25th May 2022

European lawmakers call on central bank to hold rates steady

  • Debate among ECB's 27 governing council members over raising interest rates is sharpening (Photo: ECB)
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A large majority of MEPs urged the European Central Bank on Wednesday (16 February) to continue an ultra-loose monetary policy amid warnings that hiking interest rates would damage a post-Covid economic recovery.

The ECB has resisted calls to increase interest rates. But debate among ECB's 27 governing council members representing each EU central bank is sharpening.

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And on Wednesday, 569 lawmakers voted in favour of a non-binding annual report to the ECB recommending continuing with low interest rates.

Many were concerned that increasing the cost of borrowing could lead to lower growth and unemployment.

Greek MEP and rapporteur Dimitris Papadimoulis, who prepared the report, warned against a "new round of austerity."

"We already have an environmental crisis to handle, and it would be a pity if there were also a financial one that went hand in hand with that," said French socialist MEP Aurore Lalucq.

The ECB is independent of the European Parliament, but strong MEP support for its currently loose monetary policy may strengthen dovish voices in the governing council.

The vote also revealed a broad parliamentary consensus that the ECB should take into account climate change, which formed part of the annual report.

The financial system was "sitting on a volcano of climate-related risks," Dutch socialist MEP Paul Tang said told ECB president Christine Lagarde. Those risks needed to be reflected in corporate credit ratings," he said.

German conservative MEP Markus Ferber made a last-minute bid on Monday to push for a separate vote on the bank's responsibility in preventing climate change - calling it a "distraction" from the ECB's core duty to tame inflation.

But his amendment was rejected.

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