Mario Draghi expects the euro area to continue growing in coming years even amid risks from protectionism that need to be monitored “very carefully.”
The European Central Bank president’s remarks in Frankfurt come after the region’s expansion slowed to 0.2 percent in the third quarter, the weakest pace in more than four years. The ECB will decide at its final policy meeting of the year on Dec. 13 whether to end its bond-buying program as planned, a key step toward slowly normalizing policy.
Key Takeaways
- Draghi confirmed that the recent slowdown is mostly due to temporary factors, such as new emissions-testing procedures that slowed car production in Germany and trade growth stabilizing at a lower, but still solid, pace.
- As a consequence, his assessment was that risks to the economy are still “broadly balanced”—a code word that the ECB uses to signal it sees no significant deterioration in its outlook for now. Employment and consumption remains strong, and interest rates on loans remain low thanks to continued support from the central bank.
- Underlying inflation still lacks a “convincing upward trend” but Draghi said he’s confident that wages will eventually feed into higher prices. He reaffirmed his expectation that the ECB—“subject to incoming data”—will end new bond buying in December.
- Protectionism could also have a more lasting impact, by dampening exports and hurting confidence. Draghi said trade risks will be monitored “very carefully” in coming months.
- Another risk comes from the spending policies of countries with large debt burdens. Without naming his native Italy, which is embroiled in a budget standoff with the European Union, he said “high-debt countries should not increase their debt even further and all countries should respect the rules of the Union.”
