Frankfurt am Main, 14 April 2021

Madam Chair, honourable members of the Committee on Economic and Monetary Affairs,

Let me start by thanking you for inviting me to report on the outcome of the ECB’s public consultation on a digital euro. We are publishing our analysis of the responses we received on our website today.[1]

A digital euro can only be successful if it meets the needs and expectations of European citizens.[2] This is why our consultation will provide valuable input for the Eurosystem’s decision – this summer – on whether we should start a digital euro project. The consultation will also inform future work on the design of a digital euro, if a project is launched.

For the participants in the public consultation, the most important features of a digital euro are privacy, security and broad usability. In my remarks today, I will discuss how we can meet their expectations. But first let me share with you the main findings from our...

Frankfurt am Main, 14 April 2021

Madam Chair,

Honourable Members of the Committee on Economic and Monetary Affairs,

Ladies and gentlemen,

I welcome the opportunity to appear before this Committee to present the ECB’s Annual Report for 2020.[1] Today we will also publish the feedback on the calls and requests contained in your resolution on our previous Annual Report.[2]

This has been an exceptionally challenging year for all of us. The global coronavirus (COVID-19) pandemic has triggered an unprecedented crisis, creating social, political, economic and financial challenges for Europe and the rest of the world.

Therefore, allow me to focus my remarks first of all on the evolution of the economic outlook and the subsequent monetary policy decisions taken by the ECB. Second, I would like to discuss in more detail the impact of the pandemic on the European financial sector.

The Annual Report describes the tasks and activities...

The euro area economy was struck by the extraordinary and severe coronavirus (COVID-19) pandemic shock in 2020. Economic activity contracted sharply during the first half of the year as a consequence of lockdown measures and heightened risk aversion. The strong and coordinated monetary and fiscal policy reaction, combined with positive news on vaccines, helped stabilise activity in the second half of the year. Overall, euro area GDP contracted by 6.6% in 2020. Annual headline inflation declined to 0.3%, from 1.2% in 2019, in large part as a result of falling energy prices, although there were also factors relating to the pandemic. For example, sectors that were hardest hit by the crisis, such as transport and hotels, contributed to the fall in inflation during the second half of the year.

The ECB substantially eased its monetary policy stance to counter the negative impact of the pandemic on the euro area economy, through a comprehensive set of measures that were...

We asked 18 questions to collect views on the benefits and challenges of issuing a digital euro and on its possible design. Our public consultation ran from 12 October 2020 until 12 January 2021.

The overview of the 8,221 responses is published in this report. It will provide important input for the Governing Council’s decision in mid-2021 about whether to launch a digital euro project to formally investigate its possible design and use.

Prepared by Michael Grill, Luis Molestina Vivar and Michael Wedow

Following the onset of the coronavirus (COVID?19) crisis, a significant number of European investment funds suspended redemptions. We find that many of those funds had invested in illiquid assets, were leveraged or had lower cash holdings than funds that were not suspended. Furthermore, suspensions were more likely to be seen in jurisdictions where pre-emptive liquidity measures were not available. Our findings also suggest that suspensions have spillover effects on other funds and sectors, highlighting the importance of pre-emptive liquidity management measures.

Prepared by Laura-Dona Capot?, Michael Grill, Luis Molestina Vivar, Niklas Schmitz and Christian Weistroffer

The turmoil seen in March 2020 highlighted key vulnerabilities in the money market fund (MMF) sector. This article assesses the effectiveness of the EU’s regulatory framework from a financial stability perspective and identifies three important lessons. First, investment in non-public debt assets exposes MMFs to liquidity risk, highlighting the need to limit investment in illiquid assets. Second, low-volatility net asset value (LVNAV) funds are particularly vulnerable to liquidity shocks, given that they invest in non-public debt assets while offering a stable net asset value (NAV). Enhanced portfolio requirements could strengthen their liquidity profile. And third, MMFs seem reluctant to draw down on their liquidity buffers during periods of stress, suggesting a need to make buffers more usable.

12 April 2021

Europe is at an interesting point, because there’s a lot of optimism about a recovery, and yet Europe is still in the throes of the coronavirus (COVID-19) crisis – high cases, lockdowns. What is your level of concern at this point about the system and the economy as the President of the ECB?

Well, I think there is recovery – it is delayed, certainly, but it’s not derailed. It is delayed because Europe has been hit by the third wave of the virus. Not exactly the same one – the one that we call the English variant, which has hit most European countries hard. So we are still going through some lockdown measures. Not as severe as a year ago, but it is still slowing down the economy, which is back in many ways, because there has been a lot of ingenuity on the part of the private sector, in particular, to resist the slowing down of the measures. So a lot of invention, a lot of innovation, a lot of ways to deal with a situation that is still a...

The ECB Macroprudential Bulletin provides insight into our ongoing work in the field of macroprudential policy. The aim of the Macroprudential Bulletin is to raise awareness of macroprudential policy issues in the euro area by bringing greater transparency to the ECB's ongoing work and thinking in this field, and to foster broader discussion on key macroprudential issues.

Transparency about our ongoing work is not an end in itself. It is also an opportunity for an exchange of views. We therefore invite you to share your views with us by sending an email with your feedback to ecb.macroprudential.bulletin@ecb.europa.eu. The same address can also be used if you want to receive notifications of future issues of the Macroprudential Bulletin.