European Central Bank head Mario Draghi has defended the need to continue stimulus measures for the eurozone.
At their latest regular meeting, ECB policymakers decided to keep pumping money into the region’s economy by buying 60 billion euros worth of bonds each month until at least the end of the year. They also made no changes to the cost of borrowing.
But Draghi also signalled there was now less of a need to prop up growth and inflation. He said the ECB removed a reference to using all available measures to induce growth and inflation “because the sense of urgency is not there.”
Introductory statement Mario Draghi to the press conference https://t.co/OsAK0YmVx6— ECB (@ecb) March 9, 2017
After the meeting he told reporters: “We were expecting some significant economic impact from the various risks that have been materialising; you remember the Brexit, you remember the Italian referendum, you remember the new US administration, now we have the elections in Europe. Now these risks – some of them – have materialised, but we haven’t seen yet a significant economic impact.”
Economic sentiment is at a six-year high, trade is rebounding, services and manufacturing output is rising, and unemployment is at its lowest since 2009. Draghi accordingly announced small upgrades to eurozone growth forecasts, now seen at 1.8 percent this year and 1.7 percent next.
Draghi: ECB staff projections: GDP increase by 1.8% in 2017 (1.7% in Dec proj), 1.7% in 2018 (1.6%) and 1.6% in 2019 (unchanged)— ECB (@ecb) March 9, 2017
Among the looming political risks, the French presidential election is of particular concern.
Far-right candidate Marine Le Pen is threatening to take France out of the eurozone and even out of the European Union.
Opinion polls suggest she is unlikely to win, but financial markets are jittery and are pushing up the French government’s cost of borrowing.
Draghi, when asked about the political threat to the EU and the euro, said: “The euro is being perceived as being the prerequisite of the single market. If there is no single market there is no European Union, and countries – no matter what their views are – have greatly benefitted from the single market.”
Before France, the Dutch general election promises a strong showing by an extremist party with similar rhetoric, but Draghi insisted there is no possibility of the eurozone breaking apart, saying: “There are tensions but not anything that is that serious. In any event … we are ready. The euro is irrevocable.”
Draghi: The euro is here to stay. It is irrevocable. A more productive question is how do we increase prosperity?— ECB (@ecb) March 9, 2017