Every three months, the President of the European Central Bank answers questions of the Committee on Economic and Monetary Affairs of the European Parliament (ECON) within the scope of the so-called Monetary Dialogue. It was the first appearance of Christine Lagarde before MEPs, since she had taken over as President of the ECB on 1st November. Hence, her appearance was met with great anticipation.

Similar to her predecessor Mario Draghi, she too began with the current indicators from the EU Economic Area: growth within the Euro zone had slowed down in the past months; in the third quarter of 2019 it had only been 0.2 %. She stated decreasing international demand as one of the main reasons. It is first and foremost the manufacturing industry, which is affected by the slowdown. However, that the slowdown had not been greater is due to the domestic demand and improvements on the labour market.

According to calculations by Eurostat, the fact that inflation in November 2019 stood at exactly 1 %, had been due to falling economic activities. Looking into the future, Lagarde spoke of a “possibly historic low” price increase to be expected.  However, to achieve a stable price level, which has been firmly established as an ECB target, inflation should be just short of 2 %. Hence, the ECB will in particular focus on strengthening domestic demand. She confirmed the set of measures, adopted by the ECB in September 2019, including lowering the ECB base rate of -0.5 % and the resumption of bond purchases by the ECB.  

In addition, Christine Lagarde announced a review of the ECB’s monetary strategy. National Banks carry out such strategic reviews on a regular basis; however, the last ECB review took place 16 years ago. There had been a number of key developments during this period - from the growing number of Euro States up to the 2008 Financial and Economic Crisis - a reason, why, from Lagarde’s point of view, a strategic review was overdue. Within this scope, the ECB also intends to deal with the question, what contribution the ECB can make in the fight against climate change. However, Lagarde did not give a concrete date when asked when this review would be complete.

From the point of view of the Chamber of Labour it is of key importance that the European Union puts a wealth-oriented and sustainable economic policy at the centre of its orientation, thereby pursuing targets such as full employment as well as a high level of fairly distributed material well-being.  Apart from that, Member States have to be given greater budget flexibility for public investments in form of a “golden investment rule”. This would also sustainably strengthen domestic demand in order to secure long-term economic growth.

Christine Lagarde is the first woman to head the European Central Bank. However, this institution too is far from achieving gender parity. In fact, it is further away from it than many other EU institutions: Christine Lagarde is the only woman in the 25-strong ECB Council. When asked about this imbalance, she replied in no uncertain terms: the gender distribution in the ECB’s most important Council does not reflect well on our society. She therefore called on all decision-makers to support women. This call was also and in particular addressed to the 19 National Banks of the Euro States, as their Governors are automatically Members of this Council.

Further information

AK Position Paper: Towards a sustainable Europe by 2030

AK EUROPE: ECB President Draghi demands reform of the der Economic and Monetary Union

Speech by ECB President Christine Lagarde before the Committee on Economic and Monetary Affairs of the European Parliament