Eiro vanaga skats

Valdībām jāspēj samazināt budžeta deficītu un atgūt uzticību – cita ceļa vienkārši nav, uzskata Eiropas Centrālās bankas vadības pārstāvis Jirgens Štarks

Jirgens Štarks ir ļoti vērtīgs cilvēks. Kad septembra sākumā viņš paziņoja, ka atkāpsies no amata Eiropas Centrālās bankas valdē un padomē, gan Eiropas, gan ASV akciju tirgi piedzīvoja strauju kritumu, samazinot biržās kotēto uzņēmumu vērtību par miljardiem dolāru. Oficiāli viņš nav gatavs izskaidrot savas atkāpšanās iemeslu, tomēr visiem ir skaidrs, ka tas notika kā protests pret ECB krīzes laikā piekopto politiku, kuras ietvaros centrālā banka sākusi pirkt grūtībās nonākušo eirozonas valstu obligācijas, tādējādi novēršot to vērtības krišanos. Štarks tika uzskatīts par svarīgāko «vāciskās» ekonomiskās politikas pārstāvi ECB, jo viņš iestājās par ļoti stingru monetāro politiku un valstu parādzīmju pirkšanu uzskatīja par pirmo soli uz ECB naudas drukāšanas mašīnas bīstamu pakļaušanu politiķu īstermiņa vajadzībām.

Pagājušajā nedēļā Štarks Rīgā uzstājās Latvijas Bankas ikgadējā konferencē ar runu, kurā, cita starpā, pateica, ka Latvijas lēmums nedevalvēt latu krīzes laikā bija pareizs. Žurnālam Ir bija iespēja garākā intervijā viņu iztaujāt par Latvijas izredzēm iestāties eirozonā un par Eiropas kopējās valūtas nākotni.

Šodien žurnālā lasāma intervijas īsā versija latviski, bet ir.lv lasītājiem piedāvājam pilnu intervijas atšifrējumu oriģinālvalodā.

Do you think that Latvia will join the euro in 2014?

It’s well known that the plan of the government is to join the euro area in 2014, but we also know that we have to follow the rules in the Lisbon Treaty. To enter the euro area requires an assessment of the degree of convergence that has been achieved. This is based on two reports. One has to be prepared by the EU Commission, the second one will be prepared by the ECB. An assessment has to be made about the sustainability or the durability of the degree of convergence achieved, also taking into account the experience we have had with the monetary union so far. In the past the interpretation of the convergence criteria were very lax, very weak. This does not mean that new standards will be applied, but we have to consider a more thorough analysis of the durability of the degree of convergence.

Considering the fact that Latvia’s GDP per capita is still considerably below the eurozone average, should Latvia join the euro?

You know that all member states of the European Union with the exception of the United Kingdom and Denmark are obliged to join the euro area. This is up to the country itself – but also the European institutions – to decide whether Latvia has qualified for monetary union. Again, drawing lessons from the most recent experience, the real test will start after the adoption of the euro. So it requires an adjustment of national policies to the conditions of the euro area and this is something that has been lacking in some countries of the euro area. We have to draw lessons from the most recent experience.

One of the key areas of sustainability will be inflation for countries that lag in terms of income. How will this inflation sustainability criterion be evaluated, how sharply, how hard will it be evaluated?

We have clear rules for this – the three best performers plus 1,5%, this is accepted as qualifying to meet the inflation criteria. But there are other criteria, the fiscal criteria. These are the two main issues on which Latvia still has to do some work. To keep the fiscal deficit under control, the target for 2012 is to bring the deficit below 3%. This, again, has to be on a sustainable basis. Regarding the inflation rate, there might be some future pressure taking into account what you referred to, namely the low level of GDP per capita in relation to the euro area or the EU average. During the catching up process there is a risk that the inflation rate will be higher. Against this background it has to assessed when is right time, the appropriate timing for joining the euro area. But the fact that we discuss this issue is a positive sign that the euro area is still an attractive target.

Regarding inflation – does that mean that simply meeting the Maastricht criteria may not be enough?

I think we have to apply the Maastricht criteria – inflation, the fiscal situation and the deficit and the debt to GDP ratio. For this I think there will be no problem for Latvia, you have a debt ratio of 50% to GDP. Then there are also long-term interest rates and the exchange rate. The exchange rate is pegged to the euro and Latvia has shown that it can live with the peg. It showed that very clearly, despite the advice that was given by some observers three years ago to give up the peg. When we had the negotiations on the program and there was a strong recommendation made at that point in time. I have a good memory of this. In the spring of 2009 there was enormous pressure to give up the peg. This is also a very important lesson one has to draw from the Latvian experience – that it is possible to adjust the economy, to take tough decisions, to implement tough decisions, in a situation where the nominal exchange rate as an adjustment parameter is not available. It is a clear demonstration that it can work. However, there must be a political will to make it work.

How do you think Estonia has done since joining the euro?

Estonia has performed well. There is one issue which we at the ECB were considering already at the time when we prepared the convergence report, namely the inflation rate. The inflation rate is very high in Estonia. This is something that the government has to deal with. But all in all Estonia has performed well and already adjusted to a large degree before joining the euro area.

Speaking of 2009 – the ECB decided not to give Latvia a swap line that would have helped it maintain the peg. Why was that? It gave swap lines to the central banks of Denmark and Sweden, and certainly that would have helped Latvia maintain confidence about the peg if we had had that.

There are different issues here and we should not mix up the different approaches which are available. Denmark is a member of ERM II, as is Latvia, but the swap line is the last line of defense in ERM II. When all other instruments have been used, the swap line is the last step. We have a difference here in Latvia because there is a unilateral commitment to the peg with a plus-minus one percent. On this particular point the ECB has never committed to defend this exchange rate. It is a unilateral commitment. In the Danish case it is a multilateral commitment. Denmark had used all the instruments that is had available and also used its own reserves to intervene in the market at that point in time. And then as a next step there was this swap line. So a distinction has to be made. To be very clear on this, this position of the ECB was clarified already when Latvia joined the ERM II – this is a unilateral decision that you peg your currency with a margin of plus-minus one percent to the euro.

How can the euro zone get out of the crisis it is in right now?

It is not only a crisis of the euro area. It is in particular a crisis of sovereign debt of most advanced economies. Some nations are running deficits close to the double digits or having a debt to GDP ratio which is close to or above 100% of GDP. The only promising way forward is consolidation. This is discussed internationally in a controversial way. One argument put forward is not to consolidate now, when the global economy or the national economies are still in a weak position. At the same time there is also a risk now for advanced economies to be cut off from market access. This is the first time after the Second World War that we have experienced this, that advanced economies have no access to the capital markets to finance their expenditures, as we have seen in the cases of Greece, Ireland and Portugal. These countries were taken off the market and temporary financing is provided by EU partners and by the international community.

There is no other option than to consolidate fiscal policies in combination with structural reforms, in order to enhance the growth potential. Only in this combination is there a promising way forward. This is what has to be done. We know that these adjustments which have to take place in the respective countries are painful. For this reason there is financial support by the Europeans and the international community to gain time. But the key question is – to gain time for what? To what end? There must be a target, there must be an objective, which has to be achieved within three years. This is exactly what we have in the adjustment programs. There is no other way than to implement the adjustment programs one to one in a credible way, to consolidate budgets. What we have seen so far in the three EU and IMF program countries in the euro area is a clear warning signal to others not to allow any slippages in the fiscal position. Even in a demanding economic situation you have to take the right steps in consolidating the budget. Budget consolidation will lead to regained confidence. We have a confidence crisis, and to regain confidence is key. First, to regain the confidence of the public at large, second and in particular of the financial market participants.

Do you think the European Central Bank has gone off course by buying government bonds as it is now doing?

This is a decision by the Governing Council and this decision is based on monetary policy considerations.

Would you have recommended this policy?

I have not recommended this policy.

And if this policy were to stop suddenly, isn’t there a danger that such a move could precipitate a greater crisis?

Again, this is according to the decision by the Governing Council of the ECB. The implementation of this instrument is motivated by monetary policy considerations. As long as the Governing Council sees the monetary policy transmission mechanism as impaired, the interventions in the view of the Governing Council are justified. However, I hope that the EFSF, with the reformed framework agreement will be in a position soon to intervene in the secondary market. So that in the end the EFSF, for reasons of financial stability, can take over this task from the ECB.

The big question now is Italy. Everyone considers the EFSF as too small to help Italy if there were suddenly a bond buyers strike. If that were to take place, if the markets suddenly cut Italy off from access to capital, would it be appropriate for the ECB to step in?

We have to apply the rules of the Maastricht Treaty and the Lisbon Treaty. The principles enshrined in the treaty, which are still a sound basis for economic and monetary union, and one of the rules says that the ECB is not to provide any financing to governments. There is a prohibition of monetary financing. So the ECB will not step in. The ECB cannot step in. We cannot replace governments. For Italy, as for other countries, the key point is on the fiscal side. I think on the fiscal side Italy has done a lot already. However, what has been agreed has now to be implemented. Implementation is key. On another front, Italy has to do more on structural reform to enhance growth potential, because Italy has been one of the poorest performers in terms of economic growth since 1999, since the start of the third stage of EMU. They have to do more in this respect, and this is well acknowledged. The government is working on a program to foster structural reforms.

I understand your point that it should be governments which in the end cover these costs. Nevertheless we see that the European governments have a very hard time acting in a coordinated and timely manner.

But this is a normal procedure in democratic systems. I must say I am not disappointed that it takes in some cases longer than usual to come to an agreement. The same is true on the other side of the Atlantic. It was not with the first attempt that Congress approved the draft bills presented by the US administration. We live in democratic systems and on balance we have to accept what the democratic system produces. Strangely, this is not acknowledged by markets. Markets expect rational, immediate decisions. By whom? By a dictator? I am very happy that Europe does not believe in dictatorship. So we have to accept that we live in democratic systems and it takes time to get in the end the best possible, the optimal outcome of these discussions. But there is a strange issue that markets behave sometimes in a not very rational way. We know that in the long term the market is the best coordinating mechanism for the economy to produce welfare for the citzens. But [it does not] appreciate, does not consider appropriately that we have to deal with political systems, that people around the world are represented by parliaments, and the parliaments have to understand what this is all about. I can tell you that what we are dealing with at present is extremely difficult for citizens and for non-expert parliamentarians to understand. They are asked by their electorate and they have a hard time explaining it.

This leads to the next question. When the euro was founded a Stability and Growth Pact was established, supposedly to ensure that the countries would obey the rules. That was run by politicians, and it didn’t work. How can the eurozone or the EU as a whole set up a political system that enforces these rules so that we don’t end up in another crisis like this?

The only way to enforce the rules is by more automaticity, to give less leeway or discretion to politicians. We need strict rules which are applied in an automatic way. This was the idea already in the nineties when the Stability and Growth Pact was negotiated. In the first years the SGP worked quite well, until 2003 when Germany and France came under pressure and the French and German governments decided to “kill” the Stability and Growth Pact. It was watered down so that it was not applied effectively any more. But with the experience we have had with this crisis, we see now an enhanced Stability and Growth Pact emerging. An agreement was reached between the European Parliament and the European Council and the European Commission two and a half weeks ago. This is an important step in the right direction. It is not, in our view, in the view of the ECB, sufficient. What has been achieved is a starting point to use the review clause, which the Commission and the Council also agreed upon, that it can be activated as early as possible in order to go further. In the end, in my view, we need a transfer of national sovereignty to the supranational level. Otherwise it will not work and we will in a couple of years be in a similar situation.

Will some countries have to leave the eurozone?

There is too much talk about all this. In my view this is an armchair discussion. People without responsibility sit in an armchair and say that it would be best if country A or country B leaves the euro area. Those who bear the responsibility have to consider the costs of exit. The ECB has warned time and again against the involvement of the private sector. It is similar to the discussion about expelling a country. By the way, from a legal point of view a country cannot be expelled from the euro area. And how will it work? We know that private sector involvement is more costly for the European taxpayer than the politicians think. And an exit by one country will also be extremely costly for the tax payers. What does it mean for a country to leave the euro area? To reintroduce its own currency, to devalue its own currency by X percent so that the external debt will multiply? In such a scenario European banking system would be hit in an extreme way. So it is just a shot from the hip to say – get out of the economic and monetary union. It is easier said than done and in my view it is not an option.

We were talking about the fact that governments do not move at the same rate as markets. Imagine a worst case scenario. For whatever reason, for irrational reasons, the markets decide that they will not fund Italy any more. Italy has done all the things that are required of it. It has adopted and is implementing its budget and nevertheless it is not being funded, threatening it with default.

It is not our working assumption.

But it is a possibility.

What Italy has done on the fiscal front is a big step forward, including a clause in the constitution to run a balanced budget or to have some kind of debt brake. This is for the first time. Italy should have done this much earlier, already in the nineties. But now, as Italy was under market pressure, they did it and it was already approved. Also Spain. Within a very short period of time, only ten days, the Spanish parliament adopted a ” debt brake” clause in its constitution. There was a broad political consensus, both leading political parties agreed with this, and there was a majority in parliament to adopt this clause. What the Italian government and the Italian parliament have realized is that they have to do more to foster growth potential. Real structural reforms are the right way to do it. But again – when you are confronted with a confidence crisis, you have to do everything to regain confidence. We know that you can lose confidence very quickly, but to regain it takes much much much longer.

We can imagine a situation where there is an existential crisis for Europe because Italy is in danger of defaulting and the only institution that can act quickly is the ECB. In such a situation would the ECB have to step in to save both the euro and itself as well, perhaps by buying bonds in a way that may go beyond the strict interpretation of its remit?

It is not about strict interpretations. We have to follow the legal provisions, we have to be on legally sound ground. It is not up to the ECB to bail out countries. This is not feasible. It is legally not possible and it only would create moral hazard. This is something which governments would have to consider but not the central bank.