|08-23-2014, 03:47 PM||#1|
Draghi says ECB willing to add more stimulus but seeks help from governments
European Central Bank President Mario Draghi said the bank is ready to provide more stimulus help a wailing recovery, signaling a withdrawal from the austerity-focused philosophy that has dominated economic policy-making in the Eurozone since the financial crisis.
Draghi also warned that governments must join in efforts to reduced high unemployment.
Speaking at the Federal Reserve Bank of Kansas City`s annual conference Jackson Hole, Wyoming, Mr. Draghi said European central bankers and politicians each have a role to play in boosting demand and reducing joblessness.
"It would be helpful for the overall stance of policy if fiscal policy could play a greater role alongside monetary policy, and I believe there is scope for this, while taking into account our specific initial conditions and legal constraints," Mr. Draghi said in his prepared remarks.
“We need action on both sides of the economy: aggregate demand policies have to be accompanied by national structural policies,” Draghi said. “We should not forget that the stakes for our monetary union are high.”
“I am confident that the package of measures we announced in June will indeed provide the intended boost to demand, and we stand ready to adjust our policy stance further,” Draghi said.
The U.S. Federal Reserve is tapering monetary stimulus and debating when to start raising interest rates. In contrast, Draghi announced unprecedented policy measures in June, including a negative deposit rate and targeted funding for banks tied to lending to companies and households.
Meanwhile, Draghi reiterated the effects of new long-term lending –“Targeted Long-Term Refinancing Operations ”–which will provide cheap and secure funding for banks to lend on to businesses and households.
He also talked up plans to buy high-quality asset-backed securities . But he made no reference to buying government bonds–the sort of ‘quantitative easing’ that has been used with varying degrees of success in the U.S., U.K. and Japan.
Draghi’s remarks are the clearest reflection yet of the ECB’s concern at the way the Eurozone’s economic recovery has run downhill this year, depressed by the Ukraine conflict, the failure of Italy and France to enact meaningful, growth-friendly reforms and a strong euro that has badly hit exporters.
Mr. Draghi`s comments came days after a report showed that the euro-zone economy stalled in the second quarter, fanning fears that the bloc`s roughly $13.5 trillion economy is stuck in a lasting rut of stagnation and high unemployment.
The GDP data "confirm that the recovery in the euro area remains uniformly weak, with subdued wage growth even in non-stressed countries suggesting lackluster demand," he said.
Draghi highlighted the scale of job destruction in the Eurozone over the last three years and warned that many of the region’s long-term unemployed risk becoming unemployable if they stay out of the labor force for much longer.
His remarks signaled a new approach to these risks : combining policies to stimulate demand with efforts to make labor markets more flexible.
With inflation at very low levels—annual inflation in the euro zone was just 0.4% last month, far below the ECB`s 2% target— policy makers should cast aside any fears that stimulus policies may lead to inflation and instead focus on keeping high unemployment from taking root in Europe, Draghi suggested. The euro zone`s unemployment rate was 11.5% in June, far higher than in the U.S., U.K. and Japan.
Some economists believe that mixing fiscal austerity with labor-market reforms exacerbated Europe`s downturn, even though they have long-term payoffs.
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|European shares rises, investors weigh Fed stimulus hopes||Hazem Ahlawy||Forex News||0||08-21-2014 04:01 PM|