Frankfurt/Main (dpa) – On the occasion of the 25th anniversary of the central bank, ECB President Christine Lagarde emphasized the determination of the euro currency guardians in the fight against the currently high inflation. “After years of low inflation, it is now too high and is likely to remain too high for too long,” Lagarde writes in an article published on Wednesday in newspapers in all 20 euro area countries, according to the European Central Bank. “But we will bring inflation back to our medium-term target of 2%. That is why we have raised interest rates in record time, will raise them to sufficiently restrictive levels and leave them there for as long as necessary.”
At a ceremony on Wednesday evening, leading politicians want to look back on 25 years of work by the politically independent central bank. Among those expected at the ECB premises in Frankfurt are Federal Chancellor Olaf Scholz (SPD), EU Commission President Ursula von der Leyen, the President of the EU Parliament, Roberta Metsola, and EU Council President Charles Michel.
The beginning of the euro age
The ECB started its work on June 1, 1998. On January 1, 1999, the age of the euro began for 11 of the then 15 member states of the European Union: The European common currency was initially used electronically as a settlement currency alongside the D-Mark, Lira, Schilling and Co. On January 1, 2002, these national currencies disappeared , the euro was brought into circulation in notes and coins. Today, the common currency is the official means of payment for more than 346 million people in 20 EU countries.
The primary task of the ECB: a stable euro. According to the most recent definition, the central bank has achieved its goal of stable prices in the medium term with an inflation rate of two percent in the euro area.
Because inflation has been persistently high for months, after years of zero and negative interest rates, the monetary watchdogs have raised interest rates seven times in a row since July 2022 in an unprecedented series. The key interest rate in the euro area is now 3.75 percent.
Higher interest rates – slower demand
After the latest rate hike in early May, Lagarde made it clear that the ECB was not finished yet: “We know that we still have some ground to make up.” Bundesbank President Joachim Nagel reiterated in a speech on Tuesday evening that, in his view, “several interest rate hikes are necessary” to get inflation under control in the long term. Higher interest rates make loans more expensive, which can curb demand and counteract high inflation rates.
Former ECB President Jean-Claude Trichet expects the central bank to continue to struggle with higher inflation rates. “I see three reasons for higher inflationary pressure in the longer term,” Trichet told the “Handelsblatt” (Wednesday): “First, globalization will no longer ensure lower costs and prices as it has in the past ten years.” The second reason is “growing inequality”, the third is the need to make the economy more climate-friendly.
New high-tech banknotes
Lagarde writes: “In a world marked by uncertainty, the European Central Bank has proven to be a reliable anchor of stability and will continue to be so in the future.”
The euro bills should also be and remain reliable. “We are working on issuing a new series of high-tech banknotes to prevent counterfeiting and reduce environmental impact,” ECB Executive Board member Fabio Panetta told French daily Les Echos (Wednesday). Regarding the design of the new banknotes, Panetta said he “would like to see famous Europeans represented on our future banknotes”.
The ECB announced in December 2021 that it would involve the public in the process of redesigning the banknotes. According to information given at the time, the Governing Council of the ECB wants to decide in 2024 on the production of new banknotes and when they could be put into circulation.
Panetta emphasized that the parallel work on a digital version of the common currency does not mean the swan song for cash. “We will make banknotes available to citizens for as long as there is a demand for them.” However, it is conceivable that digitization could lead to cash being marginalized. “That’s why we need a digital euro.”
In October, the Governing Council will decide whether to launch a preparatory phase to develop and test the digital euro, Panetta said. “This phase could last two or three years. If the Governing Council and European lawmakers – member states and members of the European Parliament – agree, we could introduce the digital euro in three or four years.”
© dpa-infocom, dpa:230524-99-807452/4
2023-05-24 11:33:05
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