Tuesday

28th Mar 2017

ECB monitoring effects of Ukraine confrontation

  • Draghi (c): 'The economic impact is likely to be relatively limited' (Photo: Stephanie Jones)

The European Central Bank (ECB) is monitoring the possible economic effects of the Ukraine-Russia crisis, ECB chief Mario Draghi told EU lawmakers on Monday (3 March).

During a hearing at the European Parliament that was otherwise dominated by questions about the eurozone's low inflation rate, Draghi told MEPs that "the geopolitical dimensions of this could have themselves a strength and a capacity to affect events that go beyond the actual links and the statistical numbers."

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

“It is not only monetary policy but also a broader issue that may have an [impact] on the broader economy as well.”

But he said that Ukraine's trade links with the EU were "rather small".

"All in all, the economic impact is likely to be relatively limited," he said. The EU imported goods worth around €14.5 billion from Ukraine and exported €24 billion in 2012, less than 1 percent of its total demand.

Earlier, Russia's central bank raised its main interest rates from 5.5 percent to 7 percent on Monday after a day of market turmoil saw the rouble fall to an all-time low against the euro and US dollar and a 10 percent dive in the value of the country's stock market.

"The decision is directed at preventing risks to inflation and financial stability associated with the increased level of volatility in the financial markets," the Russian central bank said in a statement.

Meanwhile, Draghi played down fears about the bloc's low inflation rates, although he conceded that the 0.8 percent inflation rates recorded in January and February were "way below" the European Central Bank's 2 percent target for prices.

"US inflation is not much higher despite the fact that their recovery is way more advanced than ours," said Draghi, who stated that the low inflation rate was also a result of price adjustments in the EU's crisis countries.

He told deputies that the ECB would publish its forecasts for the eurozone's inflation rate between 2014 and 2016 on Thursday (6 March) to coincide with the bank's next meeting of its monetary policy committee.

"The longer it stays at the current level the more likely it is that inflation could become de-anchored from the 2 percent."

Draghi also rejected suggestions that the bank's Outright Monetary Transactions (OMT), which allows the ECB to buy potentially unlimited supplies of eurozone government bonds, was under threat.

The programme was launched in summer 2012 and has been widely credited as the single most effective action in reducing speculative pressures against government bonds and curbing the eurozone debt crisis.

But its legality has been questioned by the German Bundesbank which has laid down a legal challenge in the German Constitutional Court. Last month, the Karlsruhe-based court referred the issue to the European Court of Justice for a final ruling, although it indicated its opposition to the programme.

"The integrity of the euro area is an absolute precondition for us to be able to deliver on the mandate prescribed by the Treaty," said Draghi, adding that the programme was "fully legal" and was "ready to be used in the spirit in which it was designed."

German top court to rule on whether ECB can buy bonds

Germany's constitutional court is expected to rule this spring on the legality of the European Central Bank's bond purchases, a scheme that has eased the eurozone crisis by calming markets.

Euro area sees record low inflation

One year after oil and food price crisis, the euro area has showed the opposite record of extra low inflation due to the overall economic downturn.

Austria wants out of EU migrant relocation scheme

Austria is required to start relocating asylum seekers from Italy and Greece after an exemption to the scheme ended on 11 March. But Austria's chancellor has other ideas and wants the exemption prolonged.

Focus

Uber: Goodbye Denmark, but not farewell

Ride-sharing service Uber has announced it will shut down activities in Denmark in protest over a new law introducing the same requirements for Uber as for other taxi services.

News in Brief

  1. Scottish MPs give go ahead to seek referendum
  2. Uber pulls out of Denmark over new taxi-regulation
  3. EU court validates sanctions on Russia's Rosneft
  4. Luxembourg to team up with Ireland in Apple tax appeal
  5. EU majority against GM crops, but not enough to block them
  6. Turkish referendum voting starts in Europe
  7. Le Pen says she lacks election funds
  8. UN dinner for Cyprus leaders to restart stalled peace talks

Stakeholders' Highlights

  1. The Idealist QuarterlyCan Progressive Stories Survive Our Post-Truth Era? After-Work Discussion on 6 April
  2. ACCAG20 Citizens Want 'Big Picture' Tax Policymaking, According to Global Survey
  3. Belgrade Security ForumCall for Papers: European Union as a Global Crisis Manager - Deadline 30 April
  4. European Gaming & Betting Association60 Years Rome Treaty – 60 Years Building an Internal Market
  5. Malta EU 2017New EU Rules to Prevent Terrorism and Give More Rights to Victims Approved
  6. European Jewish Congress"Extremists Still Have Ability and Motivation to Murder in Europe" Says EJC President
  7. European Gaming & Betting AssociationAudiovisual Media Services Directive to Exclude Minors from Gambling Ads
  8. ILGA-EuropeTime for a Reality Check on International Day for the Elimination of Racial Discrimination
  9. UNICEFHuman Cost to Refugee and Migrant Children Mounts Up One Year After EU-Turkey Deal
  10. Malta EU 2017Council Adopts New Rules to Improve Safety of Medical Devices
  11. Nordic Council of MinistersNordic Energy Research: How to Reach 100 Percent Renewable Energy
  12. Party of European SocialistsWe Must Renew Europe for All Europeans