Draghi: “The challenges to european cohesion has increased” since February – Jornal de Negócios – Portugal

The ECB anticipates a continuation of the slow recovery of economic activity and inflation in the Euro Zone, but that is only possible because of the stimulus unheard of that the ECB gives and will continue to give the Euro Zone economy. It is therefore urgent that a more rapid response of the governments with more budgetary stimuli, more structural reforms, and an acceleration of the recovery of the banks. This was the message that Mario Draghi led the European Parliament to the 21st of November in the hearing under the annual report of 2015, stressing that the challenges to the european cohesion increased over 2016.

“During our exchange of ideas in Plenary in February I said that the cohesion of Europe was to be tested. Since then the challenges have increased,” said the President of the ECB before a chamber where there were frequent messages of concern about the future of the Euro Zone and with side effects of the measures of stimulus from the ECB. With the Brexit on the United Kingdom, the election of Donald Trump in the us, and the fears of the inhabitants populists in the European Continent present in the minds of the majority of responsible europeans, Draghi stressed that “it is now more important and necessary than ever for Europe to respond cohesively and decisively to the challenges it faces”.

In his speech, the ECB President argued that the stimuli of the monetary authority continue to be required, and that the slow recovery of the economy and inflation is only possible by the non-conventional measures. For those who argue for a slowing of stimulus in Frankfurt, Draghi reminds us that underlying inflation (which discounts the effects of the oil price and food) continues without a recovery evident, signaling that in the next meeting, on 8 December, the ECB should at least extend the bond purchase program that has kept pace with 80 billion euros per month.

In the last meeting of the monetary policy, the ECB maintained the interest rate the central at 0%, and the rate of deposits -0,4%. However were known more data on the Euro Zone. In the third quarter, the economy of the single currency expanded by 0.3% in chain and 1.6% yoy according to preliminary data of Eurostat. Inflation in October stood at 0.5%, accelerating from 0.4% in September.

“Supported by our monetary policy, the recovery is sustain-if. We also expect that inflation will continue to increase in the coming months,” said Draghi, who said then that “at the same time, we’re not seeing a strengthening consistent dynamics in the underlying prices”, a statement that reminds you that the increase in inflation results to a large extent the stabilization of the price of oil in relation to values, at historically low a year ago.

“The return of inflation to our objective [of 2% in the medium term] still depends on the continuation of the current level of monetary support is unprecedented,” said Draghi, by ensuring that “it is for this reason that we remain committed to preserving” the monetary stimuli are needed, he said in his opening statement.

Before the concern of several members about the risks of monetary policy with too many stimuli and low interest rates for too long, Draghi assured that there are no signs of bubbles in many markets, and that the negative real interest rates, while taxes on the profitability of the banks, they still have more advantages than disadvantages. In short, financial stability is not in question by the policy of the ECB which, in its opinion, continues to be essential to the recovery.

The president of the ECB followed after to defend there are “structural challenges that are waging a dynamic that is more expansive of the Euro Zone economy”, whereas “the correct policies need to be designed to cope with the vulnerabilities and challenges”, pointing out three areas of action: more flexibility, more stimulus budget where possible, and a more rapid recovery of the banking restructuring credits of poor quality and rationalisation of the banking institutions.