Draghi Says ECB Ready to Do More as Governments Urged to Help
2014-08-22 18:30:00.9 GMT
(For more on the Jackson Hole conference, click here.)
By Paul Gordon
Aug. 22 (Bloomberg) -- Mario Draghi said the European
Central Bank is ready to add more stimulus and called on
governments to do more to help the euro-area economy.
“We stand ready to adjust our policy stance further,” the
ECB president said today in the text of a speech at the Federal
Reserve Bank of Kansas City’s economics conference in Jackson
Hole, Wyoming. “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.”
Draghi’s call for politicians to play their part in
safeguarding the euro-area recovery comes as pressure mounts on
the ECB for radical measures such as quantitative easing. While
he has previously pledged to take further action “should it
become necessary,” he omitted that qualifying phrase today.
One year after the end of the currency bloc’s longest-ever
recession, the economy has stalled, unemployment remains near a
record high and inflation is the weakest in almost five years.
The ECB’s Governing Council next meets to set monetary policy on
Sept. 4 in Frankfurt.
“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.”
Jobs Gap
Countries including France and Italy have argued for more
flexibility with their budgets, and French Finance Minister
Michel Sapin said this month that his country will exceed a
deficit target agreed upon less than four months ago with the
European Commission. Germany has said nations should stick to
the rules on fiscal goals.
Euro-area unemployment data next week is forecast to show
the jobless rate held at 11.5 percent in July, almost twice as
high as the U.S. rate of 6.2 percent. Fed Chair Janet Yellen
said earlier today at Jackson Hole that too many Americans are
still out of work while acknowledging that “considerable
progress” has been made.
The Fed 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.
Draghi said he is “confident” that the package of
measures will boost demand, while warning that there is still a
“real risk” that monetary policy loses some effectiveness.
He proposed four areas in which fiscal policy could be
improved: better use of flexibility within existing European
Union rules; lower taxes; stronger fiscal coordination between
governments; and EU action to ensure a large public investment
program. He also said such measures could only buy time.
“No amount of fiscal or monetary accommodation, however,
can compensate for the necessary structural reforms in the euro
area,” he said. These reforms “can no longer be delayed.”
For Related News and Information:
Italy May Need More From Draghi as Debt Load Mounts: Euro Credit
NSN NAODMJ6VDKHS <GO>
Yellen Still Sees ‘Significant’ Under-Use of Labor Resources
NSN NAPS3J6S972V<GO>
France Risks Deficit Clash by Dropping Goal as GDP Stagnates (2)
NSN NAARXW6K50YB <GO>
Top Economy Stories:TECO<GO>
European economic statistics: ECST EU<GO>
--With assistance from Simon Kennedy and Jeff Kearns in Jackson
Hole, Wyoming.
To contact the reporter on this story:
Paul Gordon in Frankfurt at +49-69-92041-224 or
pgordon6@bloomberg.net
To contact the editors responsible for this story:
Fergal O’Brien at +44-20-7330-7152 or
fobrien@bloomberg.net
Jana Randow
2014-08-22 18:30:00.9 GMT
(For more on the Jackson Hole conference, click here.)
By Paul Gordon
Aug. 22 (Bloomberg) -- Mario Draghi said the European
Central Bank is ready to add more stimulus and called on
governments to do more to help the euro-area economy.
“We stand ready to adjust our policy stance further,” the
ECB president said today in the text of a speech at the Federal
Reserve Bank of Kansas City’s economics conference in Jackson
Hole, Wyoming. “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.”
Draghi’s call for politicians to play their part in
safeguarding the euro-area recovery comes as pressure mounts on
the ECB for radical measures such as quantitative easing. While
he has previously pledged to take further action “should it
become necessary,” he omitted that qualifying phrase today.
One year after the end of the currency bloc’s longest-ever
recession, the economy has stalled, unemployment remains near a
record high and inflation is the weakest in almost five years.
The ECB’s Governing Council next meets to set monetary policy on
Sept. 4 in Frankfurt.
“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.”
Jobs Gap
Countries including France and Italy have argued for more
flexibility with their budgets, and French Finance Minister
Michel Sapin said this month that his country will exceed a
deficit target agreed upon less than four months ago with the
European Commission. Germany has said nations should stick to
the rules on fiscal goals.
Euro-area unemployment data next week is forecast to show
the jobless rate held at 11.5 percent in July, almost twice as
high as the U.S. rate of 6.2 percent. Fed Chair Janet Yellen
said earlier today at Jackson Hole that too many Americans are
still out of work while acknowledging that “considerable
progress” has been made.
The Fed 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.
Draghi said he is “confident” that the package of
measures will boost demand, while warning that there is still a
“real risk” that monetary policy loses some effectiveness.
He proposed four areas in which fiscal policy could be
improved: better use of flexibility within existing European
Union rules; lower taxes; stronger fiscal coordination between
governments; and EU action to ensure a large public investment
program. He also said such measures could only buy time.
“No amount of fiscal or monetary accommodation, however,
can compensate for the necessary structural reforms in the euro
area,” he said. These reforms “can no longer be delayed.”
For Related News and Information:
Italy May Need More From Draghi as Debt Load Mounts: Euro Credit
NSN NAODMJ6VDKHS <GO>
Yellen Still Sees ‘Significant’ Under-Use of Labor Resources
NSN NAPS3J6S972V<GO>
France Risks Deficit Clash by Dropping Goal as GDP Stagnates (2)
NSN NAARXW6K50YB <GO>
Top Economy Stories:TECO<GO>
European economic statistics: ECST EU<GO>
--With assistance from Simon Kennedy and Jeff Kearns in Jackson
Hole, Wyoming.
To contact the reporter on this story:
Paul Gordon in Frankfurt at +49-69-92041-224 or
pgordon6@bloomberg.net
To contact the editors responsible for this story:
Fergal O’Brien at +44-20-7330-7152 or
fobrien@bloomberg.net
Jana Randow