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President of Eesti Pank Ardo Hansson replied to the interpellation concerning the decisions of the European Central Bank (No. 210), submitted by members of the Riigikogu Kadri Simson, Dmitri Dmitrijev, Valeri Korb, Anneli Ott, Tarmo Tamm, Kersti Sarapuu, Erki Savisaar, Enn Eesmaa, Olga Ivanova, Peeter Ernits and Mihhail Korb on 19 April.

The interpellation concerned the decision of the European Central Bank to buy bonds on the secondary market. This project was launched last year, and Eesti Pank has also actively participated in this project. The interpellators wished to know the opinion of the President of Eesti Pank in this issue.

Hansson explained that euro area central banks buy up secondary market bonds in order to encourage investors who have sold the bonds to invest money somewhere else. “This would mean better funding conditions for businesses operating in euro areas, including for Estonian businesses,” Hansson said. He added that since it is a single financial market, more favourable interests spread everywhere in the euro area according to the principle of communicating vessels. Thus Estonian businesses and residents have gained short-term profit from the current bond buying programmes. Hansson mentioned that central banks may buy Government bonds as bonds of enterprises belonging to the state only on the secondary market. This means that if Eesti Pank buys for example the bonds of Elering, then Elering will not profit directly from it. It is the investor who sold the bond who profits, and this investor may be in Tallinn, Berlin, London or somewhere else.

Hansson noted that the euro area economy is affected by the external environment which is open to various risks. In recent time, global growth forecasts have been cut regularly, and weak external demand is one of the reasons why the euro area economic growth has proved so poor. “According to current forecasts, it appears however that the last year will very likely remain the year with the lowest growth of euro area external demand, and the growth of euro area external demand will begin to accelerate already this year,” Hansson said. He underlined that it must be kept in mind that the right to make economico-political choices to ensure growth capacity comes through a democratic election process and thus falls outside the mandate of central banks. “Here I acknowledge the many-sided dialogue between Estonian politicians and experts in shaping the economic policy that would be best for Estonia,” Hansson noted.

The interpellators referred to the decisions of the European Central Bank concerning the deposit interest rate at a negative level. This means that commercial banks must pay extra for depositing money in the European Central Bank. The interpellators wished to know how such a step may affect deposit interest rates in banks operating in Estonia in the near future. How likely are the commercial banks to set negative deposit interest rates on deposits of private persons?

Hansson explained that the negative interest for depositing money in the central bank has caused money market interests to become negative for a short time, and this situation will definitely not change in the near future. “I believe however that banks avoid setting negative interests on deposits of private persons, and they will do so as long as their profitability does not fall significantly. I hold it unlikely,” President of Eesti Pank said. He added that, in other countries, also in the countries where interest rates are even more negative than in the euro area, it is not spreading to the deposits of individuals.

The Minister of Education and Research Jürgen Ligi replied to the interpellation concerning the research and development activities in the state budget strategy for 2017–2020 (No. 218).

During the open microphone, Jüri Adams took the floor.

Video recordings of the sittings of the Riigikogu can be viewed at https://www.youtube.com/riigikogu

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Riigikogu Press Service
Gunnar Paal,
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[email protected]
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