Based on our regular economic and monetary analyses, 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 programmes continue to proceed smoothly. As explained on previous occasions, our monthly asset purchases of $ 60 billion 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 and the medium-term outlook for price stability.
All in all, the information that has become available since the Governing Council meeting in early June has been broadly in line with our expectations. Recent developments in financial markets, which partly reflect greater uncertainty, have not changed the Governing Council 's assessment of a broadening of the euro area 's economic recovery and a gradual increase in inflation rates over the coming years. The ECB 's monetary policy stance remains accommodative and market-based inflation expectations have, on balance, stabilised or recovered further since our meeting in early June. The latest information also remains consistent with a continued pass-through of our monetary policy measures to the cost and availability of credit for firms and households. Our measures thereby continue to contribute to economic growth, a reduction in economic slack, and money and credit expansion. The full implementation of all our monetary policy measures will lead to a sustained return of inflation rates towards levels below, but close to, 2% in the medium term, and will underpin the firm anchoring of medium to long-term inflation expectations.
Looking ahead, we will continue to closely monitor the situation in financial markets, as well as the potential implications for the monetary policy stance and for the outlook for price stability. If any factors were to lead to an unwarranted tightening of monetary policy, or if the outlook for price stability were to materially change, the Governing Council would respond to such a situation by using all the instruments available within its mandate.
Let me now explain our assessment of the available information in greater detail, starting with the economic analysis. Euro area quarterly real GDP growth was confirmed at 0.4% in the first quarter of 2015, supported by contributions from private consumption and investment. The latest survey data, available up to June, remain consistent with a continuation of the moderate growth trend in the second quarter. Looking ahead, we expect the economic recovery to broaden further. Domestic demand should be further supported by our monetary policy measures and their favourable impact on financial conditions, as well as by the progress made with fiscal consolidation and structural reforms. Moreover, the recent decline in oil prices should provide additional support for 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, the ongoing slowdown in emerging market economies continues to weigh on the global outlook and 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.
The downside risks surrounding the economic outlook for the euro area have generally been contained as a result of our monetary policy decisions, as well as oil price and exchange rate developments.
Inflation bottomed out at the beginning of the year and has moved back into positive territory in recent months. According to Eurostat, euro area annual HICP inflation was 0.2% in June 2015, slightly down from 0.3% in May. 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.
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 pass-through of our monetary policy measures, as well as on geopolitical, energy and exchange rate developments.
Turning to the monetary analysis, recent data confirm robust growth in broad money -LRB- M3 -RRB-. The annual growth rate of M3 was 5.0% in May 2015, compared with 5.3% in April. Annual growth in M3 continues to be strongly supported by its most liquid components, with the narrow monetary aggregate M1 growing at an annual rate of 11.2% in May.
Loan dynamics continued to improve. The annual rate of change of loans to non-financial corporations -LRB- adjusted for loan sales and securitisation -RRB- increased to 0.1% in May, up from -0.1% in April, continuing its gradual recovery from a trough of -3.2% in February 2014. This is consistent with the positive evidence from the bank lending survey for the second quarter of 2015. Banks reported a continued net easing of credit standards on loans to enterprises which was stronger than expected in the previous survey round. Net demand for loans to enterprises increased further, supported by demand for credit related to fixed investment. Fragmentation in terms of credit demand in individual countries decreased and the targeted longer-term refinancing operations helped to improve the terms and conditions for credit supply. Despite these improvements, the dynamics of loans to non-financial corporations remain subdued. They continue 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 -LRB- adjusted for loan sales and securitisation -RRB- increased to 1.4% in May 2015, after 1.3% in April. Overall, the monetary policy measures we have put in place since June 2014 provide clear support for improvements both in borrowing conditions 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 's 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. 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.
Question: Could I ask a first question on Greece? Is the financing, the short-term financing that 's being discussed right now, sufficient for the ECB to raise ELA liquidity to the Greek banks?
Question: Second question, regarding terminology: time out on the eurozone, a potential temporary Grexit that 's been talked about in the last week and a half, and at 4 am on Monday morning it seemed a potential Grexit was a possibility. I just wondered whether using that terminology has opened Pandora 's box on the perception of eurozone membership, and by inference the euro?
Draghi: The decision to raise ELA today is symmetrical to the one we took a few days ago to freeze it. As you know, ELA goes to solvent banks with adequate collateral. After the breakdown of negotiations and the likely default to the IMF, the ECB decided to freeze ELA at that level, applying what we call the proportionality criteria. There were some who were actually calling for a cut to zero, which would have caused an immediate collapse of the banking system. The Governing Council decided to keep ELA at that level.
Draghi: Now, things have changed. We had a series of news, with the approval of the bridge financing package, with the various votes in various parliaments -- to begin with, in the Greek Parliament -- which have restored the conditions for a raise in ELA.
Draghi: Your second point is about the Grexit, whether this should be pronounced or not. Let me tell you what I said in the course of the summit meetings that we had in Brussels last weekend. Especially it was addressed to several observers, policy-makers, public opinion scholars who have suggested that we should have cut ELA to Greece a long time ago. I said basically that it 's not up to the ECB to decide who 's a member, who 's not. The ECB has acted within its mandate and will continue to do so, under the assumption that Greece will remain a member of the euro area. Whether this assumption proves right is entirely within the responsibility both of the Greek Government and of the Member States here represented.
Draghi: So the ECB continues to act on the assumption that Greece is, it is of course, and will remain, a member of the euro area.
Question: There 's this big Greek repayment due to the ECB on Monday. They did n't pay the IMF ; what happens if Monday comes and goes and they do n't pay you back? What would the ECB 's response be? Because the money does n't seem to be there right now.
Question: And my second question is -- you 've said before that the ECB is the central bank of Greece: have you let the people of Greece down by freezing ELA, forcing the closures of banks? People have to line up for however long it is to take a little bit of money out of the ATM. What do you say to those people who might say that the ECB let them down?
Draghi: To your first question I should read out the Eurogroup statement on Greece that just came out." The Eurogroup welcomes the adoption by the Greek Parliament of all the commitments specified in the Euro Summit statement of 12 July. On the basis of a positive assessment by the institutions, which concluded that the authorities have implemented the first set of four measures in a timely and overall satisfactory manner and which confirmed that the Euro Summit statement has been included in the preamble to the implementing law adopted by the Greek parliament, we reached today a decision to grant in principle a three-year ESM stability support to Greece, subject to the completion of relevant national procedures. Upon the completion of the relevant national procedures and the formal decision by the ESM Board of Governors expected by the end of this week, the institutions would be entrusted with the task of swiftly negotiating an MoU detailing the policy conditionality attached to the financial assistance facility. The Eurogroup calls on the Greek authorities to swiftly adopt the second set of measures by 22 July as foreseen in the Euro Summit statement, and update the legislation related to the first set of measures consistent with the recommendations made by the institutions in their compliance report. ''
Draghi: So several positive things have happened that would justify the increase in ELA that we approved today. Incidentally, I did n't say by how much. We substantially accommodated the request put forward by the Bank of Greece, recalibrated over one week. So the increase would be $ 900 million over one week.
Draghi: To your second point, let me say that the liquidity provision, according to our rules, was never meant to be unlimited and unconditional. It 's just one good opportunity to clarify some confusion. And let me preface this by saying that we take these sorts of criticisms very, very seriously. I do n't want to underplay the difficulty that the ECB and the Governing Council of the ECB had in the last few weeks about having to take decisions between making sure the payment system continued to work, liquidity provision, monetary policy and not to amass excessive risk for the euro system all at the same time.
Draghi: But just let me make one legal point. First of all, the payment system that some people have referred to does n't have to do with liquidity provisions. There is an article in the Treaty that says that basically the ECB has the responsibility to promote the smooth functioning of the payment system. But this has to do with the functioning of TARGET2, the distribution of notes, coins. So not with the provision of liquidity, which actually is regulated by a different provision, in Article 18.1 in the ECB Statute:" In order to achieve the objectives of the ESCB, the ECB and the national central banks may conduct credit operations with credit institutions and other market participants, with lending based on adequate collateral. '' But our operations were not monetary policy operations, but ELA operations, and so they are regulated by a separate agreement, which makes explicit reference to the necessity to have sufficient collateral. So, all in all, liquidity provision has never been unconditional and unlimited.
Draghi: But is it true that we did not provide enough liquidity to Greece all throughout this time? Let me just give you one piece of data. Now, the month with the highest deposit outflow was January 2015. This was the month of the Greek elections. The monthly deposit outflow was $ 13.3 billion. The increase in ELA was $ 35.2 billion. The month with the second highest deposit outflow was last month, June 2015, again associated with increased political uncertainty related to the breakdown of the negotiations and the announcement of the referendum. The monthly deposit outflows were $ 8.1 billion. The increase in Eurosystem lending to the Greek banking sector was $ 10.3 billion.
Draghi: So, as I said several times, ELA has increased from zero to almost $ 90 billion, and now the Eurosystem has a total exposure to Greece of about $ 130 billion, which makes the Eurosystem the largest depositor in Greece. If you take the total private sector deposits in Greece, they are $ 120 billion, while the Eurosystem exposure to Greece now is, as I said, about $ 130 billion. So I find these observations that there was n't enough liquidity assistance, or that actually there was a bank run that was caused by the ECB, quite unwarranted, and certainly unfounded.
Draghi: Oh, incidentally, each time we announced an ELA operation we also said -- and I think I said it explicitly in April --" and emergency lending assistance will continue, liquidity assistance will continue. '' However, when the solvency and the collateral adequacy and quality prospects deteriorated, we had to calibrate the provision of liquidity according to these developments, and that 's how it went, for the reasons that I mentioned before. And we did it, however, as I said, always acting on the assumption that Greece will be a member of the euro area. There was never a question. And that is what makes us different from the ones who said, ` You should have cut ELA a long time ago. ' They wanted us not to respect our mandate, deciding who should be a member of the euro area and who should not.
Question: Another question on Greece, Mr President. What is your assessment of the deal, of the agreement that has been reached with Greece, and do you think that it might lead to conditions that will lead to a reduction of the haircuts on the collateral which you have raised recently?
Question: And another question, again on the discussion of Grexit, because the option of the exit of a euro country has been clearly on the table in negotiations in the past few days, and you have said in the past that one country leaving a currency union would put at risk the whole of the currency union, and would put into doubt the fungibility of money, so the foundation of the money itself. So the fact that this was discussed openly, put on the table, do you think it will have an impact on the strength of the euro in the long term?
Draghi: In response to the first question, I frankly hesitate in commenting on the programme as such. But let me say one thing: for, I believe, the first time, the text that circulated at the level of heads of state was not generic, was quite specific. It contained an impressive list of policy measures, prior actions and structural reforms, for which the Greek Parliament was asked either to take a vote on or to endorse these measures. Without commenting specifically on that, let me say that the overall purpose of that document is to ensure that Greece will become a thriving economy in the euro area. Quite considerable space in that document was given to structural reforms, so it was not the usual budget-based document only. That 's one thing.
Draghi: The second thing is something that I did say many times: the programme had to be a strong programme, which promotes growth, which ensures social fairness, which is also fiscally sustainable, and which addresses the financial stability problems. I believe that by and large that programme has these features. And finally, there is another issue that has been widely discussed: is debt relief necessary? It 's uncontroversial that debt relief is necessary, and I think that nobody has ever disputed that. The issue is: what is the best form of debt relief within our framework, within our legal, institutional framework? I think we should focus on this point in the coming weeks.
Draghi: The second point is about whether the simple fact of having discussed a possibility would weaken the union: well, I mean, if you phrase it this way you can see that that is not an issue. There were discussions, and I think discussions by themselves do n't necessarily weaken things -- but they have shown, again, something that I 've said many times: that this union is imperfect. And being imperfect, is fragile, is vulnerable, and does n't deliver all the benefits that it could if it were to be completed. So the future now should see decisive steps on further integration.
Question: So you 've raised ELA today, but it 's by quite an incremental amount. How is that going to change the situation in Greece? Are we still going to have deposit withdrawals limited to $ 60 per day, for instance? Are the capital controls on foreign payments going to remain in place? And if that 's the case, what needs to happen before we see some of those capital controls lifted?
Question: Just returning to the earlier question on the decision to freeze ELA: a lot of those criticisms have focused around the refusal to provide additional lender of last resort support to banks that your own regulators are saying are solvent. You mentioned there was an issue, in the answer to that question, about eligible collateral. I do n't quite understand how you can have a situation where there 's a lack of eligible collateral but banks can still be judged solvent by the regulators here at the SSM.
Draghi: On your first question, today we have accommodated the Bank of Greece 's request, completely and fully, though scaled to one week. This is understandable because we want to see how the situation will evolve. In so doing, we have accepted the assessment of the Bank of Greece in terms of the immediate needs of liquidity that the Greek economy has. Now, if things continue to proceed in a positive way, as they have done in the last two days, we will have a phase during which the Bank of Greece and the ECB, which are working very actively in monitoring the situation, will look at exactly the needs of the Greek economy: how can they be gradually satisfied? What are the general conditions so as to make sure that we are always there, ready to provide the Greek economy with the needed liquidity, and at the same time we do n't risk a bank run again?
Draghi: In the meantime, all these developments are improving the quality of collateral that the Greek banks can post. Because, you see, each time we have an improvement in the quality of the Greek government paper, we have an improvement in the quality of the collateral of the banks. And not only in that, because as you know, much of the equity, probably more than 50% of the equity of the Greek banks -- or the largest Greek banks, at least -- is formed by credits to the state. So the quality of these credits improves or worsens according to the overall developments and the quality of the policy dialogue between the Greek Government and the euro area Member States.
Draghi: The second point: there are two assessments which are being given of the solvency of the bank. The point-in-time assessment which is given by supervisor looks at the Common Equity Tier 1 at 4.5%, the total capital ratio at 8%, and the Tier 1 capital ratio at 6%. If you take these numbers, Greek banks are solvent, and that 's what the Chair of the Supervisory Board has said several times. However, if you look at it prospectively, and just on the basis of what I said about the enormous influence that the quality of the government paper has on the solvency of the banks, well, you question their solvency in prospective terms because you look at how things go, how the policy dialogue develops, and therefore how the quality of the government paper changes according to these developments. And therefore you give some assessments. It 's on the basis of this prospective assessment that looks at the quality of the government paper, but also at the quality of the overall banks ' balance sheets after such a protracted recession, and therefore with a foreseeable increase in non-performing loans: it 's on the basis of these two considerations -- by and large ; also others, but these are the two most important -- that an overall envelope of $ 25 billion was earmarked, out of a programme of between $ 82 billion and $ 86 billion, was earmarked for the Greek banking system.
Question: As central banker of Europe, do you think it 's a good idea to suggest the reversibility of the euro that reversibility is on the table, as German finance minister Wolfgang Schäuble has done in the last few days?
Draghi: In a sense what I said before could be used in several ways: I 'm not going to comment on politicians ' statements. I only know what our mandate is. And our mandate is to act based on the assumption that Greece is, of course, and will be a member of the euro area.
Question: Could you try and give us an assessment or a prediction of when the banking situation will normalise and maybe the banks could reopen without limits to withdrawals, and capital controls could be removed?
Question: And could you also tell us why there is a total lack of transparency about ELA? I mean, you 've given us a number today, but normally we 're left to chase every time what is the increase, and if you have decided it or not, and if there is a haircut, and by how much. Why is it not possible just to announce simply, every time you make a decision, what the decision is? Which then comes out in a very roundabout way -- I mean, it in the end comes out anyway.
Draghi: Yes, I never doubt your investigative capacities. But the answer to the first point: it 's hard to predict. We are all aware it 's clearly in the interest of the Greek economy to have these capital controls last as little as possible. By the way, the responsibility to lift capital controls, as well as to impose them, is with the Greek government. So that is something that the Greek government has to decide. But we have to be doing this in a way that we do n't run the opposite risk which we were about to run before the imposition of capital controls, namely a bank run, which would leave all the depositors being, basically, hit. Capital controls have protected the depositors -- which, by the way, to a great extent are now small depositors. The awareness that capital controls are hampering the recovery of the Greek economy is there, and the idea is to move as fast as we can, but also with a due degree of caution.
Draghi: Now, on ELA, you 're absolutely right: that was the usual -- that was the past, in fact. In the past, there was a certain reticence to publish the numbers of ELA, because the whole ELA concept was born to address liquidity shortages of individual banks that are solvent and have collateral. So the situation that was addressed by the old ELA agreement was one where a bank which was solvent and with adequate collateral, in spite of this was experiencing a liquidity shortage of some kind, and would be protected by this facility.
Draghi: Now, it was quite understandable if you had that situation, and the amounts and the modalities of ELA were to be made public, this -- it was thought, at least -- could worsen the situation of that bank at that time. Now here we are facing a completely different set-up where we are not talking about individual banks, but we are talking about countries ; banking systems. So we 're talking about a systemic problem, not any longer about an individual bank, an individual institution short of collateral. And so we are in fact revising our communication about ELA, because there 's absolutely no reason to keep things secret now, when we 're addressing a massive systemic problem, a macroeconomic problem.
Question: You 've said that the ECB is a rules-based organisation, and I 'm curious to know at what point, or is this point ever reached, where the ECB has to stop assisting Greece, for example on 20 July in the hypothetical case that the bonds were not to be repaid? But more broadly, is there any circumstance under which it would envisage stopping assisting Greece?
Question: And secondly, you 've often emphasised how it 's up to politicians to decide the future of the eurozone. If politicians were to decide, however, as Wolfgang Schäuble would like them to, to grant Greece a temporary exit from the eurozone, would the ECB respect that decision? Or what would it do in a circumstance where politicians would make such a decision?
Draghi: Well, on the first, about 20 July repayment, all my evidence and information leads me to say that we will be repaid, as well as the IMF, so that is off the table. I do n't want to speculate what are the conditions whereby countries would not receive the assistance of the ECB. There are three documents that you should look at: one is the Treaty, another one is the ECB Statute, and the third is the ELA agreement. All of them make the point of solvency and availability of adequate collateral. Then, as you 've just seen in the case of Greece, the assessment of these two features is not at all simple, is not at all one-dimensional. It 's point-in-time, it 's dynamic, it depends on the underlying issuer of this collateral ; what is the credit-worthiness of the underlying issuer.
Draghi: So it 's very difficult to think about a system where you simply push a button and you decide what to do. I think by and large the Governing Council has shown that it is a rule-based decision-making body, even in the very difficult circumstances that have characterised our work in the last few months.
Draghi: Your second point is whether we respect the decision of the politicians. Well, if you phrase it this way it 's hard to answer. But I would phrase it differently: do we respect the Treaty, as it is today, as it may become tomorrow? Yes. That 's where our mandate is enshrined.
Question: Two questions, Mr President. First on ELA again: was there also a decision regarding the haircuts for the collateral given for ELA?
Question: And the second one: you said before that further integration is needed for the eurozone ; have you been disappointed that there was not much discussion about the so-called" Five Presidents ' report '' some weeks ago?
Draghi: No, there was no decision, on haircuts. We had raised it before and we took no decision today.
Draghi: On the point of further integration, well, you know, it 's not so much what matters is my disappointment or not ; clearly there was such a complex climate focused on what was happening in Greece. My understanding is the European Council is going to discuss this report at the next meeting, I believe, or the meeting after that. What is important is that -- I was answering before with the same words -- what this experience shows is that we have to act, and we can act in different ways. The Five Presidents ' report is a rather broad roadmap, but it sends three messages. First of all, complete the banking union. That is to say, establish a deposit insurance guarantee scheme and the Single Resolution Fund. Again, the modalities of this oscillate -- and I do n't want to get into too much detail -- between a purely private-sector financed system and a purely mutualised, public-sector financed system. So we 'll have to decide there, but the important thing is to move now on that front.
Draghi: The second area of action is what the European Commission has launched, namely the creation of a Capital Markets Union. That 's very important for an area that does n't share a common budget, or a federal budget, because a Capital Markets Union would be an extraordinary assistance in sharing risks across the Union. And that is actually a very ambitious and complex, and very likely long undertaking, because it entails changes in legislation in several parts of the area. Mostly that, legislation that 's been with national countries for ages, like bankruptcy legislation and so on.
Draghi: And then the third area is, what are member countries going to do in a certain number of years as far as fiscal union, economic union and political union are concerned? So the report does n't tell what countries should do in this area. It only urges member countries to reflect on what sort of a roadmap they want to design for themselves in these areas.
Question: Mr President, I have two questions. The first one is, was the decision on ELA unanimous in the Governing Council?
Question: The second one is to know why you are so confident that Greece will manage to pay back next Monday. Which solution has your favour, maybe?
Draghi: Now, on the first point, it 's actually -- technically I believe the question about whether it was unanimous or not is not well posed. The decision here is not to object to the request of the Bank of Greece, and what you need in order to object is a two-thirds majority. And that was not there. So by definition, you need n't have unanimity on these decisions, because it 's not really what 's required. -LSB- 1 -RSB-
Draghi: Now, the other thing is about what makes us confident. We know that there is a financing concept that 's been elaborated and it 's on its way to be approved. It 's been elaborated by the European Commission, which I want to thank for their responsiveness, for the designs capacity, and I want to thank also all the members of the European Union that have made this possible.
Question: The first one is also on Greece. Last time you stressed very much the importance of strong implementation of reforms, et cetera. Not only designing a programme but also implementation. What makes you confident that this time will be different, especially given the fact that the Greek people clearly said no, and that also Prime Minister Tsipras is publicly saying that he does n't believe in the programme and the deal?
Question: And the second question, if I may, not on Greece ; it 's on QE. The Governing Council has recently added some corporate names to the list of QE-eligible bonds. I just wanted to know if you can elaborate a little bit on the reasons for that decision, especially why do you judge companies like Enel to be public sector agencies?
Draghi: You are right, of course. No matter who you talk to, there are, I would say, questions about the implementation, will and capacity. And so that 's what I said: it will be really in the Greek Government 's capacity to respond with policy decisions, with actions, that will dispel these doubts. I do n't want to use other words that have been used recently, but that 's certainly an issue. But let me ask you, would you think it is legitimate for the ECB to take its decisions based on doubts about a government 's capacity to implement the measures? That 's not for us. We follow the mandate.
Draghi: The next point is about the expanding list of agencies: frankly, we have received requests. This list is not cast in stone, as you 've seen. We 've changed two times. We keep on adding members -- the requirement of this is that basically they are public-sector entities. They issue bonds that have a certain rating, and therefore they are eligible for QE purchases. There is n't any deep strategic reflection behind the list. We certainly do n't want to have private-sector entities, because then it would be a different programme.
Question: Mr Draghi, believe it or not, another question that 's not on Greece. In your introductory statement you say that you are monitoring financial markets and will react should there be any development that results in a tightening of monetary conditions. You did n't have that statement last time, despite there being a period of volatility just before your Governing Council meeting, so I 'm wondering, has that volatility led to more monetary tightening than you had previously assumed? Or what was your motive for including that sentence this time around?
Question: And my second question is, assuming everything goes smoothly now with Greece, when is the earliest that you could actually include Greece in your QE programme? Would that be after the first review, if that 's successful, or what would be the timeline there?
Draghi: Are you sure that sentence was n't in a previous statement?
Constâncio: It was in a previous-previous one.
Draghi: It was in two statements ago. Here we have the memory of the institution that says it was two statements ago. -LSB- 2 -RSB- So there is n't any specific policy decision behind having the sentence now. But certainly we discussed it in the last two meetings, there has been a considerable increase in volatility, which has led to a rise in interest rates. This rise in interest rates could be explained in a variety of ways, and I think we went through this last time: higher expectations of inflation, higher expected growth, or simply higher term premium. It 's not clear which of these explanations seems to be more robust. Probably the higher term premium is one that receives attention. But having said that, we do n't see this as having changed the medium-term outlook for price stability. So this sentence basically says what I 've said all throughout, that if we were to see an unwarranted tightening of monetary policy, which could lead to a change in the medium-term outlook for price stability, then we would seriously think, and we have instruments to address this.
Draghi: Then on Greece and QE: for being eligible for QE the issuer has to issue instruments that are eligible for monetary policy operations. So there is an issue of going back to a rating which would make Greek bonds, eligible for monetary policy.
Constâncio: Or there should be a waiver.
Draghi: Yes, or there should be a waiver.
Draghi: Second point is the limit on how much of each country 's bonds can be bought by the ECB. As some SMP holdings will be repaid on 20 July and afterwards Greece would comply with this limit and there would be some room for doing QE.
Draghi: Then there is another requirement -- by the way, someone hinted or suggested that all these requirements were devised for Greece. This just makes no sense. All these requirements come from previous programmes. So the third requirement is, we ca n't buy bonds during a review period. So the review has to be successfully concluded. So much so that we 're now doing QE for Cyprus. So I think that 's more or less the response, and it describes in a sense the roadmap that we and Greece plan to follow to make Greece eligible for QE.
Question: Even before the first review, you could do it and the waiver is in place?
Constâncio: The point is the following: when a country has a rating which is below the investment grade which is the minimum, then to access monetary policy operations, it has to have a waiver. And the waiver is granted if there are two conditions. The first condition is that the country must be under a programme with the EU and IMF ; and second, we have to assess that there is credible compliance with such a programme. And that 's what we did on 4 February this year, when in spite of the fact that Greece was formally still under the second programme, the Governing Council assessed that there was no credible compliance. That 's when we abolished the waiver. So the Governing Council will have to assess, after there is a programme, at a certain moment, that there is a credible compliance with the programme. That may come at the end of the first review, because that would be clear. The Governing Council could nevertheless decide even before that if there was credible implementation. So it 's at the discretion of the Governing Council either to wait for the review or to do it slightly before, if indeed, there is good implementation of the programme. So these two conditions are to be fulfilled before the waiver can be reinstated.
Draghi: So it says here, on the basis of and following the implementation of the steps and measures outlined in the Euro Summit statement of 12 July 2015, Greece is expected to soon enter into a three-year ESM programme. Assuming that it is decided that the implementation of the referred steps and measures would be sufficient, a two-month window for PSPP -LRB- QE -RRB- purchases of Greek government bonds would open after the ESM board of governors have officially approved the first disbursement attached to the approval of the MoU. The purchase window would be suspended upon the beginning of the first review or after two months, the earliest date. It 's pretty complicated, as you can imagine. But it was not meant to be complicated for Greece only.
Question: I 'm getting back to your introductory statement. You cheer the positive effect of lower oil prices to household and corporate finances. At the same time, are n't you a bit worried that this 15% drop in oil prices will affect inflation, bringing it back to deflationary territory after being a mere 0.2% in June? That 's my first question.
Question: The second question goes back to Executive Board member Benoît Cœuré, who pre-announced the frontload asset purchases. And there is no frontloading of asset purchases, as far as I know, on weekly basis statistics, so what 's going on with that? Are you happy with, or what do you mean by frontload asset purchases, then?
Draghi: First of all, it 's quite clear that a drop in oil price has an effect on inflation. But the issue is whether there are going to be stable second-round effects on inflation. And we do believe that our monetary policy decisions have avoided the second-round effects of a drop in oil price in January, and will continue to do so now. So our accommodative monetary policy will avoid this risk of stably lower inflation in the medium term.
Draghi: The second point, I 'm sorry, I have to contradict you. There has been frontloading. By the way, why should there be frontloading? Well, there should be frontloading because usually people work less in August, and so there is less of a market then. Like in December. So be ready, yes? And frankly, I ca n't see why there should be such a drama. August as a month does n't come unexpected. So that 's why Mr Cœuré suggested -- said, actually -- that there should be frontloading. Frontloading had taken place. It was by $ 3 billion in May and $ 3 billion in June. It 's likely to be slightly less in July. And so you can kind of figure out what 's going to happen in August.