ECB easy policies will continue, according to today’s speech of the President of the European Central Bank, Mario Draghi. Will the EU be able to revive innovation across the bloc?
30 November, AtoZForex – Mario Draghi, the President of the European Central Bank (ECB) has stated that populism and weakening national demand for vital reforms endanger European integration. Moreover, Mr. Draghi stressed that this aspect is negatively impacting the prosperity of the bloc and increasing the threat of diminishing incomes across the EU.
ECB easy policies will continue
The central bank has purchased governments time with its extremely easy monetary policy. However, reform efforts look to appear soft, which is a key issue as productivity growth is already sluggish. Moreover, Mr. Draghi has added that the innovation is low across the bloc. He has stated in this speech:
“Monetary policy is providing support and space for governments to carry out necessary structural reforms. It is a window of opportunity they should seize.”
In addition, analysts believe that Draghi’s remarks that the ECB would examine a combination of instruments and timeframes in order to support the EU economy appear as a clear sign that the bank will not stop its easy policies.
However, such policy can only prevent sluggish growth from extending. The growth of the EU appears weak at 1.7 percent in 2016. In addition, it may slow down further next year, as the ECB has used so much of its firepower.
EU needs to encourage innovation
Prior to his speech, Mr. Draghi has stated:
“European integration is the appropriate response, but this has become weaker in recent times, partly because of populist movements.”
Mr. Draghi has warned that the Eurozone is not on the right path. Furthermore, he has highlighted that the productivity growth is hardly sufficient to offset the weight by the aging population, a potentially risky sign in any economy. Mario Draghi has mentioned:
“Population aging will result in a stark fall of output per capita. Without concerted effort on structural reforms, per capita income growth in the euro area is likely to stagnate, and may even decline.”
He has added that EU states need to revitalize innovation, encourage technological advances and make it easier for new firms to enter markets. Moreover, ECB will meet next week in Frankfurt. Market analysts expect the central bank to announce an extension to its monetary easing to boost the growth and inflation.
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