A central bank must ensure that money and credit grow at a pace consistent with the broad stability of the value of money in challenging times. It must also ensure that liquidity is sufficient to absorb shocks and sustain confidence in the economy.
This is precisely why the European Central Bank was established in 1998 with the primary objective of maintaining price stability alongside a secondary objective of supporting the general economic policies of the union.
In the years following the COVID pandemic, inflation rose to concerning levels. While inflation appears to have stabilized now, we must remain vigilant regarding the potential resurgence of inflation, especially given the political situation, the geopolitical situation, and exchange rate fluctuations that pose significant risks.
To effectively preserve price stability, the ECB must maintain its political independence. In a fiat money world, the credibility of a central bank and the trust it garners from the public are crucial assets for fulfilling its mandate.
History provides ample evidence that direct political intervention or interference with central bank independence invariably leads to inflation, financial instability, and even nasty political turmoil.
However, independence does not equate to a lack of accountability. The ECB is accountable to the European Parliament and this accountability must be meaningful. Strong institutional design and robust accountability mechanisms are essential.
Our report encourages the ECB to explore ways to enhance the transparency and comprehensibility of its decision-making processes for both citizens and policymakers. Political independence also necessitates the ECB's actions to remain apolitical.
Reaffirming the ECB's independence is particularly vital in the current global context where central bank independence is facing increased pressure. Rising debt levels heighten the risk of what they call fiscal dominance, a situation where fiscal needs and debt financing issues increasingly dictate monetary policy.
The threat to independence is especially pronounced in the United States, where actions and comments from the current president regarding the Federal Reserve and its leadership not only undermine the internal financial stability of the United States, but also have significant international consequences given the dollar's dominant role.
These challenges exacerbate the broader financial stability risks we already encounter today. The ECB plays a crucial role in safeguarding financial stability through credit conditions, the single supervisory mechanism, and in responding to potential future crises.
However, an increasing share of financial activity occurs beyond its direct supervisory reach, particularly with the non-bank financial intermediation sector whose growth rate is really impressive. Concurrently, closer scrutiny of the largely speculative crypto asset ecosystem, including stablecoins, is absolutely necessary.
Both monetary and financial stability are colleagues like electricity or clean water. Their true importance is only recognized when they are absent. Effective monetary policy can primarily prevent money itself from becoming a significant source of economic disturbance. Thank you.
Thank you very much, sir. I'll now give the floor to the president of the European Central Bank, Christine Lagarde.
So good afternoon, bonjour to all of you. Honorable vice president of the European Parliament, honorable rapporteur Mr. Van Overvelt, honorable commissioner Donovski, all members of the European Parliament, all honorable indeed. It is a real pleasure to be back in this plenary chamber for the debate on your draft resolution of the ECB's annual report.
Today's moment is critically important in our accountability to you, the elected representatives of the European Union. I have read your report with great interest.
Your resolution and your speaking point this afternoon underscores that the ECB's independence is essential for us to deliver on our mandate of price stability. At a time when central bank independence is being challenged in parts of the world, your clear support sends an important signal to us.
But as you also emphasized in your report, independence does not mean isolation. The ECB does not stand apart from democratic scrutiny. Our independence goes hand in hand with accountability to this parliament.
Regular hearings, written exchanges, and our annual report all reflect this commitment. And our dialogue today continues this process of scrutiny, explanation, and a vibrant dialogue.
In my remarks, I will address issues you raised in your resolution with a particular focus on strengthening Europe's resilience and competitiveness in a challenging global environment. So, let me start with this imperative of stability in an uncertain environment.
When I appeared before the committee on economic and monetary affairs last October, I described how geopolitical shifts were reshaping Europe's place in the world. We are operating in a volatile global environment marked by heightened geopolitical tensions and persistent policy uncertainty.
These developments are affecting trade flows, energy security, and strategic dependencies. Supply chains are becoming more fragmented and industrial policies are reshaping global competition.
In this environment, we need strong domestic anchors of stability and resilience. And one such anchor is price stability, which as your resolution rightly underlines is a necessary condition for sustainable growth, competitiveness, and investment.
After the pandemic and Russia's unjustified invasion of Ukraine, the ECB had to navigate the most challenging episode of high inflation. Remember, it reached 10.6%. All of that since the introduction of the euro. It had never been so high. This picture has changed significantly and I will mention how. But the challenges are still there. They're different.
Today's inflation, latest reading in January, stood at 1.7%. And we expect inflation to stabilize sustainably at our 2% medium-term target.
According to the latest Eurosystem staff projections from December, headline inflation is expected to average 1.9% in 2026, 1.8% in 2027, and 2% in 2028.
At the same time, despite the challenging environment, economic activity in the Euro area has been resilient. The economy is estimated to have grown by 0.3% in the fourth quarter of last year and by 1.5% in 2025 as a whole, better than what was projected for 2025 at the start of the year.
At our meeting last Thursday, the governing council decided to keep interest rates unchanged as our updated assessment reconfirmed that inflation should stabilize at our 2% in the medium-term.
In the current uncertain environment, our data-dependent, meeting-by-meeting approach to monetary policy serves us well. We will continue to follow this approach, basing our decisions on our evolving assessment of the inflation outlook and the risks surrounding it in light of the incoming economic and financial data as well as the dynamics of underlying inflation and the strength of monetary policy transmission.
By fulfilling its mandate, the ECB provides a key source of stability for the Euro area economy and an anchor in an increasingly uncertain world. But as your resolution rightly highlights, our contribution does not end there.
The ECB also plays a role in strengthening resilience and competitiveness in other essential areas which underpin a dynamic and robust Euro area economy.
First, let me say a few words about the future of central bank money. We want to ensure that people can continue to use central bank money in all situations of their daily life. As a result, we strongly support the proposed legal tender regulation to ensure that cash remains available and accessible to all and that no undue restrictions are placed on its use.
And we are preparing to issue a third series of euro banknotes with a new design. But cash cannot be used for digital payments and its share in day-to-day payments is declining as a result. We therefore need to complement physical cash with its digital equivalent, a digital euro.
The digital euro will provide consumers a solution that is accepted for any digital payment throughout the whole euro area. It will guarantee the highest level of privacy. The ECB will not have access to personal data.
And it will be built on a fully European infrastructure, avoiding an excessive dependency on foreign providers for payment systems that are critical to the functioning of our economy.
As co-legislators, you have a key role to play in delivering these benefits by making decisive progress towards the adoption of the digital euro regulation.
In parallel, we also aim to make tokenized central bank money available to support the development of an integrated European ecosystem for digital assets. This initiative, which you welcome in your resolution, has two ambitions.
The first is to make it possible to settle distributed ledger technology-based wholesale transactions in central bank money. Our project called Pontes will deliver a solution for this purpose to the market already this year in the third quarter.
Our second ambition is to unlock the full potential of tokenization. Our project, Appia, aims to create a European market for digital assets that is integrated from the outset. The ECB's goal is to develop more resilient and integrated market infrastructures, harnessing digital finance to benefit the Euro area economy.
Second dimension where the ECB can help: simplification. A high-level task force on simplification has recently presented its recommendations for simplifying Europe's regulatory, supervisory, and reporting framework while maintaining a strong and resilient banking sector.
These proposals aim to reduce unnecessary regulatory complexity while upholding international standards. A clear, harmonized, and proportionate regulatory framework is vital for a strong financial system that supports the real economy.
Yet, as we know, Europe's resilience and competitiveness ultimately depend on a wider policy framework. In this spirit, the governing council has provided the European Council with a list of key areas where collective EU action is needed.
Advancing the savings and investment union is essential. Swift agreement on the market integration and supervision package will deepen our capital markets and allow Europe to more effectively channel its considerable savings into productive investments.
If we are to unlock the full potential of Europe, strengthening the single market will also be essential. And this can be achieved by removing barriers and reducing fragmentation, including through a proposed 28th regime under a regulation, not a directive.
Europe also needs to foster innovation and protect open strategic autonomy. Improved coordination of research and development will boost European productivity while support of strategically relevant sectors and de-risking of critical supply chains will increase resilience.
These reforms are not abstract. They are the practical foundations of resilience and sovereignty in a world where economic power is increasingly exercised through finance, technology, and trade.
So the ECB's commitment is clear. We remain focused on price stability and fostering a stronger Europe. The euro is an anchor of stability and a powerful symbol of what Europe can achieve when we work together.
And as we entered 2026, we also proudly welcomed Bulgaria as the 21st member of the Euro family. Membership of the Euro area has almost doubled since 1999 and this growth is a testament to the attractiveness of the single currency and the enduring benefits of European integration.
A strong currency rests on the solid foundation of strong institutions. An independent ECB that is accountable to the EU citizens through the European Parliament is central to this institutional architecture.
As Thomas Mann observed, I quote, 'The word, even the most contradictory word, preserves contact. It is silence that isolates.' Just as words maintain contact between people, our exchanges preserve the connection between the ECB, the elected representatives, and the EU citizens.
Let us therefore maintain this dialogue and pursue within our respective mandates a stronger and more resilient Europe. Thank you for your attention.
Thank you very much, President. On behalf of the commission, Commissioner Donovski, please. You have the floor.
Madame Chair, Madame President, honorable members, it's a pleasure to participate in this debate on the ECON report on the European Central Bank and I would like to thank the rapporteur Mr. Van Overvelt and members of the committee for their insightful reflections.
The ex-post assessment of the ECB's activities by the European Parliament is essential for the democratic accountability of the ECB. The commission acknowledges the ECB's strong commitment and decisive action to ensuring price stability and smooth transmission of the intended monetary policy stance across Euro area member states.
The commission welcomes the ECB's monetary policy measures. They helped to keep inflation expectations anchored and contributed to falling inflation over the last three years after the high at the end of the COVID-19 pandemic.
Looking ahead and in line with the latest ECB macroeconomic projections, the commission's autumn economic forecast sees inflation in the Euro area to stabilize around 2% over its forecast horizon, broadly in line with the ECB's inflation target, meaning 2% over the medium term.
In the short term, the economic picture is encouraging. The Euro area and EU economies are expected to continue growing at a moderate pace over the next two years supported by a robust labor market, falling inflation, and improving financing conditions.
Also, the deployment of the recovery and resilience facility and other EU funds, notably cohesion, the fiscal stimulus in Germany, the relatively healthy financial position of the corporate sector will support investment. Further support could come from higher than expected defense spending and continued success in reinforcing and diversifying our trade relationships.
At the same time, Europe faces a number of important economic challenges. The global economic environment is becoming increasingly adverse for Europe's competitiveness and resilience. Rising protectionism is weighing on EU exporters and adding to Europe's lingering productivity problem. At the same time, the EU's trade dependencies are being exploited and entails risks for our economic security.
Europe therefore must double its effort to unlock its full growth potential. We should complete the single market and the savings and investment union, boost innovation, advance pro-competitive reforms, and move forward with a simplification agenda. And we need to diversify our trade partnerships and reduce dependencies.
This also means stepping up efforts to take our security in our own hands. The agenda is clear, action is urgent.
Turning to the fiscal situation. Public deficits and debt ratios have improved significantly since the COVID-19 pandemic. However, we expect less positive developments in the coming years. They largely reflect the need for higher defense spending.
Given the multiple demands on public finances and the still high debt levels in some member states, we must be particularly vigilant to safeguard fiscal sustainability. This will require important policy decisions on the composition and quality of public spending as well as revenues.
Let me also say a few words on the digital euro. The ECB's technical preparatory work on the digital euro is progressing well. Considering the recent geopolitical developments and in light of the quickly evolving payments landscape, swift progress on the digital euro proposal is more important than ever.
We hence welcome the council's recent adoption of its negotiating position and appreciate the European Parliament's determination to form its position in a timely manner as well. We need a truly autonomous European payment system where digital euro and private solutions are interoperable with each other.
More broadly, we need to strengthen the international role of the euro. This means not only a wider use of euro abroad. It also means that we need to reinforce the resilience of our economic and monetary system, to deepen and integrate our financial markets, to foster innovation and competition in the payment systems, to support de-risking and strategic autonomy in a time when the international order is rapidly fraying.
We have started the work towards identification of concrete policy actions to navigate the current evolving landscape and ensure the union's capacity to safeguard its interests in an increasingly complex global order.
We need to carefully look into new developments such as impacts of cryptocurrencies, stablecoins, and central bank digital currencies on Europe's payment infrastructure, new trends in EU trade and capital flows, and the role of our EU safety nets for macro-financial stability. Of course, we will work closely together with the ECB on these matters and we will be happy to continue important discussions with this house as well. Thank you.
Thank you very much, Commissioner. Let's start the debate. Mr. Cats, you have the floor.
Madame President, colleagues, ladies and gentlemen, we've seen over the past few years how important it is to have a credible monetary policy here in Europe. Inflation has reached a fairly stable level, which is good news for citizens in Europe.
But it's very important that we learn from high inflation phases and we draw our lessons from that. Expectations seem to be going ahead of themselves. We need to ensure that the ECB's independence is the pillar for our monetary union and this independence requires political neutrality and very strict faith in your mandate.
Secondary aims should only be followed once the primary mandate has been fulfilled. So this is all about following the treaties. We had crisis instruments but these measures should not become a permanent fixture because they can distort prices. Climate risks can be taken into account but only within the actual mandate of the ECB. It's not an authority for climate policy.
Finally, simplification is something to be taken seriously, but we need solutions, less bureaucracy, less red tape and solutions for stability in our markets.
Thank you very much. Mr. Varys, you have the floor.
Chair, Commissioner, President of the ECB. In the current context of uncertainty, geopolitical pressure, and financial fragmentation, the ECB is still a pillar for stability and innovation in Europe and the world. It's kept a cap on inflation, reduced risks, and continued to innovate with the digital euro.
The ECB knows what to do, how to do it, and how to do it differently. One of our priorities was to state the credibility and independence of the ECB, which are two things that need to be protected and we should not take for granted for a central bank. You can't have credibility without independence, but you can't have independence without credibility.
We restate in the report the need for the ECB to keep its current monetary policy instruments like TPI to avoid the market fragmenting and to continue to include climate change as a fundamental part of its strategy. The future will mean that we have to be creative. Topics like stablecoins and crypto assets need special attention to avoid the system fragmenting.
Strengthening the international role of the euro means that we have to make rapid progress on the digital euro and think about a real European safe asset. The new strategy for financial literacy should give Europeans new options to save and to invest, thus unblocking millions in investments in the EU because the future is built on the present. Thank you.
Thank you. Now, Mr. Badella, you have the floor.
Thank you, President, President of the European Central Bank. Colleagues, Madame President, your mandate is clear to ensure price stability, but no monetary policy can continue over the long term to ignore economic reality.
We're seeing increasingly that Europe is not competitive on a global scale. China and India have prices that support their exports but the EU now faces competition which is not just difficult but increasingly unfair. Europe is losing market share on international markets even on the single market. Companies are trying to maintain their share but they're faced with excessive regulatory burdens.
And I think this is an alarm bell for our production sectors. The production sector just shows how dependent we are. You're trying to tax Europe and turn it into a vast consumer market rather than a global power in terms of production and innovation and over the long term the independence of our markets and our nations is at risk.
Since the middle of 2025, rates have not dropped and growth remains fragile. Inflation continues in many member states including France. The ECB cannot act too late. If you look at the history of the continent's economy, we see that all too often opportunities are missed.
So my question is a simple one, but it's key for our economies. Will the ECB be able to adapt its policies to support activities, ensure that our businesses can remain competitive and to ensure that we can keep up with the growth and power of the rest of the world? This is really what we should be focusing on. Thank you.
Greetings colleagues and greetings to Madame Lagarde and I give the floor to Mr. Crosetto.
Thank you chair and thank you to the rapporteur as well for the important work that's been done to address the main topics in the activity of the ECB.
Turning to this report, the primary objective of the ECB is to keep stability and keep prices stable and the ECB can say that it has achieved that with this main objective. There's a second as well which follows on that without prejudice to the price stability. The ECB should support economic policies of the EU.
The macroeconomic forecasts tell us that for 2026 and the coming years the inflation level will be below the 2% target. The energy prices will have the biggest impact on prices and GDP growth will continue from 1 to 1.5%.
So my question President Lagarde is what does the ECB expect in terms of the second objective under the TFEU? What do you expect to do in terms of supporting the union's economic policies? Because in the annual report that we're discussing, the ECB needs to take decisions itself to exercise its mandate without interference or political influence.
Then on the annual report, references made to the digital euro project and I wanted to express my support for that and recognition as well for the important work that has been done by the ECB. And I wanted to conclude by appreciating the work that has been done on simplification with the recommendations and with the ECB with the help for smaller banks which I think really does live up to the expectations that we have of a large central bank like the ECB.
Thank you very much. Now Mr. Van Overvelt, you have the floor.
President Lagarde, dear colleagues, European citizens are asking a simple question. Can we bring inflation down and we build confidence that the economy will deliver opportunity again and that it will do it in a sustainable fashion?
The ECB is doing the hard work of restoring price stability. Now Europe's political responsibility is to make that stability translate into investment, productivity, and good jobs.
I listened to your speech earlier very carefully and it seems to me that three objectives are particularly important in order to achieve that. First, credibility through clarity. In an age of misinformation and uncertainty, people need to understand not only what the ECB decides, but also why. More transparency on the analysis, the scenarios, and the distributional effects strengthens trust and therefore makes the monetary policy more effective.
Second, a stronger financial financing ecosystem in Europe is important for Europe's businesses. It's essential. We need faster progress on the capital market union and completion of the banking union so that innovative firms especially and scale-ups can access funding across borders with less fragmentation and less red tape. Europe should not be the continent where savings are abundant as you mentioned in your speech but risk capital is still very scarce.
Third, European sovereignty in payments and resilience in the digital age. A digital euro can be a public anchor for European payments, but it must also be designed to protect privacy, financial stability, and coexist with cash while supporting Europe's payment innovators. Independence is essential. Accountability is equally essential. Thank you.
Thank you. Please stick to your times now, Mr. E.
Thank you madam chair and good evening president, good evening commissioner. First of all I really would like to thank the rapporteur for the good cooperation on this report which really is putting all the elements around the ECB at place and I also really want to thank you Madame President also for the cooperation and the exchange we are having not only orally but also quite often in the form of letters.
I think what is also very important is that we realize that the inflation rate is going below the 2% now and every time when I hear the rapporteur is almost obsessed it seems with the inflation rates and it's good to be careful but at the same time we also should be very happy that we are now below the 2% and below the target which also creates a bit of investment room that Europe drastically needs as well.
Secondly also on the digital euro, very much support also from the greens in order to make sure that we are creating a public and sovereign alternative to third country private providers and very much welcoming also your work on that.
But then of course we also need to talk about climate action and what the ECB needs to be doing on that because sometimes when I hear the EPP they are saying you should not be ideological but I always have the feeling that EPP is ideologically against climate action and let me be very clear if you are looking at price stability climate change is one of the biggest threats for future price stability.
And just one number from the network for central banks for greening the financial system. By 2050, GDP losses because of climate change could be to the level of 15%. 15% of our GDP. This requires that the central bank because of its financial stability rules needs to take climate action into consideration by doing that for also lowering interest rates for green investments because they are very capital intensive. So they need that support. But also that we want to see more action from the ECB to explore all your possible instruments to support our economic objectives and minimize the financial stability as a result of the climate crisis as your mandate stipulates. Thank you very much.
Thank you very much. And now, Mr. Breyer, you have the floor.
Madame President, the world will not become a better place if we close our eyes. That's why it's important that the effects for instance of climate change on monetary policy risks are observed. Large areas of monetary policy will be preserved.
But in tomorrow's vote, we will hopefully give an important message to everyone. The following: public money, cash, is getting more and more rare out of the way of US private money. Payment cards as well as the growing dollar-denominated cryptocurrencies are decided on in the US. We are already blackmailed by them and this is a multi-layered problem for Europe's security and future.
What is downright stupid is that when we buy a European product from a European shop, we pay a share to a US cartel. It is dangerous that our payment system depends on a leader of a country that is unreliable and increasingly drifting away from democracy.
Already now, President Trump is using his power to prevent, for instance, judges investigating war crimes from booking tickets and hotels in Europe. We have fallen in a trap and we have to get out of it. Among the 10 biggest payment intermediaries there are only US and Chinese ones, no Indian service providers.
We need a secure European public alternative on which Europeans can build private services if they so wish. The ECB has recognized the need for a digital euro many years ago. It should be implemented already. Parliament must now put an end to this slowing down and let the ECB do its work. We must not let the US decide on European monetary policy. Thank you.
Thank you. Now, Mrs. Lat, you have the floor.
Mrs. Lagarde. This parliament, dear colleagues, has a clear task of exercising democratic control over the ECB. This is the only European institution that can do that.
The report on the ECB that we're discussing today however ignores all the important aspects and focuses on the second-hand minor issues and ignoring the elephant in the room. Actually does ignore the difficulties related to the level of the cost of living and chooses to talk about the global climate change or Putin as the major threat.
And most importantly there's no reason why the digital euro is being implemented so quickly. Let me point some of them. First, fully-fledged alternatives like gold and the dollar are fully ignored. The report doesn't say how the confiscation of Russian assets affects the euro.
Also, it ignores the fact that massively euros have been coming out of the printing press and how this affects today's situation. Also, what is the effect of the market and the link between the crisis and the competitiveness of the European markets and the companies that are referred to as zombies?
Also, how are the new programs going to be implemented in the ECB when the old ones are being phased out? For Bulgaria, the convergence criteria again were ignored and the forecasts turned out to be false. Thank you.
Thank you very much, Madame Chair. Madame President of the European Central Bank, Commissioner, colleagues, independence of any central bank is not a simple technical detail. It's an absolute prerequisite for us to have a currency that's credible for us to have stable prices.
Now, it's only when issuing banks can actually be free from political influence in taking their decisions can only then can we in the long term have stability. So this report reminds us in fact quite rightly that the ECB takes their decisions and must do so without any outside political influence.
And this is why it's a little bit worrying that the central banks internationally seem to be put under a lot of pressure especially with the new administration in the US. We need to be the model for the opposite of that here in Europe.
Basically, the European Central Bank is independent and this is something that's anchored in what we believe in in Europe. But of course, accountability is also important and transparency as well. I'm delighted to see you not only here today, Mrs. Lagarde, but thank you for coming regularly to see us in committee.
So, of course, this independence doesn't mean we're writing out a blank check. We shouldn't be talking about extension of the mandate of the ECB for example. We've seen certain decisions in the past being taken which go beyond traditional monetary policy decisions when we talk about the climate and the environment. This can lead to distortion because this is not in the remit of the ECB. Stick with your mandate and you will receive our full support. Thank you.
Thank you President, Commissioner, President. It's a pleasure to have this conversation and I think we should thank the rapporteur Van Overvelt for the work he's done. It's helped us to reach an agreement on some rather thorny issues.
Monetary policy and ECB management is something that we should welcome. We've managed to stick to our objectives. We've managed to ensure that things are slightly better than before Putin's invasion of Ukraine. And I think that in general monetary policy has been very positive.
But what's happening on the other side of the Atlantic I think can be an opportunity for Europeans. First of all, when it comes to independence of the ECB, all colleagues have referred to this. I think we need to be focusing on and the market needs this, the need for Europe to offer an alternative, one that will allow us to occupy the space that it seems that the Americans are leaving.
So we need more single market, more banking union and that's something that I think we should really focus on in all of our conversations. Thank you.
Thank you Madame Chair. Miss Lagarde, you said that monetary policy is in a good place. Who for whom? For whom is it in a good place? There are millions of citizens who have lost purchasing power and they've had to stomach that month by month.
Inflation has gone up to 15% for certain products. And you said, well, you have held these people hostage with your loose monetary policy. It's not balanced. Families have had to choose between heating or eating. That's not a success story. It's a disaster.
This is not directional policy. The direction is high levels of debt and bleed the people who are saving, the savers. Capital Markets Union, banking union, digital euro, strategic independence, lots of terms there, but just more power and more centralization for the ECB.
Let me say it clearly, we need a stable currency, not a policy that lets citizens freeze and just saying that everything's in a good place.
Hi there. We have a blue card for you from Mr. Breyer.
Thank you. You were talking about the ECB's job of price stability and inflation stability. The president said that in the past there had been 10.8% inflation, but now inflation is back to a normal level. The question is, do you believe that the ECB head, Madame Lagarde, that they have a realistic take on the inflation rate socially?
Well, those at the head of the ECB receive over 700,000 for their salary. They're not facing existential problems, but it means real losses for real families, for normal families. And this distance can be seen in these decisions. And in my opinion, the ECB leadership has no idea of the social consequences of their monetary policy. None at all.
Okay. Next speaker, Mrs. Malag.
