Introductory statement to the press conference (with Q&A)

Mario Draghi, President of the ECB,
Frankfurt am Main, 4 December 2014

Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to the first press conference in our new premises. We will now report on the outcome of today’s meeting of the Governing Council, which was also attended by the Commission Vice-President, Mr Dombrovskis.

Based on our regular economic and monetary analyses, and in line with our forward guidance, we decided to keep the key ECB interest rates unchanged. As regards our non-standard monetary policy measures, we have started purchasing covered bonds and asset-backed securities. These purchase programmes will last for at least two years. Next week, we will conduct the second targeted longer-term refinancing operation, to be followed by six further operations until June 2016. Taken together, our measures will have a sizeable impact on our balance sheet, which is intended to move towards the dimensions it had at the beginning of 2012.

In the coming months, our measures will further ease the monetary policy stance more broadly, support our forward guidance on the key ECB interest rates and reinforce the fact that there are significant and increasing differences in the monetary policy cycle between major advanced economies. However, the latest euro area macroeconomic projections indicate lower inflation, accompanied by weaker real GDP growth and subdued monetary dynamics.

In this context, early next year the Governing Council will reassess the monetary stimulus achieved, the expansion of the balance sheet and the outlook for price developments. We will also evaluate the broader impact of recent oil price developments on medium-term inflation trends in the euro area. Should it become necessary to further address risks of too prolonged a period of low inflation, the Governing Council remains unanimous in its commitment to using additional unconventional instruments within its mandate. This would imply altering early next year the size, pace and composition of our measures. In response to the request of the Governing Council, ECB staff and the relevant Eurosystem committees have stepped up the technical preparations for further measures, which could, if needed, be implemented in a timely manner. All of our monetary policy measures are geared towards underpinning the firm anchoring of medium to long-term inflation expectations, in line with our aim of achieving inflation rates below, but close to, 2%, and contribute to a return of inflation rates towards that level.

Let me now explain our assessment in greater detail, starting with the economic analysis. Real GDP in the euro area rose by 0.2%, quarter on quarter, in the third quarter of this year. This was in line with earlier indications of a weakening in the euro area’s growth momentum, leading to a downward revision of the outlook for euro area real GDP growth in the most recent forecasts. The latest data and survey evidence up to November confirm this picture of a weaker growth profile in the period ahead. At the same time, the outlook for a modest economic recovery remains in place. On the one hand, domestic demand should be supported by our monetary policy measures, the ongoing improvements in financial conditions, the progress made in fiscal consolidation and structural reforms, and significantly lower energy prices supporting real disposable income. Furthermore, demand for exports should benefit from the global recovery. On the other hand, the recovery is likely to continue to be dampened by high unemployment, sizeable unutilised capacity, and the necessary balance sheet adjustments in the public and private sectors.

These elements are reflected in the December 2014 Eurosystem staff macroeconomic projections for the euro area, which foresee annual real GDP increasing by 0.8% in 2014, 1.0% in 2015 and 1.5% in 2016. Compared with the September 2014 ECB staff macroeconomic projections, the projections for real GDP growth have been revised substantially downwards. Downward revisions were made to the projections for both domestic demand and net exports.

The risks surrounding the economic outlook for the euro area are on the downside. In particular, the weak euro area growth momentum, alongside high geopolitical risks, has the potential to dampen confidence and especially private investment. In addition, insufficient progress in structural reforms in euro area countries constitutes a key downward risk to the economic outlook.

According to Eurostat’s flash estimate, euro area annual HICP inflation was 0.3% in November 2014, after 0.4% in October. Compared with the previous month, this mainly reflects a stronger fall in energy price inflation and a somewhat lower annual increase in services prices. Taking into account the current environment of very low rates of inflation, it will be important to assess the broader impact of recent oil price developments on medium-term inflation trends and to avoid spillovers to inflation expectations and wage formation.

Against the background of recent oil price developments, it is crucial to recall that forecasts and projections are based on technical assumptions, especially for oil prices and exchange rates. On the basis of information available in mid-November, at the time the December 2014 Eurosystem staff macroeconomic projections for the euro area were finalised, annual HICP inflation was foreseen to reach 0.5% in 2014, 0.7% in 2015 and 1.3% in 2016. In comparison with the September 2014 ECB staff macroeconomic projections, they have been revised significantly downwards. These revisions reflect mainly lower oil prices in euro terms and the impact of the downwardly revised outlook for growth, but they do not yet incorporate the fall in oil prices over the past few weeks following the cut-off date for the projections. Over the coming months, annual HICP inflation rates could experience renewed downward movements, given the recent further decline in oil prices.

The Governing Council will continue to closely monitor the risks to the outlook for price developments over the medium term. In this context, we will focus in particular on the possible repercussions of dampened growth dynamics, geopolitical developments, exchange rate and energy price developments, and the pass-through of our monetary policy measures. We will be particularly vigilant as regards the broader impact of recent oil price developments on medium-term inflation trends in the euro area.

Turning to the monetary analysis, data for October 2014 support the assessment of subdued underlying growth in broad money (M3), with the annual growth rate standing at 2.5% in October, unchanged from September. Annual growth in M3 continues to be supported by its most liquid components, with the narrow monetary aggregate M1 growing at an annual rate of 6.2% in October.

The annual rate of change of loans to non-financial corporations (adjusted for loan sales and securitisation) was -1.6% in October, after -1.8% in September, showing a gradual recovery from a trough of -3.2% in February. On average over recent months, net redemptions have moderated from the historically high levels recorded a year ago. Lending to non-financial corporations continues to reflect the lagged relationship with the business cycle, credit risk, credit supply factors and the ongoing adjustment of financial and non-financial sector balance sheets. The annual growth rate of loans to households (adjusted for loan sales and securitisation) was 0.6% in October, after 0.5% in September. The monetary policy measures in place and the completion of the ECB’s comprehensive assessment should support a further stabilisation of credit flows.

To sum up, a cross-check of the outcome of the economic analysis with the signals coming from the monetary analysis confirms the need to closely monitor the risks to the outlook for price developments over the medium term and to be prepared to provide further monetary policy accommodation, if needed.

Monetary policy is focused on maintaining price stability over the medium term and its accommodative stance contributes to supporting economic activity. However, in order to strengthen investment activity, boost job creation and raise productivity growth, other policy areas need to contribute decisively. In particular, the determined implementation ofproduct and labour market reforms as well as actions to improve the business environment for firms need to gain momentum in several countries. It is crucial that structural reforms be implemented credibly and effectively as this will raise expectations of higher incomes and encourage firms to increase investment today and bring forward the economic recovery.Fiscal policies should support the economic recovery, while ensuring debt sustainability in compliance with the Stability and Growth Pact, which remains the anchor for confidence. All countries should use the available scope for a more growth-friendly composition of fiscal policies. The Investment Plan for Europe which the European Commission announced on 26 November 2014 will also support the recovery.

We are now at your disposal for questions.

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Question: You mentioned a couple of times early 2015 as a time when you’ll be reassessing your monetary policies. Are you comfortable that you will have enough information in seven weeks, when you meet again, towards the end of January, whether or not you will be able to make this type of decision, including whether to buy government bonds?

My second question is, you mentioned in the introductory statement an intended increase in the size of the balance sheet. That is stronger than you had last month when you said, an expectation, and I am just wondering if this new language is a unanimous decision by the Governing Council.

Draghi: On the first question, you see, you are in a very intelligent way trying to extract from me the date of the next decisions, and you won’t get it. Early means early. It doesn’t mean at the next meeting. It depends very much on how our assessment will go. We’ll certainly have a lot of facts to examine, namely and especially the big movement in the price of oil and what the impact of this is going to be, not only on economic activity, but also on inflation.

Let me say just two words on this, which has been the major event since we last met. Oil prices have an obvious direct impact on the price of energy, and on that ground, the effect is unambiguously positive. Just to give you a very rough estimate, our import bill of energy, of oil, fell about €10 billion between the second and the fourth quarter of this year. Now, that is about 0.2% of nominal GDP in that period. That is not going to be the final impact, because Europe also exports oil, but the net is unambiguously positive. Then you have indirect effects on the prices of, for example, transportation, the price of different transportation services, airline services, and that will have to be assessed. But then you have a third effect, which might happen if the lower prices get embedded in a lower wages formation process. So that is something that we want to look at.

We estimate the direct and indirect effects on HICP inflation are going to be 0.4pp in 2015 and 0.1pp in 2016. That is very important to keep in mind because it could alter the profile of inflation rates over the coming months, especially in the next few months. Through the indirect effects that I mentioned before, however, lower oil prices would also impact on core inflation, so we have to also be aware of this second-order phenomenon. And as I said, it’s important that it doesn’t get into second round effects, in other words that it doesn’t get embedded in inflation expectations. So there’s a lot to look at. That’s the bottom line of what I was saying. There is a lot to look at and to reassess, and to look at the medium-term outlook for inflation.

The second question is, yes indeed, intended is different from expected. It’s not simply an expectation; it’s an intention, but it’s not yet a target. So it’s something in between. It’s something in between. There was a vast majority of the members of the Governing Council, but the decision was not unanimous.

Question: Mr Draghi, you mentioned the investment plan, the European investment plan. When you talked in Jackson Hole, you mentioned that there was the necessity to boost the economy on the demand side. Do you think that the Juncker plan could boost the European economy on the demand side, as you imagined it then, as the assumption is for example that for every euro which is invested, you have 10 or 15 euros that come back from the private sector? Do you think this is credible?

Draghi: Well, certainly so. I mean, we have great confidence in the success of the Juncker plan. Let’s keep in mind that right now it’s the only initiative we have, as far as the aggregate fiscal stance is concerned. It’s rightly focused on investment because that is where I would say most action is needed. One of the features of the present outlook is actually the low level of investment, both public and private, and there are several signs that, as far as private investment is concerned, that this is so because there is a sort of lack of confidence. The confidence has by and large returned into financial markets, but has to be now spread to the real side of the economy, and namely the investment decisions. From anecdotal surveys that are being conducted often companies declare that the margins for unused capacity are not big, which means that they are not prepared yet to ramp up, to step up their investment plans, so that is the situation for private investment.

As far as public investment is concerned, I don’t remember exactly the benchmark, but it’s at one of the lowest levels in the last few years, in several years, as a matter of fact. So the Juncker plan is one response to this.

Question: Mr President, my first question would be on the TLTROs that will be the allotment on the second round in December 11. Can you tell us something about your expectations for this second tender and the impact you expect it to have on the balance sheet expansion?

My second question is on the work of the Eurosystem and ECB committees. If you could give us some more details on the measures that they have proposed, that you have ready to implement, should it be needed?

Draghi: On the first, obviously it’s very, very difficult to estimate precisely what the take-up of the TLTRO will be, and also, we should take into account that we should have in mind the net take-up in the sense that banks will also do other refinancing operations at the same time. The previous take-up came out in the lower part of our range of expectations for a variety of reasons, but still, it had a significant impact, together with other announcements of policy decisions, like the ABS and the covered bond purchase programmes. It had significant financing easing effects, and one of the effects we often forget is that in spite of the fact that the net take-up was not remarkable, it did change significantly the average maturity of the banks’ exposure to the ECB, because they basically substitute their present exposure, short-term maturity of three months, with the longer-term TLTRO, and now the average exposure is just less than a year. So you see that that has had an effect on the duration of their exposure.

So as I said, it’s very difficult to foresee exactly what the take-up is going to be, even more so than net take-up. Incidentally, there has been a rumour that the conditions of the second TLTRO could change. No, they’re going to be exactly the same conditions as the first. In the meantime, the outlook has become weaker, and that’s what we have to keep in mind. The work of the ECB committees will continue. It was the basis of a very rich, I would say, a very rich discussion, yesterday afternoon especially, but it was also today during the meeting. We discussed broadly all sorts of measures. We certainly discussed various options of QE, and more work is needed, certainly, and we’ll keep you informed as this work will proceed.

Question: Mr Draghi, could you tell us, if you take new steps next year, will it be a big step in one? I mean, buying sovereign bonds, or will it be corporate bonds first, and then sovereign bonds? That was one question.

The other one, have you discussed the regular accounts of Governing Council meetings, and have you taken a decision on it?

Draghi: On the second question, we will discuss the accounts of our meetings at the next meeting we’ll have in December.

On the first question, let’s reflect for a moment. First of all, we’ve seen that inflation now, headline inflation is 0.3 in November from 0.4 the month before. It was due to lower energy prices, certainly, but was also due to lower prices of services. So you see, one component is the services component which is part of the core inflation. The major revisions were due to three countries. Germany, Spain and Italy led the downward revisions, and by and large, these developments were in line with our previous communication that said that inflation would be low and would stay low in the years 2015 and 2016. As I said before, it could fall further because of oil prices.

Now, let me make absolutely clear that we won’t tolerate prolonged deviations from price stability, and the main reason is that if these deviations feed into inflation expectations, they’ll cause a drop on medium to long-term inflation expectations, which by the way still are within a range consistent with medium-term price stability. But if these were to feed into inflation expectations, these lower outcomes of inflation, were to feed into lower inflation expectations, we would have a zero lower-bound nominal interest rate. This would be tantamount to an increase in the real interest rate. That is something to keep in mind. So it would be tantamount to an unwanted tightening of monetary policy. That’s why we are preparing ourselves in the way that’s been described in the introductory statement.

Let me just re-read the point about this. It says in this context, early next year, the Governing Council will reassess the monetary stimulus achieved, because we don’t want an unwanted tightening of our monetary policy stance due to a decrease in medium-term inflation expectations. So we’ll reassess the monetary policy stimulus achieved, the expansion of the balance sheet and the outlook for price developments. We will evaluate the broader impact of recent oil price developments on medium-term inflation trends in the euro area. Should it become necessary to further address risks of too prolonged a period of low inflation, the Governing Council remains unanimous in its commitment to using additional unconventional instruments within its mandate, and that’s exactly where the work that’s being done by the ECB staff and by the relevant committees comes in very, very useful, because it’s opened up a very rich, ample discussion on different unconventional instruments. This would imply altering early next year the size, the pace and the composition of our measures. I think it’s worth repeating it, because these are meaningful words.

Question: Mr Draghi, at the European Banking Congress, you said that you’ll bring back inflation without delay. Today, you presented a significantly downwardly revised inflation forecast and underlined now repeatedly that there’s a risk of further revision. Now, I know that you have announced other measures, and that they still have to take their full effect, but you announced those at a time when the outlook was still stronger than today, so I’m wondering, what is causing the delay? Why no decision today?

My second question is, Vice President Constâncio said last week twice that should you decide to go down the route and buy government bonds, that this would be a pure monetary policy tool and would happen according to the capital key. And in this context, I wonder why the ECB would choose a different route from other central banks that had decided to focus on the safest available assets only in their QE programmes?

Draghi: Your first question is very, very reasonable, I would say, and there are two answers to this first question. One in the sense that I have already given it: namely that the changes that have taken place of recent in the price of oil are so meaningful. Just think that between, if I’m not mistaken, June of this year and today, the price of oil decreased by 30% in euro terms, so that they need careful assessment. They need careful assessment in the ways that I have described before. We have to assess the direct effect, the indirect effect, and whether there are going to be second-round effects. Some of these effects are positive; others are not positive. That’s one reason, I think, to just think more.

The second reason, however, is that between June and September, we have announced many meaningful decisions that, as we said several times, are having a sizeable impact on our balance sheet but, more meaningfully, have already produced a substantial easing of financial conditions, both on the credit side, and they haven’t yet fully developed their action, so we need to see more about what’s the impact of this. At the same time, we have to be aware that those measures had been calibrated with a growth and inflation outlook which was more favourable than we have today. So it’s both time to look at what effect these measures are having and will have, and also time to be prepared to further action if needed. I think that’s the basic strategic stance that is expressed by today’s meeting.

On the second point, the form of QE that the Vice President has presented or illustrated is one of the several that we’ve discussed today. Do you want to comment?

Constâncio: In the first place, I didn’t describe any decision that had been taken, of course. I just expressed my view, as is normal in our individual speeches. Also, another dimension of your question was that other countries adopted a policy of buying the safest asset. Well, they just had one, because they bought their own sovereign, and then that was not the same type of problem that you’re alluding to in a context of a monetary union that has many states and different types of debts. Also, you must also recall that we have a very clear policy on what regards what are eligible sovereign bonds for our collateral, and that provides a criteria about the safety to our balance sheet, but, as the President just said, these are all questions open and still for discussion. We have not taken any decision, and I didn’t allude to any decision that has been taken.

Question: Mr President. There’s been a lot of talk among analysts about whether or not, if you were to do QE, you could do it in the way that the BOJ did, in the sense that the decision was five to four in favour, or would you need more of a consensus? Would you need what some analysts have referred to as a super majority? So it would be good to hear your thoughts on that.

For the second question, we saw quite a lot less last week from the Commission on member states’ plans for structural reform and fiscal adjustment, notably for France. Do you think what was announced last week in terms of structural reform is sufficient or, as you suggested in recent speeches, would you like to see more centralisation and some sort of permanent framework in place for dealing with this?

Draghi: Well, I would like to answer first the second question. I think the final decision about structural reform and fiscal consolidation of France and Italy is in the hands of the Commission. The view that I have expressed several times, as far as structural reforms are concerned, is that there is a lot to gain in extending the sort of, I would say, framework that at present we have in the budgetary policies to areas like structural reforms, to have a common decision; we are so intertwined already that structural reforms are bound to have spill-overs on other countries, exactly in the same way, in the same sense, as budgetary reforms. That is the basis for having a common interest, in having a common decision-making process, and in this sense, I have argued several times that it’s not a matter of losing national sovereignty, which is the fear that many people have. It’s more a sharing national sovereignty at a supranational level, and it’s more and more true that the area of structural reforms is now of dominant importance in producing future growth, and conversely, the lack of it will continue to cause weak growth, the weak growth that we are seeing today.

On QE, you asked, whether we need to have unanimity to proceed on QE, or can we have a majority? I think, we don’t need to have unanimity. It’s an important monetary policy measure. It can be designed, I believe, it can be designed to have a consensus. I’m still confident, but we have to remember that we have a mandate, and as I said before, we don’t tolerate deviations from our mandate that would cause ultimately a tightening, an unwanted tightening of our monetary policy.

Question: Stanley Fischer has said that quantitative easing would help Europe in the same way that it helped the United States. Many people however have increasing doubts that it would filter through to the real economy in the same way as many of the other steps you have taken have, perhaps taking a longer time or struggle to get lending for example going again.

Separate to that, is it conceivable that a decision to go ahead with the quantitative easing without the whole-hearted support of Germany would be credible? Sabine Lautenschläger said last week, now is not the time. Is there time to convince Germany between now and March?

Draghi: Well, QE has been shown to be effective in the United States and the UK. In Japan, it’s harder to assess because other things have taken place concerning the process of structural reforms and the fiscal policy decisions that have taken place. So the assessment on the effectiveness of QE there is more complicated.

But it’s quite clear that QE, and without being too specific about what sort of assets, would be included in this definition, QE has several effects. One is the signalling, certainly. It shows the commitment of the central bank to keep interest rates low for a protracted period of time, and forward guidance in place for a protracted period of time. The portfolio rebalancing effect, namely if you buy euro-denominated assets, people who will get cash, will buy perhaps non-euro-denominated assets, and you have a portfolio rebalancing effect through that channel. And you have other effects. There is a quite well-documented relationship between the size of the balance sheet of a central bank and inflation expectations. So there is enough evidence to say that it could be effective.

We have to keep in mind, however, that the initial conditions matter a lot. And in this sense, the initial conditions of the US and UK, when they decided QE, were different from the initial conditions of the euro area. So that’s why we are thinking deeply about that. That’s why, in a sense, it’s another answer to the previous question as to why we’re not acting today. We want to see all these differences and how they play in one way or another.

The second part of your question is 100% political. I and the Governing Council will have primarily in mind our mandate. And the mandate is price stability with an inflation rate which is close to but below 2%. So the last thing that the ECB would do is to not comply with its mandate.

Question: My first question would be, which kind of QE variations did you discuss? Did you discuss buying gold? Did you discuss buying US Treasuries? Because you referred twice to these various QE versions.

And then also what I was missing is, when it comes to your inflation estimates, there’s no number of the end of 2016. Previously you were giving us one that was showing us that actually inflation expectations are very close to your target.

Draghi: On what sort of assets should be included in QE, my sense and recollection is that we discussed all assets, but gold.

On the second point, you’re right. I don’t have it here. But what I can say is that it’s 1.4%, so it’s lower than previously predicted.

Question: Will the ECB have a role in financing the Junker plan? You have said that it’s a step in the right direction. You suggested in the European Parliament that you’re not going to finance it, but why, if not?

And a second question if I may. If at any moment the ECB is going to embark on a QE programme, what channel do you consider to be the most important for the transmission of the policy?

Draghi: On the first question, I was asked the same question, you’re right, in the European Parliament. And, as I said before, our mandate is to have a monetary policy which assures price stability, namely an inflation rate close to but below 2%. So we will discuss what the ECB can do. But prima facie it is not the role of the ECB to finance investment plans.

Having said that, I also said in the European Parliament that the ECB, through its comprehensive assessment and through its new role as a supervisor, has ensured and will ensure healthier banks. That could actually be of great help for the implementation of the investment plan.

On the second point, what is the channel? We said that there are three elements in any QE programme. It’s the size, another one is the pace, and another one is the composition. All these decisions do have an effect, could have a credit-easing effect, or could have a signalling effect, or could have a portfolio rebalancing effect. In other words, you buy certain types of assets; the sellers now have cash and will invest into other assets. So the transmission channels could be several, depending also on the sort of QE we design, and keeping in mind that we have already decided important measures, like the ABS programme and the covered bonds programme, that are and will be especially producing effects over an extended period of time.

Question: On this move from expectations to intention, was there unanimity on the Executive Board on this being now an intention?

And a second question, you said you’re discussing all options of QE. So would this also include buying foreign assets? And probably you could elaborate on the transmission channel in this case.

Draghi: On the second question, we discussed several options and at some point someone advanced this possibility, not on this occasion, on another occasion. I think it's difficult because it would be tantamount to intervention, to foreign exchange intervention. We certainly don't want to do that because, as I said several times, the exchange rate is not a policy target, but it's important for growth and price stability.

And the exchange rate is the product of monetary policies that are on a diverging path in different jurisdictions in different countries because of the different economic conditions both as far as activity is concerned and as far as inflation is concerned.

On the other point, no, there wasn't unanimity in the Executive Board.

Question: Regarding fiscal discipline of eurozone countries, the ECB required conditions when eurozone countries wanted to have an OMT programme. Do you think this kind of system is necessary for quantitative easing? And, if not, how do you secure the fiscal discipline of eurozone countries?

Draghi: It's quite important to distinguish neatly that there’s a difference between OMT and QE. OMT was addressing the tail risks for the euro coming from redenomination risk and it was necessary to address this confidence crisis in a way that the action of the ECB would be deemed credible by the markets, which was the case. In the design of the programme, however, we had to take into account that the confidence crisis in the euro was concentrated in certain countries.

The policies that we are discussing today address the risk of low inflation for too long a time such that it would feed into lower medium-term inflation expectations. Normally in ordinary time, which is monetary policy, it's not addressing the tail risk of a certain situation, so this is pure monetary policy.

So much so that in normal times we would address this risk by lowering nominal interest rates. But in extraordinary times when we already reach the lower bound for our interest rates we signal the monetary policy's stance through changes in the size of the balance sheet of the central bank. So it's a monetary policy decision that will address as, as I did say before, an unwanted tightening of monetary policy.

Question: In Greece, Syriza, and now in Spain, Podemos, two groups that we could call from the radical left, are asking for a shift change in the way that this institution and the eurozone have been dealing with the crisis. They are asking for the purchase of sovereign bonds, and they have serious chances to win the elections next year. I would like to know if it could undermine or it could affect the way you would conduct your strategy next year and that would be a risk for the eurozone.

Draghi: I must confess I'm not entirely clear on what sort of changes they are asking from our side. We've discussed, amply, monetary policy measures and today we have discussed the possibility of doing QE where the central bank would buy government bonds as one option, but also other types of bonds and other types of assets. We in a sense had started getting more control on our balance sheet already with the ABS programme and the covered bonds programme purchases.

And so it is a discussion that in a sense continues along the decisions that we've taken in June and September. But all these decisions have nothing to do with monetary financing. If that's what is being required from the ECB that would be against the treaty, Article 123, and I want to be absolutely clear on that – the ECB cannot go against the treaty.

Question: You have said that a decision on sovereign QE does not need to be unanimous. Does that also mean that you would feel comfortable with taking such a decision against quite a number of Governing Council members, let's say, six, seven or eight?

And the second one, you said at your latest hearing at the parliament that the ECB has not been created to ensure that governments do the right things and that you have a mandate, meaning price stability. And the Vice President argued the same recently. Does that mean that moral hazard issues should not play a role when it comes to sovereign QE?

Draghi: I think it's pointless to speculate what sort of majority will actually happen to be in place at the time when we will decide, if we decide, if we were to decide these measures. But if you look at past experience we've taken major monetary policy decisions in a situation where there was no unanimity. So this is what we have to keep in mind. We have to comply with our mandate. We are not politicians here. We have a very clear mandate on that.

Now the moral hazard is a considerable consideration, but as far as we are concerned only to the extent that it can affect or it can be hampering our main objective, which is price stability. That's very important – to keep in mind these distinctions. We are not here to teach governments what they ought to do, or blackmail governments that if they don't do something we'll do something else. We are focused on price stability so any consideration has to be analysed and looked at from this angle.

Question: Mr President, two questions, one understanding question. The new economic projections of the ECB reflect a downward revision of net exports. Also we have a euro now that has reached the lowest level since August of 2012, reflecting, for example, the exchange rate with the dollar. So how can you explain to me that a weaker euro, that could be a booster for exports, could lead to a downward revision of net export expectations for the period to come?

And the second question may be hypothetical, but after the Greek’s debt restructuring you said that the ECB would be a creditor like any other, would be pari passu with other creditors. Can you confirm that it would be the case if the ECB was to buy government bonds of all eurozone countries next year?

Draghi: On the second question let me say let's first design the QE and then we'll be able to answer all these questions. Let me also add that we don't want to cause unintended monetary policy tightening in choosing forms of seniority which would be counter-productive. You all see this point, I believe.

The first question is, yes, the exchange rate has weakened considerably. This should have a positive impact on exports. At the same time we've seen that world growth demand is softer and so that's why our projections for exports have gone down. And I do think that the most recent movements in the exchange rate have taken place after the cut-off date of the projections. So they will certainly have the previous weakening of the exchange rate - they will certainly have that - but not the most recent weakening.

Question: Doubts have been raised about the legality of a QE programme that would include sovereign bonds. From what you said earlier I think you are confident or adamant that this will not be the case. But do you think this will stand up in court, as there is certainly going to be a challenge to that?

My other question is about the ABS programme which has just started, with the very low volumes. Are you just testing the waters and you plan to increase these volumes, or are you waiting for regulatory changes to which you've alluded in many occasions before?

Draghi: On the second question, no, we are not waiting for regulatory changes. When they will come they will certainly be very helpful in producing a larger market for ABS, because we should be aware that we shouldn't be taking a static assessment of the ABS market. The market will expand because of the regulatory changes, but also because of our action.

How we judge the effects of these programmes, however, is not only volumes. It's also the effects they've been having – significant effects – on tightening the spreads in the relevant markets. We judge the success of a programme, and especially this programme, depending on the contribution that it's giving to overcoming the impairment of some credit markets. And on that ground we are quite positive.

The volumes have been low and that is partly due to the fact that we just started and partly to the fact that we are at year end and partly to the fact that we count on a further expansion of the markets themselves, but also to the fact that we are very careful about not crowding out private investors from this market. That is also in a sense a self-imposed limitation.

So the potential universe of this market, as we've said a thousand times, is EUR 400 billion, but we will certainly end up buying less than that, way less than that, because at the same time the market will expand if this is well done.

On the first point, let me respond with a question. Do you think we would discuss things that we know are illegal? Would it be the best use of our time? So that's I think the answer to this.

Evidently we are convinced that a QE programme which could include sovereign bonds falls within our mandate, or better, is an eligible instrument that we could use in the pursuit of our mandate. Not to pursue our mandate would be illegal.