The president of the european central Bank has distanced itself today from the decision of the european community to consider in its whole, the budgetary position of the euro area, considering the criterion is useful but not binding. As for the upcoming referendum in Italy, Mario Draghi, has hinted that the result of the vote could cause volatility in the short term. The experience, however, shows how markets are capable of absorbing any shock.
Draghi: inflation on the rise, banks more strong
“The idea of a budgetary position of the euro area – or the fiscal stance in English – is a useful criterion, but it must be stressed that it may not be binding from a legal point of view, ( … ), The member countries of the euro area continue to be bound by the Pact of Stability and Growth”, said the president of the monetary institute, responding to an mep’s question during a hearing before the european Parliament, and taking the facts in the parts of Germany.
Noting that the budgetary position of the euro area today is a neutral, the european Commission has announced that the fiscal stance must become moderately expansive, allowing for an increase in the deficit, the aggregate of 0.5% of GDP. The idea is that the countries in surplus or balanced budget to spend more than they do. The German government has criticized Brussels, noting its levels of investment (see The Sun/24 Hours of 17 November).
Dragons prepares the extension of Qe beyond march. “We can’t let our guard down”
“The geopolitical balance has become a more important source of uncertainty for the markets in the months to come,” said the central banker, responding this time to a specific question on the impact of the vote on Sunday in Italy may have. “We have noticed a pattern that should be repeated. The markets are in the very short term, a significant reaction, which then goes down. In this sense, the markets have proved to be stronger than they prevedessimo in the past.”
The president of the monetary institute did not want to answer with reference to Italy, but he did understand that the outcome of the constitutional referendum could create volatility in the short term. Analysts fear that a victory of the "no" could lead to new uncertainty on the future of the banking sector. Today, the same vice-president of the european Commission Valdis Dombrovskis has explained that the authorities have been ready to face any volatility in the markets.
The Italian question has been in Parliament. Some members have inquired also about the high public debt of the country. The president of the monetary institute, was heard to defend Italy, noting that “according to the government’s commitment and his ability to repay the debt”, the latter is “sustainable”. “The country has the highest primary surplus,” added the central banker, pointing out, however, that despite “measures encouraging” Italy “can not fall in complacency”.
Dragons: “The Qe will not move wealth to Countries with weak Eu”
beyond its intervention in Italy, the central banker took the opportunity of the confirmation hearing here in Brussels, the second in a week after the last Monday to deal with two major issues: the situation of the economic situation in the euro area and the consequences of the decision of the british to leave the Union. On the first front, the economist stressed the need to continue to modernise the productive fabric of europe.
"The risk of a recovery is aborted is the greater risk at this time. In the December meeting, we will evaluate the various options that allow us to preserve a very substantial settlement money necessary to ensure that inflation is below but close to 2% over the medium term”
Mario Draghi, president of Ecb
“The risk of a recovery is aborted is the greater risk at this time”, warned the economist, resizing a question about the dangers of the bubble caused by interest rates particularly low. In regard to monetary policy, Draghi has repeated in two circumstances that, “in the December meeting, we will evaluate the various options that allow us to preserve a very substantial settlement money necessary to ensure that inflation is below but close to 2% over the medium term”.
Finally, with regard to Brexit, Draghi explained that “it is imperative to preserve the integrity of the single market as well as the homogeneity and the application of its rules”. In this sense, the Ecb has taken a position in favor of a hard Brexit, rather than a soft Brexit. He warned that in the case of exit from the Union of the United Kingdom, the latter will suffer more in the Union. At the same time, Draghi has urged member countries to continue on the road of the completion of the single market, regardless of the choices the british.
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