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ECB says growth prospect slightly better, but still many risks

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By Euronews
ECB says growth prospect slightly better, but still many risks

<p><span class="caps">ECB</span> President Mario Draghi said the prospects for eurozone economic growth are looking slightly better this year and it’s <a href="http://www.euronews.com/2016/04/14/ecb-relieved-as-eurozone-announces-flat-inflation-rate/">the same story for inflation</a>, but there are still many risks.</p> <p>After a meeting of the Bank’s governing council in Vienna, Draghi said: “The latest data point to ongoing growth in the second quarter, though possibly at a lower rate than in the first quarter. Looking ahead, we expect the economic recovery to proceed at a moderate but steady pace.”</p> <p>The Bank upgraded its 2016 eurozone growth forecast to 1.6 percent this year from the 1.4 percent it predicted in March, maintaining its forecast of 1.7 percent next year and trimming it for 2018 to 1.7 percent from an earlier 1.8 percent forecast.</p> <p>It also raised its 2016 inflation forecast to 0.2 percent from 0.1 percent, citing factors including the base effect of a recent rise in oil prices.</p> <blockquote class="twitter-tweet" data-lang="en"><p lang="en" dir="ltr">Introductory statement Mario Draghi to the press conference <a href="https://t.co/vMCQK1S80K">https://t.co/vMCQK1S80K</a></p>— <span class="caps">ECB</span> (@ecb) <a href="https://twitter.com/ecb/status/738350987103113216">June 2, 2016</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script> <p>There was no change in the cost of borrowing from the <span class="caps">ECB</span>’s policymakers at their latest monthly meeting and they plan to press on with unprecedented stimulus measures – <a href="http://www.euronews.com/2016/04/21/ecb-pledges-low-borrowing-costs-as-long-as-needed-but-no-helicopter-money/">that is buying companies’ bonds</a> in the fight against deflation. That operation will start on 8 June. </p> <p>Draghi once again urged eurozone governments to speed up reforms. “Economic recovery in the euro area continues to be dampened by subdued growth prospects in emerging markets, the necessary balance sheet adjustments … and a sluggish pace of implementation of structural reforms,” he told reporters.</p> <blockquote class="twitter-tweet" data-lang="en"><p lang="en" dir="ltr">Markets didn't expect much from <span class="caps">ECB</span> and didn't get it <a href="https://t.co/OC317GUnDU">https://t.co/OC317GUnDU</a> via <a href="https://twitter.com/GoldRiva"><code>goldriva</a></p>&mdash; WSJ Markets (</code>WSJmarkets) <a href="https://twitter.com/WSJmarkets/status/738391579988267008">June 2, 2016</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script> <h3>Athens disappointed</h3> <p>The <span class="caps">ECB</span> disappointed Athens by saying it will not yet allow <a href="http://uk.reuters.com/article/uk-eurozone-greece-ecb-idUKKCN0YO1LS">Greek banks to borrow from it at cheap interest rates</a>. </p> <p>That is because the Greek government bonds the banks are offering as collateral for those loans are still considered to be “junk” rather than investment grade.</p> <p>Draghi said the waiver for Greek banks to borrow will only come when there is more progress between the Greek government and its lenders over the bailout aid it is getting.</p> <p>“The Eurogroup has asked the institutions to verify the implementation of prior actions under the supplementary MoU. And this is an ongoing discussion with the Greek government. Once the prior actions will be implemented, the governing council will take a decision leading to the reinstatement of the waiver.”</p> <p>Currently Greek banks are borrowing under the <span class="caps">ECB</span>’s Emergency Liquidity Assistance programme at a higher rate of interest.</p> <p>“Possibly at the next meeting of the <span class="caps">ECB</span> we could see a lifting of the waiver,” Greek Prime Minister Alexis Tsipras told his cabinet in comments broadcast live on state TV.</p> <p>Greek shares extend earlier losses with the banking stock index down 3.1 percent. The two-year Greek government bond yield rose.</p> <blockquote class="twitter-tweet" data-lang="en"><p lang="en" dir="ltr">Greek2y yields jump as <span class="caps">ECB</span>'s Draghi says <span class="caps">ECB</span> has taken no decision on <a href="https://twitter.com/hashtag/Greece?src=hash">#Greece</a> waiver. <a href="https://t.co/midIF1YVOE">pic.twitter.com/midIF1YVOE</a></p>— Holger Zschaepitz (@Schuldensuehner) <a href="https://twitter.com/Schuldensuehner/status/738355070518104064">June 2, 2016</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script> <p>Among the risks to eurozone growth that Draghi listed was Britain leaving the European Union following this month’s referendum.</p> <p>Asked about that Draghi said the <span class="caps">ECB</span> was ready for such an eventuality but believed it was economically preferable for Britain to remain in the EU.</p> <blockquote class="twitter-tweet" data-lang="en"><p lang="en" dir="ltr">Draghi: The <span class="caps">ECB</span> has a view that the UK should remain in the EU. Both the UK and the EU benefit.</p>— <span class="caps">ECB</span> (@ecb) <a href="https://twitter.com/ecb/status/738352994798997504">June 2, 2016</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script>