The Committee on Economic and Monetary Affairs (ECON) holds an exchange of views with Christine Lagarde, candidate for the position of European Central Bank (ECB) President, in the European Parliament in Brussels. Statement by Christine LAGARDE, nominated as President of the ECB.  The following transcription is the result of an automatic process. Check Against delivery.

Brussels

exchange of views

statement

European Central Bank

Committee on Economic and Monetary Affairs

LAGARDE, Christine (FR)

appointment of the President of the ECB (T)

EP Committee on Economic and Monetary Affairs - Appointment of the President of the European Central Bank: opening statement by Christine LAGARDE, nominated as President of the ECB

https://api.multimedia.europarl.europa.eu/documents/20125/16814363/I176445Chapters%5BSD-EN%5D.srt

SOUNDBITE (English), Christine LAGARDE, nominated as President of the ECB: Well thank you very much Mr. Chairman. I would begin by asking for your indulgence because I was actually offered to prepare an intervention of 15 minutes and when discussing that with President Gualtieri yesterday it was agreed that I could speak for 15. But if you want me to stop at 10:00 I'll stop at 10:00 whatever.

SOUNDBITE (English), Christine LAGARDE, nominated as President of the ECB: Monsieur le président I was initially member this committee. I'm very honoured to appear before you and I'm actually very intimidated to appear before you. The only consolation I find is that many of you in this room probably find themselves in the same positions as I am. You're joining. I'm a candidate. You're learning I'm learning as well. And we come with all the goodwill the determination and the enthusiasm for the cause that we are prepared to serve.

SOUNDBITE (English), Christine LAGARDE, nominated as President of the ECB: I believe that the relationship between the European Parliament and the ECB is a cornerstone of our monetary union. Central bankers are independent but they're not directly elected. And as a result that can only be justified if they are held accountable. These are. Those representatives that are elected are therefore considered the opinion of the European Parliament as a key step in my appointment process.

SOUNDBITE (English), Christine LAGARDE, nominated as President of the ECB: No one presenting to you this morning I hesitated between giving you a European economic outlook or giving you a technical discussion about various matters of monetary policy and other matters but I resolved that it might be more interesting to actually highlight some aspects of my professional experience and background which I consider relevant to the tasks of ECB president.

SOUNDBITE (English), Christine LAGARDE, nominated as President of the ECB: I have been the managing director of the International Monetary Fund for the last eight years and I've had the privilege to head an institution that is the core of the global financial safety net and whose governors are themselves central banks. In that capacity and also as finance minister for France I have contributed to enhancing the crisis resolution tools and the financial regulations on both the European level and the international level. I have also been directly involved in strengthening the European and monetary union. Now what has driven me in conducting those tasks is certainly the determination that it is worth all the while to actually serve public interest and to deliver on the justified expectations of the people.

SOUNDBITE (English), Christine LAGARDE, nominated as President of the ECB: I was suddenly made aware of the critical impact that some lack of regulation or lack of decisions can have on the people. And I was also mindful of the profound impact that decisions of public institutions can have on people's lives. In my positions in previous life I've always tried to focus on what I regarded as fundamental issues.

SOUNDBITE (English), Christine LAGARDE, nominated as President of the ECB: At the IMF contrary to all expectations it's meant. Focussing also on rising inequalities focussing also on climate change focussing also on promoting fairer and more inclusive growth. These were not necessarily regarded as macro critical by that institution which mandate was to focus on macro critical matters but eventually it became regarded as macro critical. And I'm glad that I insisted on those. But good leadership is not just about setting priorities. It is also about listening to all voices not just experts voices but all voices. And fostering diversity of thought.

Speaker: At the IMF I of course worked very closely with top notch economists. In order for them to produce evidence based and data led decisions and I listened carefully to staff to develop a common and modern vision of the IMF work. Making the IMF more inclusive and harnessing its diversity and opening it to civil society was central to my strategy. Why do I sell that. Because it is those same value that I believe in. That I would promote if I was confirmed as ECB president and in my remarks today what I would like to focus is on three of those principles that I regard as critically relevant for the purpose of the task.

SOUNDBITE (English), Christine LAGARDE, nominated as President of the ECB: The first two that I will handle together is commitment. Commitment to the ECB mandate as laid out in the treaty. The second is agility in responding to the new challenges. I will handle these two together. The third one which to me is critically important as well is inclusiveness.

SOUNDBITE (English), Christine LAGARDE, nominated as President of the ECB: And I will explain how I understanding inclusiveness in that respect. So commitment and agility. We know for and I have known for decades of theory and practice that a clear mandate for monetary policy and the central bank's commitment to pursue it are vital for stability and welfare. And since its inception the ECB has demonstrated a steadfast commitment to that goal. In its early years it achieved the remarkable feat of steering a diverse monetary union in a regime of low and stable inflation.

SOUNDBITE (English), Christine LAGARDE, nominated as President of the ECB: But then it faced an abrupt change in to 2008 when it had to fight not inflation but deflation. Again the commitment was crucial. This time to ensure that price stability was not jeopardized by a long period of what I have termed low flexion. In doing so the ECB had to adjust to the new challenges that it faced at the time it had to reappraise prior convictions. In the light of evidence and experience and to be innovative in its policy toolkit within the boundaries set by the law and in accordance with the mandate. And it was this agility that allowed the central bank to continue delivering in rapidly changing circumstances.

SOUNDBITE (English), Christine LAGARDE, nominated as President of the ECB: Without that without that ability to innovate at the time the crisis would certainly in my view and in the view of most experts that look at it seriously would have been a lot worse. In fact the ECB itself did some research into that to assess what would have happened had it not been innovative.

SOUNDBITE (English), Christine LAGARDE, nominated as President of the ECB: How did not respond responded with agility and concluded that the economy would have been 2 percent smaller if it had not entered into unconventional measures since mid 2014 which is not to say that before 2014 there was no such unconventional measures as well. Employment in the euro area also increased by over 11 million. Eleven million new jobs since the trial of 2013. As those measures boosted confidence in the economic recovery and encouraged job creation. So if confirmed as president I would drawn the same sound principles.

SOUNDBITE (English), Christine LAGARDE, nominated as President of the ECB: Sticking. To the commitment that is embedded in the mandate. But using the agility to adapt to the world as it changes around us. The challenges that warrant the ECB as current policy have not disappeared. The euro area economy faces some near-term risks mainly related to external factors. We can discuss that and inflation remains persistently. Too low and certainly below the objective. I therefore agree with the view of the Governing Council that the highly accommodative policy is warranted for a prolonged period of time in order to bring inflation back to the famous below but close to 2 percent.

SOUNDBITE (English), Christine LAGARDE, nominated as President of the ECB: But there are also some important questions on the horizon that monetary policy will need to address. First though the impact of unconventional policies continued to be net positive. We need to be mindful of the negative effects and the potential side effects of those policies. And we have to take the concerns of the people into account. While remaining committed to our price stability mandate this requires continuous monitoring and a very careful cost benefit analysis as is conducted currently by the Governing Council.

SOUNDBITE (English), Christine LAGARDE, nominated as President of the ECB: Second the global environment of low inflation and low interest rates poses strategy questions for all of central banks. It's not just the ECB. The central banks need to enhance their understanding of inflation dynamics. Take stock of new instruments activated to contain the crisis including the use of balance sheets and unconventional monetary policies. And they need to reflect on whether their monetary policy frameworks are sufficient and sufficiently robust to future challenges.

SOUNDBITE (English), Christine LAGARDE, nominated as President of the ECB: This is a task that I intend to embark upon and to join if organized on a broader basis. Third central banks are increasingly facing new types of challenges not least related to climate change to the disruptive impact of technological change. The potential fragmentation of the current multilateral order. And here I see it as crucial that monetary policy is forward looking and considers the broader context in which price stability. Its mandate is achieved. Ultimately the effectiveness of our monetary policy hinges on the resilience of the financial system.

SOUNDBITE (English), Christine LAGARDE, nominated as President of the ECB: The ECB is role in financial stability has expanded significantly in response to the challenges that emerged during the crisis. It has been asked to embrace new responsibilities for macro prudential policy and to host the new European Banking Supervisor whom I understand you heard just before me. Supervision has done an effective job in strengthening capital buffers and reducing risks on balance sheets of banks. Common Equity Tier 1 ratios have risen from 11 percent at the end of 2014 to now 14 percent in 2018. The stock of non-performing loans. More work to be done I hear of most significant banks as now halved in that period of time.

SOUNDBITE (English), Christine LAGARDE, nominated as President of the ECB: But a series of challenges remain both banking union and capital markets union need to be completed to foster deeper risk sharing in the euro area and expand access to finance. Bank profitability. You've heard it is low. And the landscape of the financial sector is being changed by the growing role of non banks in intermediation and technological transformation. The share of nonbank financing flows to euro area firms has risen from around 30 percent before the crisis to more than 50 percent today.

SOUNDBITE (English), Christine LAGARDE, nominated as President of the ECB: Those are big changes they need to be considered when having in mind financial stability. Fintech firms now receive around a quarter of the financial service industries venture and start funding again big changes underway and in this environment central banks and supervisors need to ensure the safety of the financial sector but also to open up to opportunities that are procured by those changes. And that means being alert to risks in terms of financial stability privacy criminal activities and ensuring appropriate regulation is in place to steer technologies towards the public good. But it also means recognizing the wider social benefits from innovation and allowing them space to develop in an environment that is safe for financial stability purposes.

SOUNDBITE (English), Christine LAGARDE, nominated as President of the ECB: So Commitment to the mandate agility to adjust. The third component which in my view is clearly important is inclusiveness. And let me tell you what I mean by inclusiveness. The first aspect of inclusiveness in my mind is cooperation. Within the Eurosystem there is a huge wealth of expertise that we can drawn to prepare for the future and strengthen our capacity to tackle common challenges. One example of that is the network for greening the financial system which was launched a few years ago not long ago. 2017 if I recall by a few central bank governors and which the ECB is now a member. Changes will have to take place.

SOUNDBITE (English), Christine LAGARDE, nominated as President of the ECB: Central banks can also play a key role in sustaining global cooperation thereby helping to underpin the multilateral order in the field where it has competence. This multilateral order is under threat at the moment. Central banks have to close ranks and deliver on that multilateral order.

SOUNDBITE (English), Christine LAGARDE, nominated as President of the ECB: But central banks do not act in a vacuum. The effectiveness of monetary policy can be enhanced by appropriate national and European policies and by the trust of the public. So I see a possibility for deeper cooperation in other areas as well. Completing the single market remains one of the most powerful tools we have to spread new technologies and raise productivity while also safeguarding consumers and protecting labour standards by avoiding or limiting the social dumping. This holds true for the real economy and especially in the area of services but also in the financial sector which I already touched upon.

SOUNDBITE (English), Christine LAGARDE, nominated as President of the ECB: The role of the parliament here is instrumental as a core legislator. Another area of cooperation is fiscal policies which need to be available to stabilize our economies through downturns and avoid overburdening monetary policy. I was a finance minister for four years at the time of the financial crisis and I have witnessed the difficulties of coordinating policies particularly in fiscal matters. Because we are focussed on our national issues we tend to go home.

SOUNDBITE (English), Christine LAGARDE, nominated as President of the ECB: And yet. The European dimension can be critical if properly completed in order to resist destabilisation caused by external shocks. It has to be effective. It has to be simplified and this is not something that I invent off the cuff. The IMF. Has actually done a lot of work in relation to effectiveness and simplifications of the rules that preside over a strengthening and deepening of the markets in the short term.

SOUNDBITE (English), Christine LAGARDE, nominated as President of the ECB: Concluding the reform of the European Stability Mechanism operationalizing the backstop of the Single Resolution Fund and establishing a scalable budgetary instrument for competitiveness and convergence would be useful steps forward but forward. In combination with other reforms to the financial and payment systems these measures would also help reinforce the international role of the euro. That would afford the euro area more of the benefits of issuing an international reserve currency and a greater degree of strategic independence in an increasingly uncertain world. Second final dimension to me critically important is diversity.

SOUNDBITE (English), Christine LAGARDE, nominated as President of the ECB: I'm always mindful of something that Paul Valery said after the end of the Second World War. McDonald's uncle massacre was up on the menu. Obviously she saw the naughty films see Monday when she was president of the euro. European Parliament didn't say anything different. And I'm also convinced that diversity is a source of wealth.

SOUNDBITE (English), Christine LAGARDE, nominated as President of the ECB: Drawing on all talents from all backgrounds and committing absolutely to all people being treated equally. Be that on the basis of gender of race of nationality of background. But it also means speaking and listening to a wide range of voices as a wider range as possible and making sure that dialogue is a central part of policymaking and it is in that respect that are very much welcome the dialogue that we will have over the course of the next few years.

SOUNDBITE (English), Christine LAGARDE, nominated as President of the ECB: If I was confirmed the ECB needs to listen to and understand markets need not be guided by market but it certainly needs to listen and understand. But it also needs to listen and understand the people because a currency is after all a public good that belongs to the people. When at the IMF I certainly worked really hard to make sure that civil society representatives were included in the process of our deliberations and I would certainly hope that we can work hard at making sure that civil society representatives and people actually take ownership of what is currently regarded very highly by the people of the euro area the euro.

SOUNDBITE (English), Christine LAGARDE, nominated as President of the ECB: Unfortunately we cannot say the same about all the European institutions but I believe that it is through fostering a strong and vibrant dialogue that we can actually improve that situation. So to deliver on commitment agility and inclusiveness I believe that. Innovation and cooperation will be required as much as accountability and communication. I very much look forward to a fruitful exchange with you and I'm here not only to answer your questions. I prepared hard but I come with what I have and the experience that I have acquired over the course of time. But I'm also here very much to listen to your views and to appreciate what you expect from a European Central Bank president. Thank you very much to.