Committee on Economic and Monetary Affairs Ordinary meeting
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ECON European Parliament
Follow its sittingsSpeaker 4
And it has implications for economic decisions and for trust in the institutions, trust that helps anchor inflation expectations. So, today's discussion that you have selected as a topic is very timely and relevant. But before turning to inflation perceptions, I would like to start by outlining our assessment of the Euro Area economy and our monetary policy stance. So, our economy is estimated to have grown by 0.3% in the fourth quarter of last year and by 1.5% for 2024 as a whole. I think you have received, and it's being circulated at the moment, a recto verso one-pager which indicates a number of the comments that I will make on the state of our economy.
So, growth in the fourth quarter was primarily driven by domestic demand, with services activity, especially in the information and communication sector, playing a key role. Manufacturing has been weaker but overall still resilient to the impact of higher tariffs and geopolitical uncertainty, while the construction sector is gradually gaining momentum. What is interesting is that external activities, exports and imports, are actually having a negative impact on our growth. So, it's predominantly domestic investment and consumption. So, in the period ahead, activity is expected to be supported by rising labor income amid a resilient labor market, as well as investment in defense, infrastructure, and digital technologies, both from the public and private sectors.
At the same time, the trade environment remains challenging owing to higher tariffs, a stronger euro, and a persistently volatile global environment, adding to the uncertainty that we have experienced. Inflation declined to 1.7% in January, as I mentioned, from 2% in December, owing to lower energy and services inflation. Again, you have a chart in the paper that has been circulated. Core inflation, which excludes energy and food, eased to 2.2% after 2.3% in December. Now, with inflation lower than nominal wage growth, real wages—wages that are adjusted for inflation—have not only recovered but have, on average, risen above levels seen back in 2019.
Again, you have a chart detailing this. Wage growth remains elevated but has eased gradually and is expected to continue to moderate to around 3% in the medium term. We continue to expect inflation to stabilize at our 2% medium-term target. As a result, we decided to keep the three key ECB interest rates unchanged at our monetary policy meeting earlier this month. Now, looking ahead, we will continue to follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance.
In particular, our interest rate decisions will be based on our assessment of the inflation outlook and the surrounding risks. That's a new development since our assessment of our strategy in light of the incoming economic and financial data, as well as the dynamics of underlying inflation and the strength of monetary policy transmission. And we are not pre-committing to any predetermined path. So let me now turn to your chosen topic, which is the divergence between actual and perceived inflation and why it matters for our mandate. Inflation perceptions describe people's beliefs about recent price changes.
And while these perceptions tend to move with measured inflation, they are typically higher. And this is not a phenomenon specific to the Euro Area. It's a global phenomenon observed around the world. Since the launch of our ECB Consumer Expectation Survey, which started in April 2020, perceived inflation in the Euro Area has on average exceeded measured inflation by 1.2%. Inflation perceptions increased in 2021 and 2022 in line with measured inflation and have since declined substantially.
So, why does the perception of inflation matter? Three reasons. First, perceptions directly influence economic behavior. When people believe prices are rising faster, they may adjust their consumption, their saving decisions, as well as their wage demands. This, in turn, can affect aggregate economic activity and inflation dynamics.
Second, perceptions of current inflation shape expectations about future inflation. We monitor these expectations closely for any signs of a sustained deviation from our 2% medium-term target. Third, as I mentioned in my introduction, inflation perceptions can influence public trust in institutions, including the ECB. And as we know, it is a valuable good in its own right, but it also helps to anchor inflation expectations. So, why is it that perceptions always exceed measured inflation?
I think a useful starting point is that there is no single perception of inflation. Survey responses are shaped by personal experience. While the questions typically refer to changes in the general level of consumer prices, each individual interprets them through the lens of his or her own consumption patterns and experiences. And that is why the perception of inflation differs across demographic groups. What people buy and how often they buy certain goods or services, such as food or petrol, actually matters.
Price developments in frequently purchased items tend to weigh more heavily on perception than broader movements in the overall consumption basket. Food is a case in point, and food inflation has been above HICP inflation since 2022 and still is. Looking forward, we expect it to continue to decline and stabilize somewhat above 2% as of late 2026. I'm talking about food here. Psychology adds another layer.
People tend to focus more on price increases rather than price decreases of equal size, which leads to an upward bias in their perceptions of inflation. These everyday experiences are further shaped by the wider economic environment. The recent inflation surge, heightened uncertainty—particularly in relation to geopolitics and trade policy—and sustained media attention can all amplify people's experience of inflation. Finally, financial literacy matters. People with greater financial knowledge tend to report perceptions that are closer to the measured inflation rates.
And this raises an important question. What can policymakers do to bring perceived inflation closer to actual inflation? First and foremost, we must continue to deliver on our primary objective: ensuring that inflation stabilizes at our symmetric 2% target over the medium term, achieve it, and communicate about it so that it is understood. Effective communication is important. Following up on our 2021 strategy review, we have worked hard to make our communication more accessible to the wider public.
For example, we have sought to explain our policies in as simple terms as possible, and we have increased our presence on all digital platforms. Third, Europe should invest in financial education to raise financial literacy levels. While there have been encouraging improvements in recent years, financial literacy in Europe is still lagging behind that of other jurisdictions. At the ECB, we are taking active steps to communicate in a more accessible manner, for example, by offering explainers on YouTube through our Espresso Economics channel. Yes, the ECB has a channel on YouTube called Espresso Economics.
These actions are one element within a wider effort by national central banks to improve financial literacy across Europe. I welcome the initiative on financial literacy within the Saving and Investment Union agenda. Improving people's understanding of economic and financial concepts will not only bring perceived inflation closer to measured inflation, but it will also allow them to make informed financial choices, strengthening resilience in the face of future economic shocks. So in conclusion, we pay close attention to households' inflation perceptions, not only because these have an impact on economic activity and expectations, but also to ensure that we continue to earn the trust of the people we serve. But strengthening individuals' trust is a shared task. Your role is to channel their concerns and act as a bridge between the ECB and the people we serve.
Our role is to focus on delivering our mandate and explain not only what we do, but also why and how we do it, in a way that can be easily understood. So, I hope we can continue working together to understand exactly what the expectations are, to assuage the concerns when they're not relevant, and to try to reduce this gap between perceived inflation and actual measured inflation. I very much look forward to your questions. Thank you.
Speaker 2
Thank you, President Lagarde. Let's turn now to the Q&A session. One minute and a half for the questions, three minutes for the answers. And you have the possibility to have a follow-up of one minute for the question and two minutes for the answer. For the app, Markus Verber.
Speaker 6
Yes. Thank you very much, Madam President. Welcome back once. That you have the time.
So, Hans, if you comment.
Speaker 6
Okay. Once again, thank you, and welcome, President Lagarde. I have a couple of questions on the subject of inflation that you didn't talk about. Now, last year, we started to feel that the dollar was weakening. It's also linked to signals from the USA that they are interested in trying to depreciate the dollar in relation to other currencies.
That means that we have tendencies toward strengthening the euro. And where the dollar is the main currency for trade, that means we could have imported inflation into the Eurozone. How do you calculate the weakness of the dollar in your inflation analysis? Second topic, also from The U. S.
Now, how do we deal with artificial intelligence? That's a big subject in the US, and it's for anyone who is responsible for the future of our economy. Artificial intelligence could increase productivity so much that inflation could structurally decline and lead to lower interest rates. How do you account for this in your forecast at the ECB? And how do you evaluate the potential of artificial intelligence, not just in terms of productivity and growth, but also in terms of inflation expectations?
Speaker 4
Thank you very much for your two questions. So, on the first one concerning the exchange rate. First of all, we monitor the exchange rates. We do not set targets. And we measure it to the extent that it impacts our inflation outlook.
And yes, there has been a depreciation of the U.S. dollar. S. Dollar, whether it's a determined policy by the U.S. S. Authorities, or whether it's a reflection of the fundamentals, the lack of certainty, the view that investors have about the currency is something that will be determined in due course, not for us to do that. However, there has been an appreciation of the U.
S. Currency, which we monitor to see how it impacts our objective of price stability. To the extent that it has an impact on inflation, obviously, we factor that into our projections. We gave our projections on the basis of all factors, including the assessment we have based on several factors, including market intelligence as to where we anticipate that currency to go. But don't forget that when we establish our projection, we set not a deadline, but a date at which we just stop the clock, because otherwise, we would have constantly changing projections. We will have projections coming out for the next monetary policy meeting around March.
And what we will then produce will be based on the exchange rate at a certain point in time. But we do look very carefully at those movements. On AI, it is a multifaceted issue because, on the one hand, there has already been a massive investment wave in the United States, but not only in the United States. We are seeing significant investment in Europe as well for the diffusion of artificial intelligence in multiple sectors of the economy. So, there is a lot of financing that goes into artificial intelligence, both in terms of production, predominantly in the U.S.
S. And possibly in China as well, although we don't have the same degree of data concerning China, and in Europe for the diffusion of artificial intelligence. Now, what impact will it have on productivity? We are beginning to see some results and data that we can identify. What we are seeing at the moment is that it's increasing productivity.
And on this front, Europe is not lagging behind. Europe is equally moving and equally benefiting from those productivity increases, including in the SME sector. That's what our data and surveys are telling us. What we don't know yet, and which we're looking at very carefully, is the impact that it will have on the labor market. The literature at the moment tells us that the mass of investment is leading to some productivity improvement, but we are not yet seeing consequences in terms of the labor market and waves of redundancies that are feared, and that we will be extremely attentive to going forward.
Thank you.
Follow-up? Yes.
Speaker 6
Thank you very much. There's another topic that we are dealing with a lot here internally. Well, you normally set the lead interest rates, and then that determines the bank interest rates. And that then transfers through to the real economy. But what about private credit funds and non-bank institutions that are involved in loans? Then, the transmission mechanism doesn't function.
But you are responsible for that. So, what's the view of the ECB when it comes to these private credit providers? Do they have a role in interest rate decisions? And if so, how?
Speaker 4
Well, thank you for your question on private credit and the phenomenon of private credit, because it is increasing. It has doubled since 2009. It represents roughly 30% of the financing of the nonfinancial corporate sector, so it matters. And we are looking at it from two angles. Number one, to make sure that our monetary policy is transmitted.
What we're seeing at the moment is an unimpaired monetary policy transmission, but we are very attentive to it. We have observed, in particular in relation to lending to the corporate sector, a slight increase since November. So, we are looking at that very carefully. I think the second aspect that we have to be attentive to, but it is more in the remit of the SSM, is the link between the banking sector and private credit. And in that respect, I think that the level and the granularity of data that we have available is not as optimal as we would like it.
So I'm sure that the SSM, within its prerogatives, and the ESRB, for instance, which I have the privilege to chair as well, will be making some recommendations and guidance in that respect.
Speaker 8
Welcome, Madam Lagarde. Good to see you again in our group here. I'm going to get away a little bit from economics, but stay close to it. We're living in a moment where the assumptions that we've had about economic policymaking are being challenged. Globalization is fragmenting.
Capitalism is under pressure from inequality, climate risk, geopolitical conflict, and economic shocks originating outside the traditional economic sphere. Even Marcus Ferber's good question about AI is something that we would not have had to talk about five years ago. It's new things that we have to deal with all the time, and we're completely learning them at this point. As president of the ECB, you have to take all these things into account. Technical, systemic, geopolitical issues, tariffs, what Trump will do the next day, and what happens in Venezuela.
So, given that, I'm not sure how many more times we'll have you here in front of us, considering your recent statements that you'll leave earlier than expected. I'd like to know what kind of worldview, or as they say on my left here, the cosmo theory as they say in Greek, guides your own critical thinking about capitalism? And how do you translate a broader understanding of today's unstable global order into monetary policy choices that preserve credibility, stability, and trust in the euro? You can do a whole class on philosophy with this one. Thank you.
Speaker 4
I was going to ask you, how much time do we have? I have plenty of time, by the way. You raise a very deep question. Let me start with two things. One is the level of uncertainty.
It has definitely risen. Speed at which it moves, velocity of uncertainty, and the factors behind it. You rightly said that 5 years ago, we would not have talked about artificial intelligence. Actually, not even three years ago, because ChatGPT came about or whatever. I don't want to promote anyone.
But these things came out 3 years ago. And the speed at which they replace each other, the speed at which they update, is something that I don't think we have seen before. So, it's a combination of uncertainty, shock to the economy, and a transformative factor for good or for bad at a speed which is just incredible. So for the legislators, for the policymakers, for us to adjust to that and to appreciate the changes that will result from this accelerated pace is, in my humble view, new. And as a result of that, we need to adjust.
So, in response, excuse me. In response, what can we do? First of all, I think that the monetary policy stance we have adopted is perfectly legitimate and adequate for the state of affairs we are dealing with. When we are deciding meeting by meeting, when we say that we are data-dependent and not data-point dependent, and when we say that there is no preset pace for our policy, I think it's perfectly legitimate given the current situation. Now, some people argue that we have too much data.
We should stop this data dependency. I'm sorry. But I'm really convinced that that's what we should be focusing on. Now, that doesn't stop us from also bringing an element of judgment to the work that we do. Because, as you rightly said, there are factors that we would not have predicted three years ago, and there are developments that we can anticipate, but we have no certainty about.
So, in terms of the work that we do, we try to respond to that by using scenario analysis. You know, what if we roll out and use our model and our tools in order to respond and try to have ranges of probabilities of occurrences. We also use sensitivity analysis. Other examples include when we have future prices available for oil and gas, for instance. Now, we cannot take all that for granted, totally rooted, and cast in stone because that changes as well.
But we are trying to have as broad a spectrum as possible of what will actually inform the decisions that we make. This is really the work that we have been doing and that we will continue to do in the future. And when we say that we are in a good place but agile, that's really what we mean. We have to be attentive to all these developments, their consequences, and the monitoring that we can do of them. Thank you.
Speaker 9
Madam President, thank you for being with us once again. We always appreciate having exchanges with you. At the risk of surprising you, I'm going to talk about the digital euro, which is an important topic. It's of vital importance, given the geopolitical context that we face. I welcome the fact that our parliament, at its last plenary, adopted two amendments which provide massive support for an ambitious digital euro and which will hopefully guide and steer the parliament's team during negotiations so that they can fight their corner.
Speaker 10
Now, currently, I think the sector, after expressing reticence, has now come full circle and understands the importance of this, and that they want to support the process. But I do believe that when it comes to the technical and operational modalities, and the concern that has been expressed there, we do need to get to work on this. For example, the private sector believes that existing infrastructure and standards should be used to the extent possible, whereas the ECB seems to take the view that we should also be developing new standards and infrastructure to ensure interoperability of the system. Given that that's the case, could you tell us what is missing among the infrastructure and standards that currently exist? And how can we make optimal use of existing infrastructure to have an optimal digital euro?
Speaker 9
I'd also like to ask you about the distribution of the digital euro to possible non-euro stakeholders through wallets, Apple Pay, for example. Would you put a break on that type of development possibility so that we can have sovereignty over European payments? Thank you. Thank you for those two questions. And, at the risk of having to disappoint you, it does tie in with the philosophical point made by Mr. Papandreo.
Speaker 4
And he, of course, was the rapporteur, and this gives me an opportunity to thank you for the attention paid to this issue. It's a technically complicated file. Now, I said that it ties in with what was said, but that's because the work that we're doing to increase the international role that the euro can play and to improve our payment infrastructure, so that we can have a European alternative to payment systems, ties in with the work that we all do together in encountering the uncertainty that exists in a number of areas. So, I do think that they're linked. Now, you've asked a number of technical questions that my colleague, Mr. Cipollone, is better placed to answer than I am.
But what I do know, first of all, is that the infrastructure we will be setting up after the European Parliament has set the legislative framework within which the digital euro can operate will be financed using public funds because there is a public need for it, and there is public competence in the area. We also support the minting and printing of money financially. And in the same way, we would support setting up the infrastructure for the digital euro. Now, technical experts involved in this digital infrastructure are deploying all efforts to make sure that, as soon as possible, the current infrastructure can be used, but this existing infrastructure is not pan-European. In certain areas, it simply does not exist.
So what we're saying currently is that our setup will use, to the extent possible, existing infrastructure simply to reduce the overall cost of the project. And this moves me on to your second question. That infrastructure will be available to public stakeholders who want to use their payment systems. As I said, it ties in with your second question. Who will have access to this infrastructure?
Well, what you work on under this project will be key. It could be a gate, a gateway with security elements, which means we could have a European solution and make optimal use of this infrastructure. But in this area, I am counting on you.
Jan Boslego.
Speaker 11
Thank you. I'll maybe come back to the digital euro in a second, but I want to start with the inflation perception. I was wondering, the real wage development that you show is positive, but it is not very impressive. When you look at the reference day 2021, we may have reached the same level again. But I...
Was.
Speaker 12
Wondering, in what way do you think after-tax income also affects inflation perception? So, if I spend a lot on food and housing, but due to the rising costs of social systems just because of an aging population, maybe my own income is reduced, then the relationship between my after-tax income and the prices could also affect my inflation perception. I was just wondering if you had a thought on that. And then I was just wondering how you assess the overall growth outlook when it comes to, for example, new trade agreements and the provisional application of Mercosur. Do you think there will be an effect?
Speaker 11
And also, what measures are not being taken at the moment by the European Commission to strengthen the internal market alongside the Capital Markets Union? So, in the way of easing services and products flow across the union, we don't really see any proposal there. I was just wondering if you had any idea about what the most important points were. And I come back to digital in my follow-up.
Speaker 4
Thank you very much for these two questions. So, on the impact of tax on income, we factor that in on the basis of each annual budget that is passed by each member state so that we can incorporate as much as possible in our projections. How does that, at the micro level, impact the perception by the citizens is something that we do not measure with enough granularity. So, I'm not going to invent, and I don't think that we have the data and all the information as to what this sort of demographic solidarity is, which increases the cost of social benefits and, as a result, is contributed to not only by debt financing but also by reduced income as a result of increased taxes. I don't know how that impacts direct perception.
My assumption is that it probably follows the same pattern, which is: I look at what I pay, I look at what the prices are, I look at what my tax withholding is, and then I have available a certain income that helps me determine my purchasing power and, as a result, have a view on inflation. That's what I suppose. But as I said, I don't think we have that level of granularity. On the GDP outlook, we have done quite a lot of work on that. As you know, there was an IMF study that was often quoted, which I think Enrico Letta has picked up in his single market report. The thinking is the following.
If we were to remove all the internal barriers that we impose upon ourselves, what would be the reduction in price as a result? And for goods, the IMF found that it was 40%, and for services, 110%. We have done the same exercise because, of course, we feel more confident basing our findings on our own research. And we have found out ourselves that on goods, it is higher than that. It's a little bit north of 60%.
And on services, it's a little less, a little under 100. But what it tells us is that whatever it is, whether it's 40% or 69%, whether it's 110% or 96%, directionally, it's a significant imposition on ourselves. Though we are our own worst enemies. Some economists, rightly so, have said, "Well, your findings are interesting, but there are barriers that you will never remove." You will not force it, I don't know.
I want to use something that is not offensive. You know, a French person is required to eat a non-French cheese with exactly the same level of appetite. Okay. Then I don't offend anyone. That's good.
But that's what they call the sort of cultural preferences. I don't think that we can remove it, and it is part of the study that we did. It's in there. That will.
Speaker 4
And we'll always drink your beer, so it's okay. Sorry, maybe I shouldn't have said that. Right. But there's an interesting calculation that the team did as well. They assumed that across the Euro area, we could lower the barriers.
So, having taken the cultural preference into account, if we remove the barriers to the same level that the Netherlands has reduced them, we would have a significant increase in the movement of goods between our member states. And the trade would increase as a result. And it would actually, for that matter, compensate and more than compensate for the additional tariffs that have been imposed on us by the United States under the anti-dumping decisions. So, there is a huge potential. Our study is, you know, probably not 67% or 9%.
It's not probably 96%, but there is a significant gap that can be filled. Thank you.
Do you want to follow up?
Speaker 12
Oh, yes. Digital euro. Very quick one. I mean, there are the technical questions. I think we saw large support in this house for the digital euro, but there still seems to be a divergence in philosophy about what that actually means.
So I was just wondering if you can then explain the need for both the online and the offline versions. And then, just as a question, what does your personal forecast for your own career look like for the next 5 years? Thank you.
Speaker 4
Okay. So, the digital euro is one of the elements of the mission that I regard as critically important. As I said in other places, my baseline is that it will take until the end of my term to deliver and consolidate the mission: price stability and financial stability, a solid euro in digital form, both online, offline, wholesale, and retail, all of it. And I think it's important because, in this digital world we're moving towards, we need to have digital central bank money. Just as you want to have a banknote, I want to have a banknote that is my euro banknote, but I also want to be able to use a euro that is mine and that is in digital form.
If it is, in addition to that, faster, simpler, cheaper, identifiable, and usable throughout the whole euro area, both online and offline, then I think we will have delivered a huge service to our economies and significantly reinforced, by the same token, the formation of an alternative payment system that is truly European.
Speaker 15
Thank you, Chair and Madam Lagarde. I will avoid asking again about the digital euro, and you already told us very nicely what you mean. I will come back to inflation. And as you correctly illustrate, in particular referring to the leading literature and empirical evidence, we know that low-income households perceive higher inflation due to food and energy. And you track this with the ECB.
You track this distributional effect. We would like to know, first of all, how you track it, and what are the consequences of this different perception? Because I would like to add one specific thing, which is what we translate from Italian as "inflation as an excuse." The Italian Central Bank, Indochos Central Bank, started to make sure the so-called inflation, as an excuse or pretext inflation if you want, which occurs in particular for food and services, and this has an impact. I know that this impact may have some effect as a measure; it's not really the monetary policy which can cope with this pre-tax inflation, but it's more about fiscal policy which should cope with that.
But I think that the European Central Bank should start to calculate as well for low income the impact of this pre-tax inflation as an excuse. I don't know if you ever had this information, for instance, from the Italian Central Bank or from other Central Banks, which, in particular during the last years, started to monitor this new form of inflation, which has consequences for low-income households in particular? Thank you.
Speaker 4
Thank you for your question, but I'm not sure that I understand exactly. What I can tell you is how we try to measure. But the pretext of inflation, I'm not familiar with that. And maybe you will explain to me separately what it is exactly, or should I ask my Banca d'Italia colleague about the research that they produce? There is a distribution analysis of how inflation is perceived depending on the quartile in which households find themselves.
That we know and try to analyze. We do that on the basis of our consumer survey, which we started establishing and publishing in 2020. So, it's not a very old survey, but it is one that is really rooted in a very solid assessment, which is based on a broad number of countries and a very large sample of households. So that's what we use predominantly to analyze and understand the perception by households of inflation, as opposed to the measured inflation. That's the technical tool that we use.
And it is a fact, as you rightly said, that there are some components to which people are particularly attentive if they repeat the purchases, as we all do for food. And if they repeat purchases for transportation, whether it's public transportation or otherwise, those are the sort of regular purchases that inform, probably more so than rentals, even rentals, the perception that people have of inflation. And that's also the reason why we have core inflation, which is measured by taking out both food and energy from the measure. But you will explain to me the pre-tax inflation.
Speaker 4
Great, okay. Oh, I see. So some people take advantage of inflation to actually increase prices.
Speaker 15
And if I may, the Italian Central Bank has started to measure it. Okay. And this was interesting to me, meaning that it is a phenomenon which occurs, and then the authority started to capture it.
Speaker 4
Sorry, but, as far as I know, I think they will probably have a hard time not measuring it because Banca d'Italia can measure so many things and so well. But given that we brought inflation back to the target, you know, an asymmetric 2% medium term. And in some countries, because of the heterogeneity between member states being lower than the 2% target, it's going to be difficult for those eventually, as measured by Banca d'Italia, who use that pretax inflation to actually argue that it is there because it's under control.
Siegbert Frank Droese
First of all, just a comment for you as Chair, Madam Lalouk. You talked about perceived interest. Oh, sorry. You mentioned the digital euro instead. I was at the debate in Strasbourg as well, and I heard quite a lot of criticism of the digital euro. So, you said that there was broad support, but I think that we had a different perception of the debate.
Thank you, Missus Legard, for coming to speak to us today. I come from a country that is in a difficult phase. The German economy is not doing particularly well. It's made up of small and medium-sized companies, and your monetary policy has an impact on them. So, how does the ECB assess the impact of long periods of tight monetary policy on small companies?
And how will that affect their investment and competitiveness? And how will that affect the competitiveness of Europe as a whole? Second question: if you look at the development of company balance sheets in Europe, many companies in Europe are losing out in international trade, particularly when competing against Asian companies. So, we're losing dynamism, and that's a bad situation. So, has the ECB examined how your expansive balance sheet policy has led to zombification, keeping undynamic companies alive, and to what extent private investment decisions are being replaced by central bank decisions?
Speaker 4
Thank you very much for your questions. There are many questions, actually. First of all, don't get me wrong. I'm not characterizing the debate that took place on the digital euro. I just looked at the votes because this is something that my team brought back to me, and that's what really matters at the end of the day, doesn't it?
And on the German economy, I don't want to go deeply into the changes that we're observing. I think that the President of the Bundesbank, Joachim Nagel, keeps us regularly informed of developments. And what we have seen in terms of PMI numbers, in particular, and changes is rather in the positive direction. Although yes, there has been a period of difficult economic situation as far as Germany is concerned because of the business model on which its economy had been built for a long period of time, with very successful results for the country. You know, our mission at the Central Bank, our primary mission, my mandate is to deliver price stability.
And I think that whether you're a large corporation or a small business, you always want to be certain that prices are going to be kept under control and that the inflation target we have published and are setting is an important element in investment and hiring decisions. That's what we can contribute the most and the best. And we are dedicating all our energy to that, delivering price stability. If I'm a small business person and I know that prices are going to rise in the range of 2% because my central bank is keeping its target, then I know exactly how I am going to organize my business. So, on the balance sheet, I'm a bit curious about your question because we have been steadily reducing the size of our balance sheet.
And compared with the highest point at the time of COVID, when we had to massively support the economy, we have reduced that by €2,500,000,000,000. The commitment is now at €6,200,000,000 and will continue to gradually, predictably reduce as we have determined. So, in relation to zombie firms, this is certainly not the experience that we have had. And as I said, the balance sheet is in a constant, predictable, and gradual reduction. Thank you.
Speaker 20
You. Sorry, Chair. Yes. Sorry, you don't have a lot of time for a follow-up because you took 2 minutes for your question. So if you want to follow up, then it will be in ten seconds or something like that.
Yes, very short.
Yeah. The colleague,
Siegbert Frank Droese
Well, Mr. Buzellager was asking earlier. Well, you said, do the markets trust the ECB, and are you fulfilling your mandate, Madam President?
Speaker 4
So, you're asking me if I'm fulfilling my mandate? Yes, I think so. I really think so. And I think that the markets are seeing it. And I have no doubt that we will continue collectively.
It's a governing council that makes decisions under my leadership, but we will continue to be committed to the mission that we have.
Speaker 2
You. Second round of questions: one minute for the question, three minutes for the answer. And I will start with EPP and Mr. Falcone.
Speaker 21
Thank you, Chair. Madamella? The.
Recent statements about the continuation of your task as the head of the ECB are a factor for stability. And this is very important for the markets, as well as for the European institutions. Here in the European Parliament, we could contribute to continuing this institutional confidence factor as something needed by the markets because they want stability. And in particular, given the turbulence and the trade uncertainties which exist now with the United States, the European Union has to carry out substantive actions, that is, actions which reinforce the manufacturing process and the European industry. That's why, having listened to what you were saying, madam, on the question of perception, do you believe that we should have tighter policies from the ECB concerning that?
Speaker 4
Thank you so much for your long question. I think that every institution has to do what it was assigned to do. And our assignment is price stability. Our assignment is, as a result, financial stability, because there is no price stability without it. The Central Bank is very attentive to this.
The SSM has its duties in relation to supervision. And we have to continue to deliver that undeterred, independently, and other authorities have to do their job as well. So, I'm not going to comment on industrial policy, for instance. I'm not going to comment on Made in Europe. I know those are topics and subjects that you will be debating that are somebody else's competence.
My determination is to make sure that, within our remit, we deliver on our mission and our objective. And I mentioned earlier the international role of the euro. To me, this is an important element of the work that we have to continue to do continuously. We have introduced changes recently, and I think that this belongs to the objective of the international role of the euro, so that people anywhere in the world can feel confident that they can trade in euros, and that in case of crisis, there will be euros available at their central bank. That is the purpose of this repo line, which is called Europe, of which we have extended the scope with the securities and the guarantees associated with it because we are the custodian of Europe of the euro.
But, you know, a man's got to do what a man's got to do, but I don't want to substitute anyone. But we will do our job. I can assure you.
Eero Heinäluoma
Thank you, Madam President. The market integration package is quite high on our political agenda today, and rightly so. We believe we have to set our ambition quite high to tackle regulatory fragmentation in all parts of the financial sector. I noticed the recent comments by ECB economists on the need for centralized supervision of large asset managers. However, I was also a little bit surprised by the reaction of the business sector when the European Fund and Asset Managers Association said quite rapidly that the ECB needs to better understand the ABCs of asset management.
So, I would be interested to hear your viewpoints. Is there a need for more centralized supervision of the big asset management sector? Sector? And if so, how could we do it?
Speaker 4
Thank you very much for your question on the value of integration and the value of supervision at the European level. We have seen the Commission's package on EU market integration and efficient supervision that was delivered on December 4. We support it. And we believe that, in relation to all the areas identified by the commission, supervision should be more efficient. Supervision should not be fragmented.
Some supervision of sometimes very large asset management funds should not be left to the remit of one jurisdiction or another because of forum shopping determinations. So we do support the supervision at a much more centralized level, which does not mean that it excludes all the other supervisors, but we need to have sufficient harmonization of that supervision so that there is one interpretation, not 27 different interpretations.
Thank you for the renewal.
Speaker 24
Yes. Thank you. And good morning, Madam Lagarde. Europe's financial system is highly interconnected with the United States and, in certain critical areas, structurally dependent upon it. In the current geopolitical context, it would be prudent not to assume that such interdependencies will never be subject to political or strategic leverage.
And could you therefore elaborate on the concrete measures the ECB is taking to enhance the resilience of our financial system in the face of potential geopolitical tensions or disruptions? And where do you assess the most pressing structural vulnerabilities lie today? Thank you very much. Well, thank you very much for your question. And there is no doubt in anybody's mind that a financial market as large, deep, and innovative as the US market plays a role around the world.
Speaker 4
It's not specifically with Europe, but around the world. There is a geopolitical context that we know, which is changing regularly, where the level of uncertainty tends to increase and where there is quite a high degree of unpredictability. So, what we have to do is, and this is a determination from the governing council. This is also a determination by the supervisory authorities, about which I'm not going to speak because they have their own job. But it's pretty obvious that we want to stick to the international framework within which financial institutions operate.
And Basel III comes to mind, along with the speed at which it is implemented and the eventual delay that is observed. All of that is decided at the European level and then discussed at length in the Financial Stability Board. Those discussions are ongoing, but I remain convinced that we have to strengthen and maintain the resilience of the banking sector. I'll remind you that our banking sector is solid. If you look at the core equity Tier One, for instance, we are a little over 16%. If you look at the various ratios that are important, in particular the liquidity ratios, we are a little north of 150%.
So we have a financial sector in the banking area, which is solid. There are other financial sectors. We call them the NBFI. It used to be called shadow banking, but it's now NBFI. You have lots of animals in that NBFI.
You have the insurance companies. You have the private credit. You have the equity funds. You have a lot of things. There are institutions in charge of those domains.
EIOPA is one that comes to mind concerning insurance. One thing I'm certain of, though, is that we need as much transparency and as much reliable data as possible to identify the interactions between these various components. NBFI is the topic of the FSB. We are looking at it ourselves as well. The ESRB is looking at it, and we need to be very attentive, given the developments that we've observed.
Thank you.
Speaker 27
Thank you, Madam Chair, and it's great to have you here again, Madam President. I share your view that the inflation outlook is good, and I would like to congratulate the ECB for doing a good job. But I will look at the other part of the equation because the growth is also relevant not only for the economy but also for inflation. And here, I appreciate your strong, clear comments enforcing the importance of the single market development. But there is also the other part of the equation, which is growth in individual member states.
Speaker 26
Looking at the data shows that there are big divergences. Some economies are systematically doing well. Some are doing very poorly. And it doesn't seem to me that it's cyclical. It should be structured.
Speaker 27
And, also, the divisive point is not how rich the economy is, because some rich are doing well and some poor are doing poorly. So I wonder to what extent you think it is essential that the member states also introduce growth-enhancing reforms. And without that, there will not be prosperity in the EU as such.
Speaker 4
Thank you very much, and thank you for acknowledging the success on the inflation front. So on GDP, I agree with you that we cannot regard this heterogeneity between member states as strictly cyclical. There's always an element of cyclicality, but it is not the decisive factor. I think we have to look under the skin of those economies. And some of them have been built over time on business models that are no longer justified by the geopolitical transformations taking place, number one.
Number two, there is also a sectoral component. When you look at the contribution of tourism, for instance, on some economies versus others, it's obvious that tourism, transportation, and hospitality sectors play a significant part in the success of some countries. One can think of Spain as an obvious example of that sectorality. There's another component which also matters quite a lot, and that is the energy cost. You can tell that for those countries where the cost of energy is high, by virtue of the grid or the sources of energy, it has an impact on the growth level as well.
So, I'm not sure that we can transform, equalize, or that it is actually appropriate to do so. What I'm certain of, though, is that this one market, one market that we all hope for, will have an impact across the board. And I think we should take all necessary measures and push the actors in charge to go in those directions. Thank you.
Thank you.
Speaker 29
Thank you very much indeed, Madam Chair. 2025 was a very successful year for the European banks. They were very successful indeed. In 2026, the focus seems to be on increasing their profit and paying out dividends to shareholders. And it is against that backdrop that I have the following question.
Speaker 28
How does the ECB assess the sustainability of European banks, given the high financing costs for households and SMEs? And is there any risk that you identify in the fact that there is a strong focus on margins and dividends being paid out to shareholders? Do you think it might endanger price stability in the long term?
Speaker 4
Thank you very much for your question. Two points. One is that banks in Europe play a significant role in the transmission of our monetary policy. And we are very attentive to the transmission. It's one of the three components that we have in our monetary policy stance.
It's the inflation outlook, underlying inflation, and proper transmission of our monetary policy. So, we look at that aspect very carefully. I would say that from a different angle, which is not necessarily my remit directly, the SSM is very attentive to how risks are assessed, anticipated, provisions are made, buffers constituted, and not all banks like it. But there is a constant reminder of the cost associated with operating in a different world and with a green transition that is also in the works. Thank you.
Speaker 2
Thank you. Let's move to CACI. And I know there is a request from the floor by Fabio Di Maci. One minute for the question and two minutes for the answer, okay?
Speaker 32
Thank you very much. Mr. Lagarde, first of all, if the wage share took some time to recover or real wages took some time to recover, this means, conversely, that the profit share must have benefited. We know that corporations tend to hike prices if they know others do it as well, but they bring them down more reluctantly. So, would you also see some room for fiscal responses, such as taxing excess profits, instead of putting too much burden of adjustment on the wage share by using the blunt instrument of the interest rate?
Speaker 30
And the second question: you know there has been some debate around your salary for the Bank of International Settlements. I don't want to discuss your salary here. I just want to know, would you be willing to publish that additional income in a more transparent way in the future and for the past years? Thanks.
Speaker 2
There are many requests for the floor, so I will group the questions. Ludovic Todor, for one minute.
Speaker 31
Thank you, Madam President. We had a joke in socialism that bread is more expensive, but locomotives are cheaper. And so that is actually the spirit of the perceived inflation. And usually, the more frequently we buy something, the more sensitive we are to it. But I have a question about a different part of the equation, which is the actual inflation.
There are tendencies where we underestimate or overestimate actual inflation. One example is the housing costs. Sometimes, it is not easy to include relevant parts of the housing costs in the CPI indices. But in the second part, we already talked about the technological revolution. We are buying a lot.
We are having a lot of services for free because of zero marginal cost. Also, quality adjustments are extremely hard to measure. We usually have the same price on our phones, but the quality is much higher. So, it is not easy to evaluate. So, do you also look into the problems of estimating, actually?
Speaker 4
Thank you very much. So, the first part of your question concerns wages versus profit. I think we've observed different movements. And if there was, for a period of time, in the initial part of the COVID shock in particular and the energy price increases, we observed an increase in profits and a compression of wages. And then the movement reversed so that profits were reduced, squeezed, and wages increased.
So, there was a loss of wages in the first place, compensated by reduced profit margins for a period of time, and we are now at a point, a long time into the process, I agree with you, where wages have caught up with the pre-2020 pre-COVID period. You know, there are member states. Fiscal policy is a prerogative of member states. Some member states, in certain sectors in particular, have decided on fiscal withholding and special, exceptional tax withholding. I can think of a couple of countries that have actually done that, but it is something that is decided by member states in their respective capacities.
Now, concerning my compensation, I wouldn't call it remuneration because I'm a board member. I'm not an employee of the BIS. That compensation, I have disclosed it very clearly and transparently in response to a member of parliament's letter. I have indicated all the terms and conditions and what is to be known about that, and I have no qualms doing so. In 2025, in our annual account, we have been more readable, not that any of those numbers concerning ECB executive board members' compensation were hidden or undisclosed, because all is disclosed in our declaration of interest.
You can check my employment contract, the terms and conditions; everything is available. So in 2025, as I've said in my letter, we had hoped that everything would be more easily combined and readable. The Executive Board suggested it. The Governing Council approved it yesterday at its meeting. In the disclosure of all financial information, it will be a much more readable set of data.
Now, compensation for all board members of the BIS is not paid by the ECB; it's paid by the BIS. But I'm perfectly happy each year telling you how much that is. Oh, and then I don't understand the issue of bread and locomotive, but you will explain it to me later on. I'm lost. So, on actual inflation, when we did our strategy review back in 2021, we tried to figure out whether we could insert the actual overall cost of housing.
We asked all the statistical offices, and Eurostat in particular as an aggregator of all of them, to provide us with those data. It is not possible. So, we try to have it as close as possible, but with an approximation of some of the housing costs borne by the people. But it is not ideal. We don't have it.
And we don't give up. We hope that the statistical offices can actually get there. We hope that artificial intelligence, the collection of data, and the analysis of data can help us have a true assessment of all the costs borne by households. But at the moment, we do not have it. Now, you also asked me about the impact of technology.
Well, that is something we try to measure as much as we can in terms of expenditure, investment, output, productivity, and usage. We do that on the basis of the numbers that we receive, and we do that on the basis of the corporate surveys that we conduct on a very regular basis to ask them whether they are looking at massive investment in AI, for instance, and we try to draw intelligence from that. Thank you.
Speaker 35
Thank you, Chair, and welcome again, Madam President. It's great to have you here. It's very instructive and always enlightening that you spend so much time with us every time you are here. First of all, there was a question about the digital euro vote from the audience. He voted in favor of the Trillico amendments.
Speaker 38
So, he hasn't corrected his votes. So if anyone is contributing to the confusion, it's the AFD party in Germany. Check the roll call votes. It's there. It's very amusing.
Speaker 36
Secondly, there's one sentence in your opening statement, and it's not about inflation, but about the external contribution to economic growth. You said it's actually negative. Is that a temporary phenomenon in your view, or is that just due to the absolute chaos that is going on at the moment on the other side of the Atlantic? Or are we, I would say, and how does this feed in? And I know you don't want to talk about it, but the bio-European discussion.
Because if we're so dependent on domestic demand, what is the role that, for example, international trade and trade treaties can play in helping to support that? I believe our future is not to have an economy that is totally dependent on public expenditures. Thank you.
Thank you. And Mr. Pédrula ?
Speaker 34
Thank you, Cheryl, for speaking Italian. Président ?
President Lagarde, I have a great deal of respect for your work and the work of the ECB. And that is why I believe it goes beyond financial stability, Tier One, and containment of inflation. Let's look at some concrete data. 2025, as was reminded here, was exceptional for the banks and the banking system in Italy. We were expecting a profit rise for last year between 10-13%.
Now, given that situation, banking posts were 0.8%. That is assets from 10% to 130.8%. So, my question is: will you actually carry out some moral persuasion on the banking sector so that they can do what they should do and give credit to companies? Because at the moment, we have a huge difficulty due to the burden of investment. But if we don't give them the wherewithal, it will be impossible. Thank you.
Speaker 39
Sorry, very quickly, I was solicited about raising the issue of housing. Recently, Bowman, the Vice President of the Federal Reserve, said that they are considering measures to lower requirements to make it easier for banks to loan and hold mortgages. This is justified as a way to make it easier for people to own homes, but also, most importantly, to bring back loans and mortgages to the banking sector rather than nonbanks because they have seen a drop in these. And now, I don't know if this is really the way we want to monitor things: to lower capital requirements or to loosen the regulation. So, I don't want you to comment too much on what Bauman said, but I would like you to tell us how the situation is in Europe, how you see that, and if you are seeing internal debate pressures to follow these kinds of measures in Europe as well, and how you see that.
Thanks.
Speaker 4
Those are a lot of great questions, actually. Mr. Gottling, on your question about the point that I made, which is not actually in my written introductory remarks, I think that it is such a significant change that I wanted to mention it. Our growth at the moment is decisively driven by domestic factors: investment and consumption. But investment is not just from the public sector.
When you look at the detailed numbers, you have quite a lot of investment coming from the private sector as well. Those are the two main drivers. The external factor is, I think, memory, and don't quote me, we'll double-check on that, but I think it reduces by 50 basis points, 0.5, the outgrowth. So, it's not a completely trivial element, and it's clearly a testimony to the geopolitical changes, to the fragmentation of markets, to the uncertainty about trade, and to all sorts of components that are out there. And is it for the long run?
Is it a temporary factor? I think we should just be prepared that it is for the long run. And as a result, we should deepen our internal market and make sure that we eliminate as many of the barriers that we impose on ourselves as possible. And if external relationships, because trade in goods and services improves due to increased certainty, that will be an add-on. But I think that's the reasonable approach to risk management.
That's how I would put it. So, I don't want to drop anything. So, on banks lending, what we try to do is partly expose and partly project. We have two studies. One is our bank lending survey, which we conduct quarterly.
And the other one is SAFE, which is also a survey about households' and non-financial corporates' demand for lending. So, try to cross the supply of banks on the one hand, and the demand of borrowers on the other hand. What we are seeing at the moment is that banks are lending a little more. You know, it grows at a pace of about 2 point something percent on a regular basis. And to be on the safe side, we are not receiving any complaints from those we survey that they do not have access to lending.
We are receiving feedback concerning the types of guarantees or securities that are being asked for, but not in a very obvious way. So, for the moment, we see that the meeting of supply and demand in terms of bank lending is reasonable and slightly increasing. Not a lot, but slightly increasing. And we are very attentive to that because we know that it is part of the monetary policy transmission. So, look at that very carefully.
We have this thermometer out there, constantly on the pulse of the banking sector and the banking services customers. On the issue of the housing sector, I've lived through the global financial crisis. I know how much the housing sector was, way before 2007, at the origin of a meltdown that we don't want to see again. So I think that we have to be particularly attentive to the standards, to the requirements, to the criteria, to the ratios concerning the housing sector. Because just as the construction sector is generally a trigger for future growth, I think the housing sector can be a strong indicator of things that have to be under control.
Thank you.
Speaker 40
Thank you. No more requests for the floor? No? So, you have a couple of minutes to conclude if you want. It's okay.
Well, thank you so much.
Speaker 4
No, I want to thank you all. I'm really happy when I come here before you, and we can have these discussions and debates. And I hope you enjoy it at least a little bit as much as I do and will continue to enjoy it. Thank you.
Speaker 20
Thank you so much for being with us today and for answering all of our questions. Thank you. It's a pleasure for us as well. Thank you so much. The vote will be in 30 minutes.
Speaker 41
Okay? So, if you have time, we can have a coffee or discuss inflation. Colleagues. If you can go back to your seat, we'll proceed to the vote. I have been informed that the following non-Econ members will take part in today's vote.
Speaker 2
Mr. Francisco Assis will be replaced by André Rodriguez. Monsieur Pampy will be replaced by Catherine Gerset. And Ms. Michele Aboraz will be replaced by Ms.
De la Pizzard Carreon. Carreon. Thank you. So, before we proceed to vote, we will start with a test vote as usual, and the vote is open. So, I'm leaving it.
Speaker 20
But it's closed, and everything is fine. So, we will proceed to the vote on the European Semester for economic policy coordination 2026. The reporter is Kiera Peter Hansen. By showing the end, we would start with compromise A: was in favor, with against, who abstained, adopted; compromise B: was in favor, with against, who abstained, adopted. Compromise C was in favor of it, against it.
We abstain. Adopted. Compromise was in favor of and against. We abstain. Adopted.
Compromise. With favor. With and against. Who abstained? Adopted.
Compromise. With favor. With or against. Who abstained? Adopted.
Compromise. G, with pleasure? With or against? Who abstained? Adopted.
Final vote by a whole call vote. The vote is open. Okay. The vote is closed. And it is adopted.
Speaker 44
30 in favor, 15 against, re-attention. Congratulations to the rapporteur. Ms. Aubrey, do you want to take the floor?
Speaker 42
I would like to express a minority opinion. I don't know if you would like me to do it now or at the end.
Of the vote.
I will do it in one minute.
Speaker 45
Thank you very much, Madam Chair, and thank you to the rapporteur. I know that this has been a difficult job, but I get the feeling that there are some mistakes or errors. This report on the European Semester has a rapporteur from the Greens, and a lot of effort has been made by her. There are very interesting elements in the first draft on the impact of climate change. Unfortunately, however, we also have the usual elements.
I'm sorry that our colleague from the Greens has gone along with this. I have a very simple idea concerning investment opportunities, and this would help temporarily, in particular regarding climate change. We need money. For example, there is none being allocated for hospitals. Thank you, Madame Obris.
Speaker 20
To avoid an appointment of the Vice President of the European Central Bank, Mr. Boris Vucic. It's a secret electronic vote, and the vote is open. The vote is closed. And it is approved. The appointment is approved.
Speaker 2
Congratulations to Mr. Vučić. We now move to the employment of the Chair of the European Banking Authority, Mr. François Louis Michel, some process, secret ballot via electoral process. The vote is open.
Speaker 20
It is adopted. So, congratulations also to François Louis. Michel, thank you for this voting session. The next item on the agenda will be an exchange of views with Nadia Calvino, the president of the European Investment Bank, in 20 minutes. Oops.
Speaker 2
Okay. So, I'm very pleased to welcome Ms. Nadia Calvino, President of the European Investment Bank and Chair of its Board of Directors, today's Innocon. The IB not only plays a special role in the economic and financial architecture of the European Union, but is also becoming increasingly important for contributing to the implementation of an investment union and to the competitiveness agenda in economic and financial matters, for which our committee is responsible. Last July, the European Parliament adopted its annual resolution on the EIB's activity, highlighting four strategic pillars for the current mandate: consolidating the EIB's role as the EU Climate Bank, scaling up financing for security and defense, addressing the housing crisis, and accelerating the digital transformation.
These priorities are designed to bridge the investment gap identified by the Draghi report at the very beginning of this mandate. By providing financial additionality and derisking strategic projects, the EIB acts as a catalyst for the private investment essential to Europe's competitiveness. Our time is very limited today, so I will ask you to stick to the agreed practices. You will have one minute for the question, three minutes for the answer. But before, we will have the chance to have an opening statement from Ms.
Speaker 48
Thank you very much for giving me this opportunity, dear Aurora, and honorable members. It is always a great opportunity and a great pleasure to be able to exchange views with the Econ Committee of the Parliament. And I think it is also a very timely exchange, which gives me the opportunity to share a strong idea with you: the idea that Europe is a superpower. I am recently trying to explain what is underlying this assertion. And coming as I am today from the Digital Europe gathering, and having been able to visit a number of companies and research centers in Europe, I can only confirm that Europe is a global center of excellence in some key technologies for the future.
Quantum and high-performance computing, industrial robotics, advanced manufacturing, aerospace, biotech, health tech, medical devices, and advanced pharmaceuticals. Europe's capacity in this area is second to none in the world. At the same time, Europe is the incubator of the world because these companies, in order to raise the necessary capital and have access to a large unified market, often need to go and develop elsewhere. And we know what we need to do to make sure that Europe's competitiveness and security are up to the level of our leadership in the world. We need to have deeper integration, including in capital markets.
We need to mobilize large-scale investment in critical infrastructures and also strategic capabilities. We need simplification to make the EU more agile and more efficient. And we also need to bolster win-win partnerships around the world to diversify our supply chains and open new markets for our goods. Now, with a record financing of €100,000,000,000 in 2025—a very high level that will be maintained in 2026—the European Investment Bank Group is instrumental in supporting this agenda. And there are two basic points that I want to share with you.
The first is to build on our strengths. Europe's competitive edge in fast-moving sectors lies in its ability to combine speed and scale. And I think this matches very well the role of the ECON Committee, which is about implementation, speed, and scale. From the European Investment Bank's perspective, we are investing record levels in energy grids, technological innovation, security and defense, housing, water, and cohesion, trying to also maximize our impact inside the Union and around the world. And it is very good to see that so many things are changing in the different European institutions and in the member states to make progress in these areas and to make sure that we achieve our objectives, whether it is in the area of artificial intelligence or in the area of the energy transition, as you, Madam President, already mentioned.
The second point is about the need to mobilize private capital. It is not just a matter of the public sector. It is a matter of mobilizing and leveraging the European budget. And there is a great opportunity here because, in the current geopolitical context, Europe stands out as a beacon of stability and trust. These are very valuable currencies in the current geopolitical turmoil.
We see that Europe is becoming increasingly interesting for investors to reallocate their capital. Yet again, the European Investment Bank Group plays a key role in mobilizing private investments. With a 30% share in venture debt in Europe in 2025 and a 25% share in venture capital mobilization in Europe in 2025, it is clear that the EIB Group can be a catalyst to mobilize private investment. We are now working on new initiatives to accompany the legislative process of the Savings and Investment Union so that we can also generate bottom-up instruments that can mobilize and catalyze this investment from the private sector. So, these are the two key ideas I wanted to share with you. And let me close, and I cannot avoid closing with a reference to the next multi-annual financial framework, 2028-2034.
The key idea from us is: let's build again on what works. InvestEU is a true European success story, and the European Investment Bank is the key partner in implementing existing instruments like InvestEU inside the Union, as well as Global Europe and the NDICI outside the EU. We have a 1 to 15 leverage when it comes to mobilizing and having an impact on the ground with the guarantees from the EU budget. It is interesting to know that, in the case of InvestEU, 70% of the investment mobilized is private investment. And so, this partnership, this close partnership between the EIB and the European Commission in mobilizing the European budget, we think, is a very strong basis on which to build the next MFF.
You will not be surprised: pan-European by design, with a robust balance sheet, a AAA rating, strong partnerships in Europe and around the world, a core role at the heart of the multilateral development bank network, and also the national promotional bank network. The European Investment Bank Group is the natural partner to deploy the instruments that are being shaped as we speak. I think that we can maximize the potential of the EU budget going forward, and I am very grateful that the ECON Committee has expressed very strong and clear support for this core, central role of the EIB today and in the years to come. So, thank you very much. I'm happy to take your questions.
Speaker 2
Thank you so much. So, we will start the Q&A session. I will start with Fernando Navarrete for one and a half minutes for APP.
Thank you.
Fernando Navarrete Rojas
Thank you very much, Madam President, and to our chair. I would like to note that on July 8, our plenary voted with a majority for strengthening the governance and supervision of the European Investment Bank. Nevertheless, so far, you have ignored this political mandate. That's worth noting. And besides the governance problem, the other big issue is the lack of respect for internal controls.
Statistical bodies have improved GDP growth estimates, but that is largely due to the president of the institution. It seems that there are no instructions from governments or institutions to help them take this step. Now it's the European Investment Bank, but how do you feel, Missus Calvino? Can you have trust in European institutions and in European cooperation when the highest representatives permanently disrespect control mechanisms?
Thank you.
Speaker 49
€100,000,000,000 we mobilized for the next generation. These were essential for the autonomous communities, and they were good for the GDP of the country. It was good for SMEs. It had an essential role to play. The EIB has worked to support the Spanish economy, and we have also managed to deploy European lending in an effective manner.
We should be pleased about that, and we should be proud of it. As for your statements, I can only refer you to what has been the public statements of all the various institutions. The European Commission has been very clear, and I think that we could refer you to them.
Speaker 54
Thank you very much, Chair, and it's a pleasure to have you here, Mrs. Calvino, please tell us about the institution that you preside over. And I would also like to talk about the EIB's activities. A lot of effort has been deployed to improve access to housing. For many years, the EIB was an institution that wasn't doing enough, and I must congratulate you because now efforts, as I said, are being made to improve access to housing.
Speaker 53
But it is not an isolated problem. It's an issue throughout the EU. It's not isolated to a given city or country. It's a common problem, and the Parliament has set up a special committee on housing. There's a problem on the supply side, as well as on the demand side.
Speaker 52
And the EIB has its role to play. So, which measures have you adopted in this matter? What are your plans for the future?
Well,
Speaker 49
Thank you, Mr. Fernandez. I would agree that access to housing on acceptable conditions is one of the major challenges that the majority of European countries are grappling with, in particular for single parents and youth. Now, when I started working at the EIB, it didn't have a specific role in making funds available in this area, and it's something that affects everyone. So, that did surprise me somewhat.
Of course, at the local, regional, and autonomous levels, there are competencies for this. But we did work together with the European Commission to see how, at the European level, funds could be mobilized so that we could become active in three areas: new construction materials and techniques, renovation, and we signed a contract in the Basque Country with a Spanish company. And they help us renovate. There are a lot of buildings in the building stock where energy efficiency gains can be achieved, and we also promote affordable housing and new projects. And in the case of Spain, over 2 years, we've doubled the financing available for housing.
We have important projects underway in Barcelona and Valencia, and we work together with the competent authorities to ensure that we can have a multiplier effect at the EU level. And we have ambitious plans, which are to support innovation and construction of housing between now and 2030 to the tune of 1,000,000 housing units. And we certainly intend to continue our financing in this area. And together, we can face up to this challenge.
Speaker 55
Thank you very much, Madam Chair. I'm going to speak in French. Here I am. The competitiveness issue is at the heart of the European agenda. And if we want to catch up in terms of private financing, we have to really use all the levers at our disposal.
Speaker 56
It's indispensable. We have to have competitiveness in all the sectors. Otherwise, in particular in strategic sectors, which you are well aware of. I am the rapporteur of the annual competition report for 2025. And this is a very common, if you like, European goal.
Speaker 57
We're very happy to hear about the ambitious agenda because it has to take into consideration all the players, and this is a possibility for a new opportunity. I have a question. You spoke about European technological champions and the 2.0 point. I think we have to go further than that. And how are we going to do that and gradually involve all the member states in this interesting project?
Speaker 55
And, in addition to this initiative, how can the BEI work in other strategic sectors? And secondly, we know that the BEI is very present in all the different areas, but we'd like a little more clarity about how you are going to deal with access to financing for local companies and organizations on the ground. We'd like to hear more clearly about what you're going to do in that direction. Thank you, madam, because you're talking about a priority subject for us. Competitiveness is something we're very focused on.
Speaker 48
You spoke, first of all, about the importance of having a favorable climate for strategic investment in Europe. And I'm very happy to say that we've been able to use the new commission to sign an agreement with the Vice President, Madame Rivera, and DG Competition, exactly for that: for a fast track on how we can fast track EIB projects with semiconductors, batteries, and air energy. So, we're going to be facilitating those sectors. Now, the second reference I'd like to bring up is how we can mobilize private investment in the European Tech Championship initiative. I'm very happy to hear you mention that and that you know that initiative because, as you know, with digital innovators in Europe, it is considered one of the big successes of the EIB.
We managed to create 13 big funds, with more than €1,000,000,000 in capital in Europe. Just so that the honorable members can understand the dimensions of it, that's actually double what existed. More than 35 scale-ups were financed, and we have also managed to finance 11 unicorns, which is a really striking result in a two-year period. And we're going to try to up our game with regard to scale and speed. We have to work even faster and better so that companies can use technologies born in Europe, and these technologies flourish and become global champions based in Europe. And that's something we're really working on at the moment.
And you also asked how we can join up this financing with the players in the regions. Well, the EIB is the only player in the field that deals in all the regions of Europe, in particular through the financial system. We have a very functional network that works with the banks in Europe, and we see that private funds can reach where they should in the local areas. But we want to know how we can better communicate and better reach these areas of Europe because, of course, they are beneficiaries of the EIB. Thank you.
Speaker 34
Thank you, Chair. I'll speak in Italian. Thank you.
Thank you very much, Missus Calvino, for coming to speak to us. We, as the left group, well, I'll give you some time to put your headphones on. As the left group, we have a positive view of the work of the EIB. Yes. Thank you very much, President Calvino, for coming to speak to us.
We in the left group do not have a positive opinion of the work you're doing in the EIB. There are big projects, things to do like housing. But from 2019 to 2023, 5% of the loans issued by the EIB were linked to housing. So, we really need to change the orientation of the investments. What about the wrong investments that the EIB is getting involved in?
Well, I'd like to ask you, how much over the last few years has been lent on the subject of Ukraine? And another question is: is Ukraine respecting its commitments for the reimbursement of these loans?
Speaker 48
You jumped from housing in Italy to housing in Ukraine. And so, covering, I mean, first of all, I didn't quite get whether you have a positive idea or not, so a positive idea. I was a bit curious about that because we have been working so well with your political party in the past. So, you know, I'm happy to hear your suggestions so that we can improve our relationship going forward. Now, on housing.
As I mentioned a moment ago, the housing competencies are mostly at the local level. And we are working very closely with the member states, with the regions, but also with the mayors of the cities to see how we can provide this financing. I have personally met the mayor of Rome to talk about housing. We have just opened a very important initiative in Naples related to student housing. We are financing other projects in Italy, which are very relevant in the area of housing, based on the demand and the initiatives that come to us from the local authorities.
Actually, lending and financing in Italy reached a record last year. It was the most important country in terms of operations with our own funds from the European Investment Bank. And every time I visit the country, I see how important and impactful those investments are, whether we're talking about the undersea interconnector, local housing, as I mentioned a moment ago, innovation and research, support to universities, support to education, or the reconstruction after the earthquake. So it is a country where I think the role of the EIB is very much appreciated and quite impactful, as far as I can see. Now then, on Ukraine, since the beginning of the war, we have mobilized around €4 billion, if I remember correctly.
This afternoon, I will be having a call with President Zelensky and other representatives to see how we can also support the country in the face of reconstruction after the war, which we all hope will arrive soon. And we are always working in good and close partnership with the European Commission, building on the guarantees existing in the EU budget, which obviously allow us to continue operating in a country that is currently at war. It is an indispensable role, that of the European Investment Bank, not only to rebuild critical infrastructures in transport and energy, not only to ensure the supply of gas for the people during the winter, in this freezing winter and terrible conditions in Ukraine, but also, most interestingly, to rebuild schools, kindergartens, and hospitals, which are very much necessary to ensure that the Ukrainians can have as normal a life as possible in these extraordinarily terrible circumstances. I hope we can count on your support to continue supporting a country at this very challenging point in time. Thank you.
I'll group the questions.
Thank you very much.
Thank you.
Speaker 32
Thank you very much. So, we see an increasing tendency in the EU budget that a bigger part of the EU budget is spent via financial intermediaries, of which AIB is one. And the problem with this is, of course, banking can be a great contribution if you create money out of thin air and it is spent on something useful like investment. It can help to further the economy. But we see that in the commission regulations for certain funds, like in the MMF 2028 to 2034, it permits up to 15% of contributions to management fees to equity funds.
Speaker 30
And I would like to know how much fees the EIB usually charges when it takes a proportion of the budget, transforms it into financial instruments, and then forwards it to enterprises. Sorry.
Thank you. Thank you.
Speaker 60
Thank you very much, Missus Calvino. Well, you didn't really answer my question, Mister Navarretti, on an essential question for this Parliament. How can we improve the governance of the EIB? I would invite you to respond to that. We're absolutely stupefied to see what you have done in Spain and the way that next-generation money has been managed there.
Speaker 59
Now we've basically said no to 100,000,000,000 in loans, and maybe you could give us further information. I mean, this is something that we're asking for every day in the European Parliament: real execution of the funds. Well, you are very enthusiastic. So, I mean, maybe you have some extra information. Well, we've been asking for it for a long time in Parliament.
Speaker 2
I could also add myself to the speakers' list. I just wanted to understand. And maybe there's a bit of an internal Spanish debate going on here, but I wanted to understand what the EIB strategy is on heavy industry, steel in particular. There's a lot of work that has been going on recently. Green steel is very important for the green transition and industrial policy in Europe.
If we're not going to be left behind by China, then I need to know how you are working together with the industry. How are you following these strategic issues at the EIB in a very complicated world? And have these geopolitical developments had an impact on you at the EIB, and how do you take that into account? Thank you very much.
Speaker 48
I am happy to engage bilaterally to give you the details about how this is articulated. Let me tell you some general numbers about the European Investment Bank. So, it is an institution that has been profitable since its inception. And this profitability allows us to devote €2,530,000,000 per year to the reserves. And that allows us to multiply the investments in Europe based on the initial capital contributions of the member states.
From this point of view, it is really a success story because, with an initial capital contribution, the multiplication of investment in Europe has been phenomenal, totally incomparable with any other such institution around the world. And that explains in part why Europe has such strong infrastructures, whether it is schools, hospitals, roads, airports, train infrastructures, etc., as well as research centers. So happy to engage bilaterally with my colleagues regarding the details. But it is a nonprofit, not-for-profit institution that just reinvests those revenues and profits every year so that we can continue to have a very robust AAA rating and enlarge our balance sheet to EUR 100,000,000,000, as I mentioned a moment ago last year, while being financed in capital markets. So, it is really a very efficient way to use money in terms of the multiplication and leverage of those investments.
Then.
Speaker 49
Mrs. Bundjermeer, three comments. First of all, on the EIB's governance. Now, I don't know whether you're aware of this, but within multilateral institutions, the EIB's oversight mechanism is more robust than the mechanism in place in any other comparable institution globally, in fact. And when it comes to EIB's governance, we always try to improve it, and we apply the highest European and international standards.
And, of course, that's only normal. Then, there's the management of the next-generation funds. I can't really say much about that. With the exception of 2.2025, we mobilized €2,900,000,000 with the autonomous regions in Spain, and we don't need to mobilize more because the financial markets are offering affordable rates to Spain, precisely because the economy is doing well. That allows us to have very low interest rates on capital markets. So it's more interesting to go there rather than to go through the EIB.
But you can check with the final beneficiaries and the authorities in Spain. There's also a list published with regard to other countries. But I believe that you can ask the people who are in charge of this. And then, thirdly, the EIB and its dealings with the central government and autonomous regions. Well, we work together very well to develop projects and put them in place.
We also work with private entities to tackle challenges, such as restoring the electricity grid after unfavorable weather conditions and fires. Our cooperation is excellent, in fact, with the autonomous regions, local authorities, and also international authorities. Now, thank you, Madam Chair, for your question, because this is precisely an area where the IB is probably better suited than any other institution to support the transition and transformation of heavy industry in Europe. Now we've signed a very important operation, but I don't think it's public yet, so I can't mention it. But we're in direct contact with all of the companies on EU territory, and we're looking at how to develop and fund research into new fuels and how to continue with the decarbonization of these industries because they are at the heart of the European economy, of course, and need to continue to be at the heart in the future.
Speaker 61
Your view? And if you want to have a few, you can have some words for conclusion if you want.
Speaker 48
Yes. Thank you very much. I thought, actually, these exchanges are always very useful because they allow us to think and to see what is in the minds of the different MEPs and what their priorities are. I would like to finish with the same tone that I used in my introduction, Madam LaLuke, because in these troubling times, when we see so many challenges coming to us from the geopolitical context, I understand you had Madam Lagarde here this morning also, and I think what she said is very much the same message that I am conveying, which is we should not only look at and respond to what is coming to us from the outside. We should really look inside and build on our strengths.
Europe is a superpower. We have a very strong industrial base. We have very strong engineering capacities, excellent universities, and an ecosystem of startups that is comparable to that in the US. United, we are unstoppable. And this, I think, is the main message, you know, that we have to embrace also as a working method going forward.
From the perspective of the EIB, dear European Parliament members, dear ECON Committee, you can count on us. We are very willing to be a trusted partner to you, to the other European institutions, to the 27 member states, which are our shareholders, neither more nor less, and to continue to play a key role in contributing to a more prosperous, safer, and more stable future for Europe and for the world at large. Let me close with this idea. Thank you very much. I'm happy to come whenever you are interested.
Speaker 2
Thank you so much, and thank you for this very positive and constructive conclusion. And we know that you are key when it comes to investment, to the building of SIU, and even more than this. So, thank you so much for being with us today. And of course, I hope we'll have this kind of exchange of views on a regular basis. Thank you so much.
Speaker 20
Next, Econ's commutation will take place on March 18, March 19, and March 24. Thank you so much for today.
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