The high youth unemployment in Europe, despite affecting “the most educated generation ever,” represents a significant weak point and “to avoid a lost generation we must act quickly.” He said the ECB president, Mario Draghi, explaining that without the active role of national governments does not solve the problem.
Draghi also expressed “questions about the direction you will go to Europe and to its resilience faced with new shocks “, while the central bank said it was ready to intervene again, even with a further rate cut.
The actions of the ECB exceeds 1,700 billion with debt purchases (mainly public), the rates are negative and European banks should celebrate a help from the ECB that will pay them an interest, if will take its loans for other lending to the economy. Yet the markets meanders a climate of suspicion, as if a similar hiding monetary activism trouble ahead. Much to obscure a ECB ready to intervene once again, that “does not give up” – confirms Draghi – in inflation that many call “deflation”, and urges governments to act now against youth unemployment by ‘lost generation ».
It is not only the president of the ECB, after all, to speak of shock, using a term which is not exactly reassuring. “If there are further shocks, our measures could be recalibrated again,” echoes the ECB’s chief economist, Peter Praet warning of the risks of such low rates for banks. And the minutes of the meeting of the ECB of 10 March, that of the maxi-package called ‘QE3′, shows that even then he had not ruled out again cut rates despite the bone (the main rate to 0.00% and that on deposits -0.40%). And the Bank of Italy governor Ignazio Visco a covnegno in Frankfurt remembers as “without measures (Qe) taken by the ECB between June 2014 and December 2015″ the Italian recession would only be finished in 2017, and inflation would remain negative for the ‘entire three-year period. ” Certainly the prolonged effect of low interest rates to zero may weigh on some banks but those of the ECB “shall not bizarre choices” but derive from relaxing dell’economia2 and the current and future inflation.
When you He asks what might be these new shocks, those close to the nerve center responds spreading his arms: the risks have never been so many. Growth – warns the IMF – is lower than expected. Greece is still a mine triggered: the ‘review’ of its program was to be completed in October and the negotiation is still on the high seas. Europe, in spite of the truce in Syria, is lapped by a conflict that threatens to become uncontrollable. Deflation is a real risk, and the Bank of Italy governor, stressed that though some contract renewals concluded recently in Italy (which provide as part of future wage increases to be revised downward if the inflation rate turns out to be lower than estimated) were to become the norm, could take those “side effects” to deflationary character, basically a nightmare for any central bank.
the governor then notes that in a persistently low inflation environment there is evidence that inflation expectations are playing an increasing role in wage bargaining and therefore expectations of unfavorable inflation can self-feed. And then the refugee crisis that threatens to turn into an existential problem for Europe, and the time bomb of the referendum on Britain’s EU, with a yes to Brexit it would cost to European banks over 100 billion according to the estimates Bloomberg. It is not lost on many observers that the words of Draghi resemble those of the Fed governors, emerged from the minutes of the March meeting that speak of “global financial-economic developments continue to pose risks” so as to soften monetary tightening in April .
This is when most of the ECB or the Fed’s response, investors are paying attention to their reasoning, in what they say and (still) do not say. With a once can still epicenter in banks, even the most penalized Thursday on European markets sector. .
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