Europes economy faces three major risks: Draghi Europes recovery faces three risks – unemployment and a lack of productivity and structural reforms, according to the European Central Banks President, Mario Draghi. In a speech to be delivered to the Finnish Parliament later Thursday, Draghi concedes that the euro area economic outlook is surrounded by a number of downside risks. According to a transcript released ahead of the speech to Finnish lawmakers, Draghi will say that the euro zones recovery will likely be dampened by high unemployment, sizeable unutilized capacity, and the necessary balance sheet adjustments….Inflation in the euro zone remains very low (and) meanwhile, we are facing continuously sluggish money and credit dynamics. We have seen a weakening in the euro areas growth momentum over the summer Also, most recent forecasts by private and public sector institutions have been revised downwards. Our expectation for a moderate recovery in the next years still remains in place, reflecting our monetary policy measures, the ongoing improvements in financial conditions, and the progress made vis-à-vis structural reforms and fiscal consolidation, he said. His comments come amid speculation as to whether the ECB will implement a U.S.style quantitative easing program to stimulate the euro zone economy in the face of slowing growth, disinflation and low consumer confidence - at a 9-month low in November. The bank has already begun to purchase asset-backed securities in a bid to get euro zone banks lending again but it has so far held off buying government bonds, due to German reluctance to take on euro zone debt. The euro zones gross domestic product (GDP) grew by 0.2 percent in the third quarter, according to data from Eurostat, while Germany, the largest economy in the 18-member euro zone, eked out a meager 0.1 percent, narrowly missing a technical recession. In his Finland speech Draghi is expected to say that he would not comment on possible upcoming measures by the bank as they are in a so-called quiet period during which members of the Governing Council are expected to remain silent on this issue. The measures introduced by the bank so far need time for the positive effects to materialize, according to his speech, but Draghi reiterated the banks willingness to using additional unconventional instruments if necessary, stating: In this context, we have als o tasked relevant ECB staff and Eurosystem committees with the timely preparation of further measures to be implemented, if needed. Inflation in the euro zone, currently at 0.4 percent in October - is expected, according toDraghis speech, to remain at around current low levels over the coming months, before increasing gradually during 2015 and 2016.
Posted on: Fri, 28 Nov 2014 06:40:47 +0000
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