giovedì 8 aprile 2010 15:39

 The continued steep yield curve fosters the allocation of
funds into longer-term deposits and securities outside M3 and
implies that actual M3 growth is weaker than the underlying pace
of monetary expansion. At the same time, the narrow spreads
between the interest rates paid on different M3 instruments
imply low opportunity costs of holding funds in the most liquid
components included in M1, which continued to grow at a robust
annual rate of 10.9% in February. However, the monthly flows in
the components of M3 were generally small in February,
suggesting that the strong impact of the prevailing interest
rate constellation may be progressively waning. 
 The negative annual growth of bank loans to the private
sector continues to conceal countervailing developments:
positive, strengthening annual growth in loans to households on
the one hand, and negative annual growth in loans to
non-financial corporations on the other hand. At the same time,
the flow of loans to firms in February was positive for the
first time since August 2009 and halted the decline in the
annual growth rate. Such positive short-term developments need
to be assessed with caution, owing to the volatility in monthly
data. In addition, it is a normal feature of the business cycle
that loans to non-financial corporations remain weak for some
time after economic activity has picked up. 
 The reduction in the size of banks' overall balance sheets
appears to have come to a halt in the early months of 2010.
However, the challenge remains for them to manage possible
further adjustments while at the same time ensuring the
availability of credit to the non-financial sector. To address
this challenge, banks should use the improved funding conditions
to strengthen their capital bases further, and, where necessary,
take full advantage of government support measures for
 To sum up, the current key ECB interest rates remain
appropriate. Taking into account all the information and
analyses that have become available since our meeting on 4 March
2010, price developments are expected to remain moderate over
the policy-relevant horizon. The latest information has also
confirmed that the economic recovery in the euro area continued
in the early months of 2010. Overall, the Governing Council
expects the euro area economy to expand at a moderate pace in
2010, in an environment of uncertainty, with the growth pattern
possibly being uneven owing to a number of special factors. A
cross-check of the outcome of the economic analysis with that of
the monetary analysis confirms the assessment of low
inflationary pressures over the medium term. All in all, we
expect price stability to be maintained over the medium term,
thereby supporting the purchasing power of euro area households.
Inflation expectations remain firmly anchored in line with the
Governing Council's aim of keeping inflation rates below, but
close to, 2% over the medium term. We will continue to monitor
very closely all developments over the period ahead. 
 As regards fiscal policies, it is now essential that
governments reduce budget imbalances and correct excessive
deficits by the agreed deadlines. In a number of euro area
countries, fiscal consolidation will start this year and in all
others corrective measures will need to be in place by 2011 at
the latest. Fiscal consolidation will need to exceed
substantially the annual structural adjustment of 0.5% of GDP
set as a minimum requirement by the Stability and Growth Pact,
and there is a need to fully define and implement credible
fiscal adjustment strategies. This requires determined efforts,
notably on the part of countries with high government deficit
and debt-to-GDP ratios, not least in view of the expected rising
budgetary costs associated with an ageing population. A strong
focus on expenditure reforms is needed. The Governing Council
welcomes the statement on Greece made by the Heads of State and
Government of the euro area countries on 25 March. We fully
support the intention to strengthen surveillance of economic and
budgetary risks and the instruments for their prevention as well
as the excessive deficit procedure. We also welcome the decision
to work on a robust crisis resolution framework. Progress in
these fields should aim to support the sustainability of public
finances and promote the smooth functioning of EMU. 
 Regarding structural reforms, the agreements reached at the
European Council on 25 and 26 March on the Europe 2020 strategy
should help to reinforce job creation, competitiveness and
sustainable growth. To this end, policies should now focus on
increasing competition, while sectoral support schemes
implemented during the crisis should be phased out. In labour
markets, sufficient wage flexibility and a reinforcement of
incentives to work are required, in order to avoid higher
structural unemployment over the coming years. In the same vein,
an appropriate restructuring of the banking sector remains
essential. Sound balance sheets, effective risk management and
transparent, robust business models are key to strengthening
banks' resilience to shocks and to ensuring adequate access to
finance, thereby laying the foundations for sustainable growth
and financial stability. 
 Regarding our collateral framework, the Governing Council
has decided to keep the minimum credit threshold for marketable
and non-marketable assets in the Eurosystem collateral framework
at investment-grade level (i.e. BBB-/Baa3) beyond the end of
2010, except in the case of asset-backed securities (ABSs). In
addition, the Governing Council has decided to apply, as of 1
January 2011, a schedule of graduated valuation haircuts to the
assets rated in the BBB+ to BBB- range (or equivalent). This
graduated haircut schedule will replace the uniform haircut
add-on of 5% that is currently applied to these assets. The
detailed haircut schedule will be based on a number of
parameters which are specified in the press release to be
published after today's press conference.