Frank Elderson, Member of the Executive Board of the ECB, conducted an interview on Twitter on 16 March 2021. During the interview, he addressed various topics and answered questions from the public. One question asked about the potential negative consequences of ECB policies, to which Elderson acknowledged the possible side effects but highlighted that they are actively mitigating them. Another question inquired about the evaluation of climate risk in the ECB’s investment portfolio, and Elderson explained that the Eurosystem is working on measuring greenhouse gas emissions and other sustainable investment-related metrics. In terms of inflation, Elderson stated that while inflation has increased recently, it is mainly due to transitory factors, and underlying inflation remains subdued due to weak demand. Elderson also addressed concerns about the zombification of the EU economy and emphasized that the pandemic’s impact is temporary, reducing the risk of zombification. He expressed pride in his family and commitment to helping Europeans during the pandemic. Elderson stated that interest rates are expected to stay at their present level or lower until inflation reaches the ECB’s objective. Regarding crypto-assets, Elderson highlighted their volatility and lack of intrinsic value, contrasting them with the potential benefits of a digital euro backed by the ECB. He emphasized the importance of disclosure and transparency on environmental risks and the ECB’s commitment to incorporating climate change in their tasks. Elderson explained that pandemic-related supply constraints may increase inflation this year, but underlying price pressures are expected to remain muted due to weak demand and low wage pressures. He addressed concerns about inequality, stating that asset purchases have helped maintain jobs, and the positive effects have exceeded the negative ones. Elderson clarified the terms “upstream” and “downstream” in relation to monetary policy transmission. He also made a historical reference to Tulip Mania to caution against prices not reflecting intrinsic value. Elderson highlighted the ECB’s commitment to climate action and the ongoing strategic review, including discussions on market neutrality. He mentioned the establishment of the ECB climate change centre and its role in shaping the ECB’s climate agenda. Elderson reiterated that the ECB must contribute to the success of climate change-related policies within their mandate, but it is up to governments to implement such policies. In terms of diversity, Elderson emphasized the value of diversity and mentioned that governments appoint the Executive Board, while the ECB encourages diversity in the banking sector. Finally, Elderson explained that the ECB uses its resources to preserve favorable financing conditions and expects to increase the pace of purchases under the PEPP program.
Conversation with LETA
Isabel Schnabel, Member of the Executive Board of the ECB, discussed the current economic situation in the euro area. She acknowledged that the pandemic has caused the deepest economic downturn since World War II, but there have been positive developments, such as the rebound in economic activity supported by fiscal and monetary policy response. However, the increasing infection numbers and uncertainty due to new virus variants pose risks to the short-term outlook. Schnabel emphasized the importance of continued fiscal and monetary policy support to ensure no unwarranted tightening of financing conditions and to avoid jeopardizing the economic recovery.
Conversation with Der Spiegel
Fabio Panetta, a member of the Executive Board of the European Central Bank (ECB), recently conducted an interview discussing the potential introduction of a digital euro. The move towards digital payments has been accelerated by the COVID-19 pandemic, with more people preferring to pay digitally rather than with cash. The digital euro would serve as an efficient and universally accepted means of payment, providing an alternative to other digital payment methods. While the details have not been finalized, the digital euro would be a claim on the central bank, similar to cash, and would be distributed through banks. The ECB aims to work in partnership with commercial banks rather than competing with them. Concerns about data protection and avoiding excessive fees charged by dominant providers were key factors in the decision to explore the digital euro. The ECB also wants to ensure that it remains at the forefront of digital payment developments, particularly in light of initiatives such as Facebook’s Libra and China’s digital yuan. The ECB’s main motivation is to provide a European option and prevent a small group of companies from dominating the market. The introduction of the digital euro would not destabilize the financial system or commercial banks. If people choose to convert cash into digital euros, banks would not lose deposits, and the ECB could provide additional liquidity if needed. The ECB plans to present its preliminary analysis in the summer and make a decision on whether to proceed with the digital euro. The process of determining the operational scope and technical solution would take at least 18 months, with a potential implementation timeline of four to five years. The ECB is also considering a trial period to test the digital euro in different cities.
ECB digital euro consultation concludes with unprecedented public response
The European Central Bank (ECB) has concluded its public consultation on the digital euro, receiving over 8,000 responses. The ECB will now analyze the large number of responses in detail. The public consultation was launched in October 2020, following the publication of the Eurosystem report on a digital euro. The ECB plans to publish a comprehensive analysis of the consultation in the spring, which will be an important input for the ECB’s Governing Council when deciding whether to launch a digital euro project. Initial analysis of the data shows that privacy of payments, security, and pan-European reach were the top preferences among respondents. The ECB emphasizes the importance of citizen and stakeholder opinions in shaping the vision of a digital euro. The digital euro would be an electronic form of central bank money that would complement cash and prioritize privacy and security in digital payments.
Innovative Approaches to Money: Balancing Innovation with Trust
In an article published in L’ENA hors les murs magazine, Christine Lagarde, President of the European Central Bank (ECB), discusses the evolution of money and the potential introduction of a digital euro. Lagarde emphasizes that throughout history, the functions of money as a means of exchange, unit of account, and store of value have remained the same. However, the nature of money has evolved in response to socioeconomic changes.
Transforming Payments and Rethinking Currency
Fabio Panetta, Member of the Executive Board of the ECB, delivered a speech at the Deutsche Bundesbank conference on the “Future of Payments in Europe”. He highlighted the importance of retail payments in our daily lives and for the economy, with adults in the euro area making an average of two payments per day last year. The Eurosystem’s objectives in the area of retail payments are to ensure access to efficient payment solutions and to maintain transaction safety. Technological innovation is changing the policy implications of these objectives, and Panetta presented the Eurosystem’s strategy for empowering Europeans with efficient, inclusive, and secure payments in the digital age. He emphasized the need to reinvent sovereign money to adapt to the impending revolution in payments.
Exploring the Dual Nature of Stablecoins
The payments industry is undergoing a digital transformation, with the use of mobile wallets and payment apps becoming more prevalent. Fintechs, particularly start-ups, are driving innovation in the sector, offering payment solutions that are free in exchange for personal data. Global technology firms, known as big techs, are leveraging their customer base to expand in the global market, particularly in cross-border transactions. Stablecoins have emerged as a potential solution for innovative payments, offering stability by being pegged to a reference currency or basket of currencies. While stablecoins have the potential to transform the payments landscape and offer more efficient cross-border payments, they also pose risks. These risks include the misuse of personal data, dependence on foreign technologies, and threats to financial stability and monetary sovereignty. Stablecoin issuers may not provide the same level of safeguards as traditional financial institutions, and the payment network of stablecoin arrangements could be a source of instability. Additionally, the dominance of big techs in the payments market could harm competition and consumer choice, as well as raise concerns about data privacy and market power. To address these risks, European authorities are implementing policies such as a retail payments strategy, the possible introduction of a digital euro, and regulatory frameworks for oversight and consumer protection. A multi-sectoral response is necessary, involving central banks, financial regulators, data protection authorities, and competition authorities. It is important to ensure that stablecoins are introduced within a comprehensive policy framework to protect the European financial system and promote the interests of EU citizens.
The ECB’s Legal Response to the COVID-19 Pandemic: A Limited yet Specialized Authority
Yves Mersch, Member of the Executive Board of the ECB, delivered a keynote speech at the ESCB Legal Conference, discussing the legal framework governing the ECB’s actions. He emphasized that the ECB has exclusive but narrow competence to define EU monetary policy for maintaining price stability. The European Court of Justice has recognized the ECB’s broad discretion in defining monetary policy, but also insisted on controlling this discretion based on self-imposed constraints. Mersch highlighted the need for the ECB’s measures to be proportionate, not undermine the “no bailout clause,” comply with the prohibition of monetary financing, and respect the principle of an open market economy.
Exploring the Future of European Payments in the Digital Era
Fabio Panetta, Member of the Executive Board of the ECB, delivered a keynote speech at the ECB Conference on the new horizon for pan-European payments and the digital euro. He highlighted the importance of payments in our daily lives and the need for central banks to ensure the smooth functioning of payment systems. Panetta discussed the transformation taking place in the payments landscape driven by digital technologies and the demand for new forms of payment. He emphasized the need for European authorities to respond to the changing payments landscape to ensure that payments remain safe, efficient, and inclusive. Panetta identified three trends shaping the payments landscape: evolving preferences of consumers and businesses, the evolving structure of the payments market, and the increased risks associated with dependence on foreign payment instruments and technologies. He outlined the Eurosystem’s response to these trends, including the continued provision of cash, the retail payments strategy to foster competition and innovation, oversight of electronic payment instruments, and the exploration of a digital euro. Panetta stressed the importance of European authorities being attentive and ready to respond to the ongoing transformation of the payments landscape to ensure a resilient and innovative European payments market.
Conversation with Le Monde
In an interview with Christine Lagarde, President of the European Central Bank (ECB), conducted by Marie Charrel and Eric Albert, Lagarde expresses her concerns for the European economy amidst the worsening pandemic and the introduction of new restrictions. She highlights that the recovery has been uncertain and incomplete, and there is a risk of losing momentum. Lagarde states that the ECB will closely monitor indicators throughout the autumn and revise projections in December if the situation deteriorates. She emphasizes the long-term scars that the crisis may leave, particularly in terms of job losses, and stresses the importance of not withdrawing fiscal safety nets too soon.