On European Central Bank – annual report 2025

MOTION FOR A EUROPEAN PARLIAMENT RESOLUTION

on European Central Bank – annual report 2025

(2025/2182(INI))

The European Parliament,

– having regard to the ECB’s feedback of 28 April 2025 on the input provided by Parliament as part of its resolution on the ECB’s 2023 Annual Report,

– having regard to the Statute of the European System of Central Banks (ESCB) and of the ECB, in particular Articles 2, 15 and 21 thereof,

– having regard to Articles 119, 123(1), 125, 127(1) and (2), 130, 282(2) and 284(3) of the Treaty on the Functioning of the European Union (TFEU),

– having regard to Articles 3 and 13 of the Treaty on European Union (TEU),

– having regard to the monetary dialogues with the President of the ECB, Christine Lagarde, of 20 March 2025, 23 June 2025, and 6 October 2025,

– having regard to the ECB’s 2025 monetary policy strategy assessment,

– having regard to the ECB’s 2025 report on the international role of the euro,

– having regard to the ECB’s climate and nature plan 2024-2025,

– having regard to Eurostat’s inflation estimate of 20 August 2025 and Eurostat’s flash estimates of 1 October 2025,

– having regard to Rule 55 of its Rules of Procedure,

– having regard to the report of the Committee on Economic and Monetary Affairs (A10-0000/2025),

A. whereas, according to Eurostat, EU annual inflation stood at 2.4 % in August 2025 and euro area inflation at 2.2 % in September 2025, as measured by the harmonised index of consumer prices (HICP);

B. whereas the ECB’s inflation target has shifted over time from a reference value of ‘below 2%’ to an objective of ‘below, but close to 2%’, to a symmetric target of ‘around 2%’;

C. whereas the marginal lending facility and deposit facility rate have formed a tight corridor around the interest rate on the main refinancing operations;

D. whereas the ECB’s boundaries in purchasing government debt have been widening steadily, from the Securities Market Programme (SMP) to Outright Monetary Transactions (OMTs), the Public Sector Purchase Programme (PSPP), the Pandemic Emergency Purchase Programme (PEPP) and the Transmission Protection Instrument (TPI)1;

E. whereas reinvestments under the asset purchase programme (APP) were discontinued as of July 2023, and in the case of the PEPP as of December 2024;

F. whereas Article 123 TFEU and Article 21 of the Statute of the ESCB and of the ECB prohibit the direct monetary financing of governments;

Governance

1. Recalls that Article 127 TFEU states that ‘the primary objective of the European System of Central Banks (ESCB) shall be to maintain price stability. Without prejudice to the objective of price stability, the ESCB shall support the general economic policies in the Union with a view to contributing to the achievement of the objectives of the Union as laid down in Article 3 of the Treaty on European Union. The ESCB shall act in accordance with the principle of an open market economy with free competition, favouring an efficient allocation of resources, and in compliance with the principles set out in Article 119.’;

2. Underlines that the statutory independence of the ECB, as laid down in the Treaties, is a prerequisite for it to fulfil its mandate of maintaining price stability;

3. Highlights that the ECB is accountable to Parliament; stresses that the ECB must take decisions to fulfil its mandate without political interference;

4. Notes the importance of transparency for accountability; invites the ECB to make efforts to enhance instruments that improve transparency, such as benchmarks, insights in its model-based assumptions and the Governing Council’s assessments of inflation developments;

5. Emphasises that political independence requires that the ECB refrain from taking political actions;

Monetary policy

6. Highlights the ECB’s primary objective of maintaining price stability, which is a precondition for growth and economic stability;

7. Expresses concern at the high levels of inflation in recent years; notes that the ECB reacted too slowly to the surge in inflation; invites the ECB to thoroughly assess the causes of these high levels of inflation;

8. Acknowledges the continued risk of a resurgence in inflation; underlines the importance of not easing monetary policy too rapidly;

9. Emphasises in particular the potentially distortive impact of geopolitical uncertainty and trade disruptions on price developments;

10. Notes that a symmetric target of around 2 % is adduced as a reason to encourage inflation in times of near-zero inflation;

11. Invites the ECB to revise its symmetric target in favour of a more qualitative framework for protecting price stability, where price stability is defined as that state in which expected changes in the general price level do not effectively alter business or household decisions;

12. Indicates that price stability, as mentioned in the mandate, could be interpreted as stability of the price level as opposed to the current interpretation of inflation stability;

13. Notes that deflation can be the benign consequence of technological progress; recognises the ECB’s role in avoiding protracted periods of deflation due to deficient developments in the money supply;

14. Stresses that the ECB’s purchase programmes are unconventional policies applicable only during crisis periods; notes that the ECB started shrinking its balance sheet only very gradually; supports the ECB in further diminishing its direct role in purchasing securities;

15. Regrets that the ECB’s short-term lending schemes have largely displaced the private interbank funding market; calls on the ECB to avoid paying banks deposit rates that are above market rates, as this runs counter to the principle of an open market with free competition;

16. Emphasises the importance of ensuring high standards on quality requirements for collateral in lending arrangements with the ECB;

17. Supports the ECB in its efforts to include owner-occupied housing in its monitoring of price indices for reasons of both representativeness and comparability across countries in the euro area;

Secondary objectives

18. Recalls that the Eurosystem has been built on the principle of monetary dominance;

19. Highlights, in the context of the EU economic governance framework, the importance of sound public finances in withstanding a high interest rate environment;

20. Calls on the ECB to drastically diminish its role in sovereign debt markets; regrets the inhibitive impact of the fiscal position on the ECB’s fulfilment of its primary mandate;

21. Expresses concern about diverging TARGET2 balances as an unintended consequence of the ample reserve regime; notes that it is not the task of the ECB to finance capital outflows or persistent trade deficits;

22. Underlines the political nature of addressing climate change and protecting the environment;

23. Notes that the ECB’s monetary policies aimed at delivering its primary mandate are subject to a proportionality assessment;

Other aspects

24. Takes note of the ongoing discussions on the digital euro for both retail and wholesale purposes; stresses the importance of the role of cash;

25. Supports the ECB in its efforts to accommodate the international role of the euro through, inter alia, sufficient currency swap and repo lines;

26. Expresses its concern at the consecutive losses made by the ECB in 2023 and 2024 due to interest rate risk;

27. Supports the ECB’s role in promoting financial stability within the single supervisory mechanism and the ECB’s function as lender of last resort to solvent institutions, against good collateral and at penalty rates, to safeguard liquidity and trust during crises;

28. Points to the need for a high degree of ambition in the work and the follow-up of the ECB High-Level Task Force on Simplification;

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29. Instructs its President to forward this resolution to the Council and the Commission.

EXPLANATORY STATEMENT

In uncertain times, it is appropriate to go back to basics on the goal of monetary policy. The central bank needs to make sure that in good times the amount of money and credit grows at a rate sufficient to maintain broad stability of the value of money and in bad times the amount of money grows at a rate sufficient to provide the liquidity for unpredictable swings in demand. In 1998, the ECB was set up to conduct monetary policy in the EU with the primary objective of maintaining price stability and a secondary and subordinate objective of supporting the general economic policies in the EU.

In certain parts of the world, the political independence of the central bank has come under scrutiny. Therefore, the report starts off with a section on governance and the clear recognition that the ECB has and retains statutory independence. The ECB’s political independence is crucial for stable monetary policy. Otherwise, the incentive would be great to use the money printing press to get out of the conundrum of tight fiscal positions and challenges such as defence spending, a recipe for instability. The ECB is, however, accountable to the European Parliament. The Parliament holds continuous discussions, as the EU institution responsible, with the representatives of the ECB. These arrangements should be enhanced where useful. Furthermore, accountability has no heft without transparency. Monetary policy is too often likened to alchemy with model-based assumptions and programs that merely take care of effective transmission of monetary policy. The report invites the ECB to look into ways that could enhance transparency in its policymaking.

The primary objective of the ECB, and the subject of the next section of the report, is price stability. The price stability mandate was quickly interpreted as an inflation stability mandate, whereas stability of the price level could be a more natural interpretation. Inflation stability was linked with a reference value of ‘below 2%’. In 2003, this objective was altered towards an inflation rate ‘below, but close to’ 2% and rephrased into a symmetric target around 2% in 2021. This evolution towards a symmetric target is quite fundamental. Even if prices stayed stable, monetary authorities would still aim for slight inflation, once seen as “below 2%.” Between 2014–2019, the economy grew steadily and inflation stayed low. Rather than easing interventions and raising rates, the ECB let its balance sheet more than double.

Another risk lies in putting too much weight onto a precise numerical target. The language of anchored and deanchored inflation expectations may prove more useful, such that price stability is looked at qualitatively as a state in which expected changes in the general price level do not significantly alter business or household decisions. The years after the Covid Pandemic led to a surge in inflation and the ECB’s response was too slow. Its forward guidance schemes said that the interest rate should remain low.

The underlying concern behind the shift in the target is the risk of deflation. A 2% target allows for a margin before deflationary numbers are reached. Yet, protracted deflationary periods have been rare in developed economies and deflation can also arise as a benign consequence of technological progress. In this context, preventing deflationary spirals would benefit most from a strong lender of last resort to solvent institutions, against good collateral and at penalty rates, rather than from a target that deliberately leaves room for manoeuvre. Encouraging inflation, on the other hand, can increase risk-taking and contribute to the formation of bubbles, which may ultimately bring about the very deflation such policies aim to avoid.

The political independence of the ECB is linked to the popular consensus about price stability. In other cases, such as fiscal policy and how to tackle climate change, a political and democratic debate is essential. The report discusses secondary objectives next. Since the sovereign debt crisis in the EU of the early 2010s, the ECB has gradually become more involved in sovereign debt markets. The ECB’s capacities to purchase sovereign bonds have been widening over the different purchasing programmes. Nowadays, the ECB gains a reputation as a fiscal backstop. However, its large role in the sovereign debt market may turn up as an important consideration in the ECB’s policy responses and complicate its role to preserve price stability. The ECB has also ventured into green central banking, as climate change and nature variation are deemed a threat to price stability. Even though this could be the case in the longer term, numerous other factors can thus be found to affect price stability. A war would evidently have an impact on prices, but that does not mean the ECB should have defence capabilities.

The report ends with several other aspects. The topic of the digital euro is mentioned, as it is currently under discussion among the co-legislators. Moreover, it is recognized that the international role of the euro can be accommodated by the ECB, but the euro’s prominence will ultimately depend on fundamentals, such as the strength of the euro economy and the rule of law. The ECB also has an important role to play in the Single Supervisory mechanism.

To conclude, a return to the basic principles of conducting monetary policy is due. Monetary policy can foremost prevent money itself from being another major source of economic disturbance.

ANNEX: DECLARATION OF INPUT

The rapporteur declares under his exclusive responsibility that he did not include in his report input from interest representatives falling within the scope of the Interinstitutional Agreement on a mandatory transparency register1, or from representatives of public authorities of third countries, including their diplomatic missions and embassies, to be listed in this Annex pursuant to Article 8 of Annex I to the Rules of Procedure.