No violent protests this time as ECB meets in Barcelona

Barcelona (CNA).- Twice a year the ECB monthly meeting takes place outside its headquarters in Frankfurt, Germany. According to the Spanish Central Bank Governor, Miguel Angel Fernández Ordóñez, this initiative is aimed at bringing the institution closer to citizens. In order to stay true to this idea and bearing in mind the recent protests in Barcelona, the Catalan capital has been taken over this week by huge policing contingency plans to limit to the full negative international media coverage.

Although (or maybe because) Barcelona seemed ready for a siege, there were no demonstrations in the surrounding areas where the 17 Eurozone central bank governors and the ECB managers met. The following chronology summarizes the Governing Council Meeting of the European Central Bank in the Catalan capital:

April 28^th Spanish Government temporarily suspends Schengen Agreement. This protocol establishes the free movement of European Union citizens. Border controls have been reestablished in order to guarantee the security of the ECB and European national bank governors’ staff. 8,000 security forces with Catalan Police, Spanish Police and the ‘Guardia Civil’ (Spanish Gendarmerie) to patrol the city as well as to set up border controls until the end of the meeting on May 4^th.

May 1^st Coinciding with the International workers day demonstrations, police officers make the first arrests in the city although there are no significant incidents.

May 2^nd The President of the European Parliament, Social-Democrat Martin Schulz, visits Barcelona. Meanwhile, European national bank governors and ECB staff arrive in police convoys.

May 3^rd - 9 am ECB’s Governing Council Meeting starts in the Arts Hotel. At 2:30 pm a press conference would take place in the International Conference Center of Barcelona, in the Forum Area.

-10 am Helicopters guard the Arts Hotel and Forum Area from the air. The Spanish Police are combing the area. The only people present are police, journalists and economists who joined the Meeting later on. No demonstrators to keep at bay.

-11:30 am The first group of demonstrators arrives. A dozen people from the Unemployed Workers Assembly of Barcelona show a banner which reads ‘counter-labor reform, general strike’. One of them approaches the journalists and states calmly “This central bank is to blame in large part for this crisis. In its statutes it doesn’t say anything about job creation”. They stage the only protest around the ECB HQ.

- 2:00pm With half an hour still to go to the press conference, the main headline is already out there: the ECB keeps its key interest rate unchanged at 1%, its record low. Countries with public debt and deficit problems can breathe more easily for a while.

- 2:30 pm The ECB President Mario Draghi, the ECB Vice President Vítor Constâncio, and the Governor of the Spanish Central Bank Miguel Fernández Ordóñez enter the room and the press conference starts. The speech is structured in two main parts: economic analysis and monetary analysis.

As for the economic analysis, inflation rates are likely to stay above 2% in 2012 – according to Eurostat’s flash estimate, the annual Harmonized Index of Consumer Prices (HIPC) inflation was 2,6% in April 2012, 0,1% less than the previous four months –, but there is however an expectation of price developments to remain in line with price stability. “Prevailing uncertainty for the Eurozone” and “stabilization of economic activity at a low level” are other significant and recurrent conclusions.

During the monetary analysis, the main words are dedicated to the banking sector: “it is essential for banks to strengthen their resilience further, including by retaining earnings. The soundness of banks’ balance sheets will be a key factor in facilitating both the appropriate provision credit to the economy and the normalization of all funding channels”. Will that help with the lack of credit flow that some countries like Spain suffer? We shall see.

“Together with fiscal consolidation, growth potential in the euro area needs to be enhanced by decisive structural reforms. In this context, facilitating entrepreneurial activities, the start-up of new firms and job creation is crucial”. The speech doesn’t propose specific solutions but the national states aim to do so.

The lecture finishes with a hint at government reforms: “We note that progress is being made in many countries, but several governments need to be more ambitious. Ensuring sound fiscal balances, financial stability and competitiveness in all euro area countries is in our common interest”.

During question time, Draghi is asked for his opinion on social rejection of Spanish Government reforms. He answers “it is much better to consolidate from social cuts than by raising taxes. Unfortunately, there are countries that have no time to do so and have to raise taxes as well as reduce capital investment”.

The idea of growth instead of austerity appeared to be personified in the socialist candidate for the French election François Hollande, but for Draghi “there is no contradiction between a growth compact and fiscal compact. Long term growth is stable if there is fiscal stability”. 

Draghi also answered questions about fiscal reforms. It is better to reduce current, not capital, investment expenses, instead of raising taxes .But in the ECB president’s own words, “fiscal union is not the starting point”. It is the fiscal compact. After that the rest will come.

- 3:30pm: the press conference ends. No trace of demonstrators.