Thursday

25th May 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.

News in Brief

  1. Pressure grows on climate impact of EU timber harvesting
  2. US goes after Fiat Chrysler over emissions cheat
  3. Munich police break up Europe-wide burglar clan
  4. Report: VW threatened with €19.7 billion French fine
  5. Turkey begins mass trial of suspected coup leaders
  6. Merkel's CDU consolidates lead in polls
  7. France to host Russian president
  8. Switzerland votes against nuclear power

Stakeholders' Highlights

  1. UNICEFChild Alert on Myanmar: Fruits of Rapid Development yet to Reach Remote Regions
  2. Nordic Council of MinistersBecome an Explorer - 'Traces of Nordic' Seeking Storytellers Around the World
  3. Malta EU 2017Closer Cooperation and Reinforced Solidarity to Ensure Security of Gas Supply
  4. European Healthy Lifestyle AllianceHigh-Intensity Interval Training Is Therapeutic Option for Type 2 Diabetes
  5. Dialogue Platform"The West Must Help Turkey Return to a Democratic Path" a Call by Fethullah Gulen
  6. ILGA-EuropeRainbow Europe 2017 Is Live - Which Countries Are Leading on LGBTI Equality?
  7. Centre Maurits CoppietersWhen You Invest in a Refugee Woman You Help the Whole Community
  8. Eurogroup for AnimalsECJ Ruling: Member States Given No Say on Wildlife Protection In Trade
  9. European Heart NetworkCall for Urgent Adoption of EU-Wide Nutrient Profiles for Nutrition & Health Claims
  10. Counter BalanceInvestment Plan for Europe More Climate Friendly but European Parliament Shows Little Ambition
  11. Mission of China to the EUPresident Xi: China's Belt and Road Initiative Benefits People Around the World
  12. Malta EU 2017EU Strengthens Control of the Acquisition and Possession of Firearms

Latest News

  1. Openness over Brexit is 'political play', says EU ombudsman
  2. Le Pen's EU group in fresh spending scandal
  3. New EU right to data portability to cause headaches
  4. Cyber threats are inevitable, paralyzing impact is not
  5. Transparency complaints keep EU Ombudsman busy
  6. EU sets out criteria for relocating UK agencies
  7. EU states back bill against online hate speech
  8. Dutch coalition talks collapse again