The Governing Council conducted its regular examination of the outlook for price developments and the risks to price stability in the euro area. The interest rate on the main refinancing operations of the Eurosystem was left at 3.75% and the interest rates on the marginal lending facility and the deposit facility were maintained at 4.75% and 2.75% respectively.
Allow me to give you an overview of the main elements of our assessment of the latest information on monetary, financial market and other economic developments.
In March 2000 the three-month average of the annual growth rates of M3 - covering the period from January to March 2000 - rose to 6.0%, compared with 5.9% in the period from December 1999 to February 2000. Consequently, M3 growth remained 1 1/2 percentage points above the reference value of 4 1/2%. The annual rate of increase in credit to the private sector also rose, to 10.9%, compared with 10.4% in the previous month. These figures confirm our earlier assessment, namely that liquidity continued to be ample in the euro area in early 2000.
As regards economic developments, recent information confirms the very positive outlook for strong growth in the euro area. All available indicators and forecasts seem to point to a phase of continued economic growth, following the upturn observed in the second half of 1999. Industrial production rebounded in February and this, together with further increases in capacity utilisation and industrial confidence up to April, suggests an ongoing strengthening in industrial activity. In addition, with consumer confidence remaining at an all-time high and unemployment continuing to decline, the recent strength of private consumption should be sustained. Looking at the world economy, the upturn in growth has become more broadly based, pertaining to both industrial and emerging economies, and most forecasts indicate that current growth differentials between economic areas are in the course of narrowing.
Notwithstanding the strong growth performance and favourable outlook for euro area economic activity, the exchange rate of the euro has continued to decline over the past few weeks and has thereby moved further out of line with the increasingly positive economic fundamentals of the euro area, as well as international balance of payments positions.
In March consumer price inflation, as measured by increases in the Harmonised Index of Consumer Prices -LRB- HICP -RRB-, rose to 2.1%, up from 2.0% in the previous month. This was due to developments in both oil prices and exchange rates. A moderation in 12-month inflation rates can be expected in the course of 2000, reflecting the decline in oil prices from around mid-March and base effects dampening the increase in inflation rates compared with the same month a year earlier. However, what matters for monetary policy are the trends underlying the outlook for price stability in the medium term. In this respect, the depreciation of the exchange rate of the euro, until it is reversed, will increase the risks to price stability in the medium term. These risks have to be taken seriously in the light of the current strong upswing. Other important factors which will have a crucial impact on the outlook for price stability over the medium term are a continuation of currently moderate wage developments, a further fiscal consolidation in line with the Stability and Growth Pact and the further implementation of structural reforms in product and labour markets.
The Governing Council would like its message to be very clear: price stability in the euro area will be maintained and, as I already said last week, the citizens of Europe can be confident that their savings and pensions will keep their value over time. Price stability will help to turn the current upswing into a long period of high economic growth and falling unemployment, and it will strengthen the currency.
Finally, I should like to inform you about two items related to the field of statistics. First, the Governing Council has decided in the near future to publish a comprehensive description of the statistical information collected and compiled by the ESCB, mainly in the areas of money and banking statistics, securities issues, interest rates, balance of payments and financial accounts, with pointers to possible developments in these areas. Second, the Governing Council has adopted a revised Guideline and a revised Recommendation on" the statistical reporting requirements of the ECB in the field of balance of payments statistics, the international reserves template and international investment position statistics ''. Both the Guideline and the Recommendation will be published in the Official Journal of the European Communities in due course.
Question: I have two questions, if you will allow me. Do you think or maybe agree that there is a connection or correlation between the current weakness of the euro and the lack of economic reform in Europe? The second question would be: if that is the case, how do you feel about the current strength of the Japanese yen vis-à-vis the euro, given the even greater lack of economic reform in Japan?
Duisenberg: First of all, as far as structural reforms are concerned, almost day after day and press conference after press conference we urge the people, the social partners and governments of the euro area to continue to carry out and implement further structural reforms in the labour and product markets. And it is a process which is taking place - we do not deny that - but it should be persistent and should take place at a determined and hopefully faster pace than is currently the case. To the extent that it does not take place, it does have an impact on the views of the outside world vis-à-vis the euro area and, with that, on the exchange rate of the euro - there is no denying that. With regard to Japan, I would advise you to ask my Japanese colleagues that question. And as many things in Japan are difficult for us to understand, and even more difficult to explain, such is the case with the exchange rate of the Japanese yen.
Question: With the euro hitting some new lows, there have been some calls - not too loud - for you perhaps to step down. And I want to know how serious this pressure is and how you feel when these rumours hit the markets and the euro actually rises? And the other question I had...
Duisenberg: May I answer that question first? I have read those rumours, just as you have, and I am inclined to do the same as the markets are apparently doing, i.e." shrug them off ''.
Question: And the other question I have is: could you tell us a little bit about the conversations you have had with the US authorities about the exchange rate? It is clear you want a stronger euro, but do the United States want a weaker dollar, and what arguments are they presenting?
Duisenberg: I can not tell you anything about the conversations I had with my US colleagues when I met them last weekend in Basel. I am not prepared to pursue that conversation further in public.
Question: Mr. President, could you please elaborate a little bit more on Greece and the position the EU is taking on the membership of Greece in the Eurosystem? The markets do not seem to be very much in favour of Greece entering the Eurosystem. Will this be a consideration for you in the near future or should you perhaps take a stronger stand against Greece?
Duisenberg: The ECB has issued its" Convergence Report '' on Greece and my colleague Mr. Noyer has presented it to the European Parliament. And that should say enough. That is the judgement that the ECB has given in advising the Council of Ministers on the state of convergence of the Greek economy in the light of the Greek request for entry into Monetary Union. And I really have nothing to add to what has been said in that Convergence Report.
Question: Mr. Duisenberg, as you are aware, I am sure, there were a lot of rumours in the market yesterday that you may switch to a variable rate tender. Is that a possibility? How seriously are you considering this and, if you are, for what reasons? And you have obviously not done so today: what is holding you back?
Duisenberg: We have obviously not done so today and I will not exclude, as I have said before, the possibility of our switching to that technique at some time, some day. I do not know when. Why we have not done so today is due mainly to the fact that in the very volatile and virulent markets we are experiencing these days we did not want to instil a new element which would again increase uncertainty or volatility or virulence. So, let us remain calm.
Question: Mr. President, have you discussed the idea of interventions with your colleagues today? Have you spoken about it and is this a possibility for you? Or is it not possible to go into the markets?
Duisenberg: Interventions are always a possibility and the only time you will hear me speak about interventions, and the deliberations concerning them, will be at the time we intervene. And I will not comment on that issue at any other time, not even on whether discussions have taken place.
Question: Mr. President, looking at the differing remarks of Mr. Fabius and Mr. Schröder lately about the euro, there seems to be a vision at the heart of Europe about how to treat this question. Is it a cause of concern to you that the political side has not come up with a clear message vis-à-vis the euro? And my second question, Mr. President ; given the drop of EUR 3.3 billion in the ESCB reserves which we have seen over the past five weeks, can you deny that this represents covert interventions by ESCB members and, if so, are we to expect these reserves to rise again?
Duisenberg: Last question first: yes, I would deny that. They were not covert interventions. So the very last question I do not have to answer. Returning to the first question on the statements made by Mr. Fabius and Mr. Schröder, I have seen them. I have listened to them. But let me say that those statements were not unwelcome, nor were they welcome. I would advise you to listen only to me.
Question: Sorry, one more thing, I asked: if you deny it, are we to expect that these reserves are going to rise the next few weeks?
Duisenberg: I do not know. If these were - and they were - normal commercial transactions, then you should not expect anything from this phenomenon in coming weeks.
Question: You have already told us that you are not inclined to resign. But I have two questions. One is: does the European Central Bank share any blame at all for the decline in the euro? And secondly, what is your view of the proposal that the Euro-11 need more cohesive economic government as a counterbalance to the European Central Bank?
Duisenberg: First of all, I am not prepared to take any blame for the decline in the euro, although I realise that markets may do so. But I do not share that blame. And do we need an economic government? I think not. I think co-operation between the responsible euro area Ministers of Finance and Economics in the context of the Euro-11 and their continuing dialogue with the European Central Bank are a very acceptable, even agreeable, situation which does not, to my mind, point in the direction of institutional political developments which would be different from those in progress.
Question: Mr. President, do you expect that the current exchange rate of the euro will have any effect on the enlargement process of the European Union?
Duisenberg: I do not.
Question: Last Friday you said that you understood that the citizens of Europe were concerned about the weakness of the euro. People who read that text consider that you do not feel responsible for that. And there is internal stability. But do you think political factors within the European Union are responsible for this? And why do you not point the finger more clearly at what you consider to be political responsibilities?
Duisenberg: I did not wish to engage in a debate on the" whys '' and" ifs '' of the developments in the exchange rate. What I merely wished to do was to convey the feeling to the citizens of Europe that they should not be concerned about these exchange rate developments, as they increasingly tended to be in view of the value - the intrinsic value - of their money, the euro, and of the intrinsic value of their savings and pensions. Because we are achieving the main thing that we at the ECB have been hired for - it is to maintain price stability and to pass that price stability on to future generations, to people who are saving or building up a pension, and to their children. That is our main goal, and it is a goal which we are capable of achieving.
Question: I have just two brief questions for you. First of all, without actually going into detail on the meetings with your American colleagues, could you just say whom you met with, if that is possible? I was also wondering whether you could give us some kind of guidance on how you can stop the different European ministers from saying something different about the euro. Is there anything you could do to" shut them up ''?
Duisenberg: Whom did I meet over the weekend? We had a regular meeting, as we have every month, of the G-10 central bank governors to which I am grateful to be invited as the 11th representative of the G-10. So, I met all the colleagues I meet every month, including the American ones. And these are Mr. Greenspan, Mr. McDonough, Mr. Hayami, Mr. Trichet, Mr. Welteke, Mr. Wellink... And, to re-phrase your last question in a slightly less antagonistic way, we make every effort we can to let those ministers and ourselves, all governors, speak in a choir with one voice. And I think that Mr. Noyer did a great job in achieving just that last Monday when he was in Brussels attending the Euro-11 Ministers of Finance meeting, while I was attending the G-10 meeting in Basel. Mr. Noyer succeeded, as you will all have noticed, in getting the ministers to speak with one voice and not to point in different directions.
Question: Mr. Duisenberg, you have stressed again that you think the current exchange rate is not in line with the fundamentals. Why and where have the markets lost the ability to come to the right judgement or conclusions? Or is it possibly true that the current exchange rate does reflect, beyond GDP forecasts, the prospects for the euro area?
Duisenberg: Well, if the current exchange rate is compared with the exchange rate for the euro over the period - let us say - two years before the euro came into existence, a period in which growth forecasts, unemployment figures and inflation figures were far - I do n't want to say" worse '' - less good than at present, then the fact that the exchange rate has clearly fallen below that level for some time now indicates to me that it may well be that the markets have overshot the level which would be appropriate for an economy which has such a strong growth potential, which is actually realising that potential, which will realise a healthy balance of payments surplus for the foreseeable future and which is realising a climate of price stability - in terms of price increases in the foreseeable future, i.e. over the next two years - which will remain below the ceiling we have defined as the limit for acceptable price movements, namely 2%.
Question: Since I am new in Frankfurt - I have just come from Tokyo - please forgive me if I am too rude or irreverent. In the Tokyo market, an intervention is regarded as a sort of convenient manoeuvring tool for the central bank. It is surprising for me to see how reluctant and careful the ECB is. And would you kindly reiterate the basic stance of the ECB in order to explain when and under what conditions you basically think an intervention is possible? And what is the difference between your thoughts and those which are widely held in Japan?
Duisenberg: It is good to see that you realise that there are differences between Tokyo and Frankfurt. But I would not be very consistent in my stance if I were to answer your question when I did not answer the first question which was put to me. No further comments on interventions.
Question: Mr. Duisenberg, I still have some problems with your statement on the euro. You just said - I am trying to look at it through the eyes of a citizen, of an ordinary citizen, and not as an economist - you just pointed out, and I quote:" I am not prepared to take any blame for the decline in the euro. '' And then you said:" what I merely wished to do was to convey the feeling to the citizens of Europe '' that - I summarise - you are keeping prices stable. So to me, looking at it as a citizen, there is contradiction. Because when you read the statement as a citizen, you try to have confidence in Mr. Duisenberg that he is also trying to get and keep the exchange rate more or less stable. That is my first question: do you see a contradiction? Second question: how great is the effect of a low or falling exchange rate on import prices and how do you calculate that? Do you work with models or what is the procedure?
Duisenberg: Well, the most important question, if I may call it that, is the first one, of course. There is no contradiction. But what has been happening over the last couple of weeks? Across Europe, people at large have become concerned about all they have read and heard about their having a weak currency. What I wished to convey to the public at large was that, if you talk about a currency and its weakness, you also have to look at, in technical terms, the internal value of the currency. And so, how can one call a currency which is characterised by stable prices a weak currency? I do not. It is only the external value which you refer to. But I wanted to impress on the people who were becoming concerned about the value of their property, their savings and their pensions that there was no danger at all. And, as long as the ECB is there - may I say, as long as I am there - there will be no danger. The second question is very simple to answer. We have models, we have good reasoning, so that we know what the proportion of imports in our GPD is euro area-wide. So we can calculate what impact a persistent exchange rate level, as compared with a previous period, will have on import prices. And that is, I must say, rather limited.
Question: And the figure - 10% of the exchange rate? How much will that be?
Duisenberg: That depends on how long it lasts. If it persists, it would add to inflation - a few decimals of a percentage point.
Question: President Duisenberg, the German stock exchange is now merging with the London stock exchange. Everything is now taking place in London, i.e. outside the euro area. Not only German shares, but also European shares, the whole euro capital market trade in euro, will take place in London. That is the way things look at the moment. Now, how do you feel about this? Are you happy with this? That is the first thing. And the second question is: has the European capital market not come to a halt, because international investors and US investors, if they buy shares in euro, want to have the same securities supervision and so on?
Duisenberg: First of all, I was not aware that the merger between the London and Frankfurt stock exchanges meant that everything would go through London. I thought not. And I think that the merger of the Amsterdam, Brussels and Paris stock exchanges will not mean that everything will go either to Amsterdam or to Brussels or to Paris. They will find a certain division of labour which, I think, is only healthy. And, as far as developments in the capital markets are concerned, there are only euro-denominated" Wertpapiere '' -LRB- securities -RRB- available, as you said. What is true is that the unification of the market into one big European capital market is taking place at a slower pace than the unification at the short end of the market, in the money market. In the money market, we have seen, within days of the introduction of the euro, the development of one large European money market. In the capital market, there is still very different legislation governing the 11 participating countries - different traditions, different terms in which the contracts underlying an equity or bond are couched. That is still dividing the capital market up into segments, but there is development. It may take another decade before we can speak of one large European capital market. It will be denominated in euro, there is no doubt about that. It already is, but it will take time before the instruments traded in the capital market are completely comparable and tradable anywhere in Europe or anywhere in the world on the same footing.
Question: Mr. President, in the last few days several voices have asked for a" Mr. Euro '', just for the euro area, just like there is a" Mr. Common Foreign Policy ''. Do you think it is legitimate to ask for him or her, or are you the" Mr. Euro ''?
Duisenberg: I am !
Question: Mr. Trichet has come under investigation in France for a very old case. Many people thought that this could challenge his future position as President of the European Central Bank. Do you feel that this is the case? Do you think that could challenge the compromise that was arrived at in May 1998 and, if there were to be a change, would that change your own personal plans?
Duisenberg: I will not, in any event, comment on my personal plans or on the position of President of the ECB, as I had promised the press that I would not do so at any time in the future. So, I will not do that. As far as Mr. Trichet is concerned, I will simply say: at the time when the judicial investigation started and was made public, the Comité Monétaire in France published a communiqué of three lines, stating that it continued to fully support and have confidence in Governor Trichet as the Chairman of the Committee. If they had asked me to do so, I would have joined them in that communiqué.
Question: Mr. Duisenberg, are you concerned about the overbidding in your fixed interest rate tenders since early April being a very extreme development? And what are your plans to fight against this?
Duisenberg: This is almost too complicated for me. We are concerned, but may I ask Mr. Noyer to express our concern
Noyer: We are, in fact, concerned - not about a certain level, but about certain developments which have occurred and about the fact that there may be fewer automatic stabilisers in that respect than may have existed in various financial centres before. We have studied this quite extensively. We have studied a number of tools that could permit us to rule out any excessive developments in the same direction. The work is not yet fully finalised. But the question was:" are you concerned '' and" can you do something about it? '' Yes, we are concerned. We are monitoring the situation very closely and we are developing tools that could be used in due course, if necessary.
Question: I have come from even further away than Tokyo. The question I have, because I find it quite interesting, is: it was reported that your statement on Friday was quite unprecedented and I realise that there are not really many precedents in the history of the ECB ; it is fairly young. I was wondering, because of the nature of that statement, in that it was directed to the public, to the citizens of Europe, whether you had any conversations with the constituent national government leaders before releasing that statement on what its content should be or, indeed, did they suggest to you, perhaps even pressure you - however gently - to make this statement at this time? Given the political implications, all the risks seem to be greater than the economic ones.
Duisenberg: None whatsoever.
Question: It just occurred to me that, perhaps surprisingly, no question has yet been asked about interest rates. So, I guess I am going to play devil 's advocate and ask that question. The question is simply: are you still on a tightening path, are any animals still creeping or running at this point? What is going on?
Duisenberg: I tell you what 's going on. Somewhere I have said that we are remaining very vigilant. That is what is going on.