, and we should all be concerned, 
not only in the Euro area, but in most developed countries, and that's the angst
of people who are preparing their- who are preparing for their old age. That's 
the angst of people who have their pension plans being reduced in capital value 
by the very low level of interest rates. That's a different thing; that's a 
serious problem which the low inflation and the low interest rates carry with 
themselves. And the- so we are also thinking about this. We are very aware of 
this problem. And that's a very reasonable angst. And we are confident that as 
the recovery takes place, as the recovery will get firmer and firmer, we will 
see better rates of return on the- on investments of the pension plans and 
insurance plans. And I will also comment that these rates of returns have little
to do with our short-term rates. So even though they are depicted- the ECB is 
depicted as the institution that actually are keeping rates low, we're not 
talking about the same rates. The rates of the pension plans are long-term 
rates. We're talking about short-term rates in our policy rate, so the two 
things are different. So I got- thanks, Christine. Now, the definition of 
perverse in English is persistent in error, different from what is reasonable. 
Now, that's one of the many definitions, of course, but this is the one I was 
referring to, persistent in error, different from what is reasonable. It's okay?
Thank you. -- Mr. Draghi, allow me to come back on the topic of SEPA migration. 
You've given us some average numbers for the Euro area on how many percent of 
transfers are made in accordance with the SEPA standards now or in October, 
November. But these different- there are differences between countries' ERM and 
would you- how could we explain that some countries are lagging behind so much, 
especially Germany? Would you also say there is a perverted- No, please. No 
more. - reluctance to adopt the SEPA here or reluctance in the error to- No 
more. Why is it that Germany especially is coming so late in SEPA migration? 
Well, I don't want to comment, really, on specific countries. I can give you the
names of the leaders. The leaders are Finland, Luxembourg, Slovenia and 
Slovakia, with migration rates close to 100% for credit transfers. Finland and 
Slovenia are also close to 100% for direct debits. So I think in- everywhere, 
even in Germany, if we focus on growth rates, the migration is actually taking 
momentum, gaining momentum. In a sense, it's quite understandable that the 
larger and the more complex banking systems take longer to achieve what is an 
amazing migration to a single European system. So I'm not- certainly, what I can
see now is that we see a general significant effort by all the stakeholders of 
banks, corporates, and so on, in the Euro area. And as I said, larger and more 
complex systems will naturally take longer. Thank you. -- Mr. Draghi, -- I'd 
like to ask you a little more details about the asset quality review. I'd like 
to know if there is consensus on the treatment of government bonds, just if you 
can give us a little more details on this. My understanding is that they would 
be considered as having no risk in the asset quality review, if you could be 
just a little more specific on this. And another question regards whether you 
have reached agreement on any date, official date for the publication of the 
details of the requirements for banks in view of the asset quality review. Thank
you. Yeah, on the second point, we will come out with a second batch of 
information at the end of this month, where we'll say more about the asset 
quality review, we'll say more about the stress tests, and so that is the 
deadline that we've given ourselves. On the first point, I'm afraid there is a 
certain amount of confusion here. The government bonds are going to be treated 
in the asset quality review exactly like the Basel committee is saying. So the 
government bonds are- in the Basel committee regulation framework are risk-less.
And that is one thing. Now, like all assets of the banks, they will be subject 
to stress tests. But they are risk-free. A different issue is what happens to 
the banking regulation. How will the future banking regulation will treat the 
government bonds? And that's an entirely different issue, which we don't cope 
with here, but the natural place where to discuss these issues is the Basel 
committee, because any change to the treatment to government bonds will have to 
be agreed at global level. Thank you. Thank you very much. 

We'll take the last question from the gentleman over there. Thank you. Thank you
very much. -- from Jiji Press, Japanese news agency. I'm sorry if I missed your 
comments on this. Were there any board members who were in favor of rate cut at 
this meeting or was the decision to hold the rate unanimous? Thank you. Thank 
you. As I said before, we had an extensive discussion on the state of the 
economy. We had- we asked ourselves questions about- more about what- like one 
question I just got, really- what sort of risks could undermine our baseline 
scenario? Could this modest recovery all of a sudden weaken? What would cause 
our medium-term assessment for inflation worsen? And when I say worsen, at this 
point in time, I mean going down. Are the risks for inflation bigger in one 
direction or in another? I said they're limited in both sides, and during in the
introductory statement, I said it's broadly balanced. And then we said- we asked
ourselves, what is an unwanted tightening on the short money markets, which 
could then translate itself into undermine- into being a threat for the 
recovery? These sorts of questions have been discussed. And then, of course, we 
discussed all instruments that would be used in case such contingencies were to 
materialize. Thank you. Thank you very much. Thank you