Papademos defends ECB’s inflation focus before MEPs
BRUSSELS (Reuters) – Eurozone inflation may not fall as quickly to below the ceiling self-imposed by the European Central Bank (ECB) as previously expected, Lucas Papademos, the man in line to be the next ECB vice president, said yesterday. The Greek central bank chief, picked by European politicians to succeed Christian Noyer when he steps down at the end of May, told members of the European Parliament, who must vet him for the job, that the ECB did not focus dogmatically on price stability. However, he took the standard ECB line by saying the central bank could best help growth by pursuing this goal and by protecting its own independence from political pressure. Eurozone inflation was 2.5 percent in March, above the ECB’s 2 percent ceiling, but Papademos said the central bank had achieved a high degree of price stability despite shocks and that price pressures would abate during the course of the year. «It is expected that inflation will gradually decline below 2 percent. It may not decline as much as expected earlier in the year,» he told journalists after a hearing of the European Parliament’s Economic and Monetary Affairs Committee. Papademos told the committee the ECB was not blind to growth. «Price stability is not, of course, the only important economic policy objective,» he said. «Attaining sustainable and non-inflationary growth and a high level of employment are other important goals.» That sat well with his choice of US Federal Reserve Chairman Alan Greenspan as one of the non-European central bankers he most admired. Still, Papademos backed the ECB line by arguing that, in the medium to long run, securing price stability was the best contribution the ECB could make to growth and job creation. He also insisted that politicians were best placed to address unacceptably high unemployment levels in Europe. He urged them to help enhance productivity by pressing on with economic reforms, integrating financial markets and addressing long-term imbalances due to demographic problems. In a wide-ranging presentation and in replies to questions from committee members, Papademos said he was a firm believer in ECB independence. On the question of transparency for the deliberations of the bank’s policy-setting council, he struck a cautious note. «The detailed publication of the deliberations of the (ECB) council, as well as the voting record could undermine… the quality of the discussion,» he told the parliamentarians. He said the statements issued by the ECB after its policy meetings corresponded to the minutes of policy meetings issued by other central banks. Still, he said that publishing ECB voting records without including names could send a useful signal to financial markets. «This could provide an additional signal to markets about prospects of changes in the monetary policy stance,» he said Parliament’s recommendation on Papademos’s appointment, along with the endorsement which the ECB gave him on Thursday, will be sent to the EU leaders, who must complete the formalities by the time Noyer steps down.
