Mario Draghi highlighted the recovery of the Euro Zone economy in recent years and the strengthening of the region, but warned that risks remain, due to “uncertainties within and outside the Euro Zone”. For this reason, the European Central Bank (ECB) is ready to act and, if considered necessary, will increase the program of purchase of assets, either in amount or in terms of the calendar.
“In the last two years, GDP per capita has increased by 3% in the Euro Area, which compares well with the more advanced economies. The feeling of economic is at the highest level of the past five years. The unemployment dropped to 9,6%, the lowest since May 2009. And the ratio of public debt to GDP is decreasing for the second consecutive year,” said Mario Draghi at the beginning of his intervention with the European Parliament, where it is being heard this Monday, February 6.
“These are steps in the right direction. But they are only the first steps. We need to continue on this path for the unemployment decrease more and more europeans can benefit from the recovery.”
And after doing this framework, Mario Draghi justified the decision of the ECB of December, which went on to expand the program of purchase of assets by the end of the year, when it was expected to end in March, albeit with a reduction of the maximum monthly amount.
“The governing council of the ECB saw the need for the recovery to strengthen to ensure a sustainable convergence of inflation rates below, but close to, 2% over the medium term. For this to happen, the financial conditions must continue to support” this recovery, taking into account the “uncertainties within and outside the Euro Zone”. Thus, “our decision of December” had the aim of finding the balance between “our belief is growing that the prospects for the Euro Zone economy are strong and – at the same time – the lack of clear signals of sustainable convergence of the inflation rates in the desired levels”.
And, “as he had already argued, our monetary policy strategy recommends that we should not react to individual indicators”, he pointed out, reiterating what he had already said at the last ECB meeting, when he explained that the germans have to have patience and wait for a recovery stronger in the Euro Zone: “The low interest rates are now necessary to ensure that the higher interest rates in the future. The recovery in Europe is positive for all, also for Germany,” he said, adding: “it Is important to have patience. To the extent that recovery is to say, the interest rates will also go up. This will happen to Germany and to all other countries.”
Draghi stressed on Monday that risks for the Euro Zone are still on the side of the falls, much due to factors global. And it goes further, reiterating that the ECB is prepared to “increase the program of purchase of assets in terms of size or duration”, if the developments warrant.
The president of the ECB stressed that the policy of the authority has been “key in the support of the recovery in progress”. “Our measures have played a key role in the preservation of stability in the Euro Zone – and that includes financial stability,” he said. While admitting that this policy accommodative represents potential risk to the financial sector, in particular for the profitability of the bank.
Mario Draghi concluded his intervention by highlighting that, “as the crisis has shown, the benefits of a single currency can only be harvested if we have the policies and institutions at national and european level to ensure that works for all”.
“The resilience of the Euro Area in 2016, despite a series of shocks to be negative, shows that we are on the right path.” Having said that, “we should not stop our efforts to make an economic and monetary union more resilient and more prosperous.”