Saturday

21st Apr 2018

Draghi urges new stimulus to stave off stagnation

  • Draghi: The risks of 'doing too little' to stimulate the eurozone economy outweigh those of 'doing too much' (Photo: Valentina Pop)

The European Central Bank (ECB) is preparing to step up its attempts to breathe life into the eurozone’s stagnant economy.

During a speech in the US on Friday (22 August), ECB chief Mario Draghi called on eurozone treasuries to take fresh steps to stimulate demand amid signs that the bloc’s tepid recovery is stalling.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

"It may be useful to have a discussion on the overall fiscal stance of the euro area," Draghi told delegates at a meeting of financiers in Jackson Hole, Wyoming, adding that governments should shift towards "a more growth-friendly overall fiscal stance."

"The risks of 'doing too little’...outweigh those of 'doing too much’”, he added.

The Frankfurt-based bank is preparing to belatedly follow the lead of the US Federal Reserve and the Bank of England by launching its own programme of quantitative easing (QE) - creating money to buy financial assets.

In June the ECB cut its main interest rate to a record low of 0.15 percent and announced plans to introduce a new four year programme of cheap loans to banks, starting in September, if they promise to increase lending to businesses.

Draghi’s remarks come as policy makers are once again under intense pressure to stave off a vicious spiral of economic stagnation, high unemployment and very low inflation across the eurozone.

They also mark a departure from the austerity-heavy rhetoric in many EU governments that has prioritised deficit reduction and structural reforms ahead of stimulus measures.

Figures released by Eurostat earlier this month revealed that the eurozone economy flat-lined between April and June. The German economy contracted on fears about the EU’s sanctions battle with Russia, while Italy fell back into recession.

This Friday Eurostat will release the currency bloc’s inflation rate in August. Analysts fear that annual inflation will have slowed to 0.3 percent this month from 0.4 percent in July, well below the ECB’s 2 percent target.

Draghi also hinted that the bank was prepared to use “all available tools” at its disposal to prevent the eurozone falling into negative inflation. "We stand ready to adjust our policy stance further," he added.

Meanwhile, the euro opened trading on Monday (25 August) at its weakest level against the US dollar for nearly a year.

Draghi’s remarks could offer further encouragement to Italian prime minister Matteo Renzi, who has led a campaign to loosen the application of the EU’s rules on budget deficit limits to enable more spending on public infrastructure projects.

On Saturday (August 23), the Italian daily Corriere della Sera quoted transport minister Maurizio Lupi calling for Brussels to exclude spending on infrastructure projects from the calculation of national budget deficits.

European industrial output slumps

The eurozone economy is facing another slowdown after figures revealed that industrial output fell for a second successive month.

Agenda

Whistleblowers, Syria and digital revolution This WEEK

The European Commission will present proposals to protect whistleblowers, combat fake news and organise the digital single market. The international community will gather in Brussels to discuss how to help Syrians in the current war and after.

Macron and Merkel pledge euro reform

France and Germany have pledged to forge a joint position on euro reform by June, despite German reluctance on deeper monetary union.

News in Brief

  1. Audit office: Brexit 'divorce' bill could be billions higher
  2. MEPs urge better protection for journalists
  3. Dieselgate: MEPs back greater role for EU in car approvals
  4. European parliament adopts new organic farming rules
  5. EU granted protection to half million people in 2017
  6. Report: Facebook to carve 1.5bn users out of EU privacy law
  7. Greek court ruling permits migrants to travel to mainland
  8. Commonwealth summit hopes for trade boost after Brexit

Stakeholders' Highlights

  1. Nordic Council of MinistersWorld's Energy Ministers to Meet in Oresund in May to Discuss Green Energy
  2. ILGA EuropeParabéns! Portugal Votes to Respect the Rights of Trans and Intersex People
  3. Mission of China to the EUJobs, Energy, Steel: Government Work Report Sets China's Targets
  4. Martens CentreJoin Us at NET@WORK2018 Featuring Debates on Migration, Foreign Policy, Populism & Disinformation
  5. European Jewish CongressKantor Center Annual Report on Antisemitism Worldwide - The Year the Mask Came Off
  6. UNICEFCalls for the Protection of Children in the Gaza Strip
  7. Mission of China to the EUForeign Minister Wang Yi Highlights Importance of China-EU Relations
  8. Nordic Council of MinistersImmigration and Integration in the Nordic Region - Getting the Facts Straight
  9. Macedonian Human Rights MovementMacedonians in Bulgaria Demand to End the Anti-Macedonian Name Negotiations
  10. Counter BalanceThe EIB Needs to Lead by Example on Tax Justice
  11. ILGA EuropeTrans People in Sweden to be Paid Compensation for Forced Sterilisation
  12. International Partnership for Human RightsThe Danger of Standing Up for Justice and Rights in Central Asia

Latest News

  1. ECJ ruling set to end 10-year 'mouth tobacco' lobbying saga
  2. Whistleblowers, Syria and digital revolution This WEEK
  3. MEP friendship groups offer 'backdoor' for pariah regimes
  4. Macron and Merkel pledge euro reform
  5. Obscurity surrounds EU military fund's expert groups
  6. New EU party finance rules short circuit accountability
  7. Draghi to stay in secretive 'lobby' group
  8. Bulgaria offers lesson in tackling radical-right populists