ECB "ready to do its part" to prop up euro economy, Draghi says

The European Central Bank (ECB) will "possibly" approve fresh stimulus measures next month, its president Mario Draghi confirmed Monday, commenting on faltering growth and stock market jitters in the eurozone.

Geopolitical tensions in Ukraine and the Middle East, slowing demand from China, internal wrangles on migration, Greece and Britain and concerns over the solidity of banks are weighing down the euro area, and hampering its recovery from recession.

Acknowledging "a general deterioration in market sentiment [that] has taken root and has gathered pace over the last week," Draghi told the European Parliament in Brussels that the eurozone and the European Union "face significant challenges."

"The ECB is ready to do its part ... The governing council will review and possibly reconsider the monetary policy stance in early March," he added, in comments to the parliament's economic affairs committee.

The ECB rate-setting panel is to meet in Frankfurt on March 10.

Draghi also called on governments to stimulate the economy through public investment, notably on infrastructure, as well as tax cuts.

He said the need for such measures was becoming "clearer and clearer," potentially giving fodder to the arguments of anti-austerity politicians like Italy's centre-left Prime Minister Matteo Renzi.

But Draghi said respecting eurozone budget discipline rules "remains essential" - even though he recalled their built-in "flexibility" - and stressed that only countries without debt and deficit problems can afford to be more profligate.

The net effect of fiscal policies followed by the eurozone's 19 governments "should be expansionary while respecting and complying with" budget rules, Draghi said. "It's easy to say for me, it's very difficult to do it politically," he added.

The ECB chief also defended European banks, whose share prices have tumbled in recent weeks, insisting that they were far more solid than a few years ago, as they have "significantly strengthened their capital positions" following ECB stress tests.

European banking share prices have suffered following the January 1 application of bail-in rules, which force the cost of bank rescues on troubled lenders' shareholders and investors, rather than on the public purse.

The regulation was introduced after governments spent billions to rescue the financial sector in the wake of the 2008 crash, but critics say the new regime is counterproductive as it scares investors off banks, fuelling a confidence crisis in the sector.

Bank of Italy Governor Ignazio Visco called last month for the bail-in regime to be phased in more gradually, but Draghi ruled out major changes.

"The rules have just entered into force, I think it is difficult to start thinking already of a revision," he said, calling however for investors to be better informed about them and for banks to act with more transparency.

Last update: Fri, 24/06/2016 - 08:49
Author: 

More from Europe

'Many dead' in hotel after avalanche in Italy quake zone

Some 30 people are trapped and many feared dead in a mountain resort hotel that was buried by what rescuers...

One dead after central Italy hit by series of quakes

One person was killed on Wednesday when a building collapsed during four powerful quakes that shook central Italy on...

Boris Johnson compares French president to WWII prison guard

British Foreign Secretary Boris Johnson on Wednesday compared Francois Hollande to a World War II prison guard after...

Merkel pledges to hold Europe together after Brexit

German Chancellor Angela Merkel pledged on Wednesday to hold the European Union together after Britain's planned...

Slovenia looks to capitalize on its connection to Melania Trump

As Donald Trump campaigned for the Oval Office, his Slovenian-born wife Melania did not receive much love and...