The president of the European Central Bank (ECB), Mario Draghi, said today that the main risks for economic growth in the area of the single currency are linked to the “threat” of greater protectionism , and urged the European Union (EU) to stay united and support global trade.
In his semiannual appearance before the commission of Economy of the Eurochamber, the head of the BCE indicated that “the uncertainties related to global factors”, in particular the protectionism, “have become more prominent”, although the risks for the growth of the eurozone “remain generally balanced”.
The institution expects growth in the area of the single currency to be 2.1% in 2018 and moderate to 1.9% in 2019 and 1.7% in 2020.
Faced with the uncertainty abroad, Draghi called on the EU to remain “strong and united” and to support “multilateralism and global trade,” but warned that to have “success outside” the EU needs “strong institutions.”
The warning comes at a time of incipient trade war for the imposition of tariffs on European steel and aluminum by the United States, which has led Brussels to respond with its own tariffs and appeal to the World Trade Organization.
Draghi’s intervention before the European Parliament was also the first after the ECB Governing Council decided on June 14 to end its debt purchases at the end of this year and reduce them from October to 15,000 million euros per month .
However, they established that interest rates will continue at their current levels at least until the summer of 2019.
Draghi defended these decisions and stressed that the ECB “has confidence” that inflation will converge towards the goal of achieving a level below but close to 2% in the medium term and in a sustained manner even when it gradually reduces purchases.
“We think that the economy is strong enough to continue the expansion even though the asset purchase program has reduced its importance,” said Draghi, who stressed that they maintain their commitment to reinvest the principal of the bonds that are coming due for an extended period. of time after the end of acquisitions.
“We are not withdrawing the stimulus, monetary policy is still expansive and a large degree of monetary accommodation is needed,” insisted the head of the ECB, who asked “be patient, persistent and prudent” with a policy that has been “very effective” to boost growth and inflation.
On the other hand, Draghi called for strengthening the integration in the eurozone to make it less “vulnerable”, improve the confidence of the markets and continue the economic expansion.
In particular, he urged the creation of the European Deposit Guarantee System (EDIS), a pillar that is essential to complete the banking union but has been blocked for years by the mistrust of Germany and other countries to pay for the problems of banking in other states.
“We should not stop because of the distinction between risk reduction and mutualization of risks,” said Draghi, who stressed that European banks have strengthened their capital and continue to reduce bad loans and that risk sharing “greatly helps” their reduction. can online payday loans garnish your wages?
Draghi also requested that the firewall for the Single Banking Resolution Fund “be operative as soon as possible” and defended the creation of a mechanism to stabilize the eurozone economy, without pronouncing on what form it should take.
However, he warned that these measures will not be possible without “confidence among member states” and this requires that each one reinforce its economy.
Brexit to have limited impact
On the other hand, the president of the ECB said that the “brexit” will have a “limited” impact on “the short term” and on “aggregate” terms on the real economy in the European Union, although he admitted that it will affect some parts more than to others.
“In essence, it will depend on how it is managed,” Draghi said, questioned by the MEPs on the same day that two British ministers resigned in connection with the departure of the UK from the bloc.
In another vein, to questions from parliamentarians, Draghi reiterated that the institution does not currently see the risk of “bubbles” in the real estate sector and believes that virtual currencies do not generate “much risk” for financial stability because the exposure of the Eurozone banks to them “is not relevant”.