From Vilnius, Mario Draghi relaunches his battle against deflation: the ECB is ready for further non-standard measures. The president of the Eurotower in fact reiterated that the executive council of the ECB remains "unanimously determined" to adopt "further unconventional measures" to face the risks posed by too long a period of low inflation. According to Draghi, the fall in the inflation rate was also exacerbated by the strong appreciation of the euro in the past months. The euro reacted by falling to two-year lows below $1,27.
SuperMario is located in the Lithuanian capital to welcome the Baltic country into the euro: on 2014 January 19 Lithuania will become the XNUMXth country in the euro area and this morning the Central Bank of Lithuania, together with the ECB and the European Commission, organized a conference in the Baltic capital. “With Lithuania joining the euro all three Baltic countries will soon be part of the Monetary Union. This is a great wealth for the Eurozone, also because it demonstrates its attractiveness”, Draghi said in his speech underlining that “the adoption of the euro could give stability to Lithuania in the current geopolitical climate”.
The country, until recently disputed within the area of Russian influence, is taken by Draghi as a true example of a virtuous path. Not long ago the Baltic countries were in the midst of a deep recession. In 2009 Lithuania's GDP fell by about 15%. Today, by contrast, it is one of Europe's fastest growing economies. Last year, GDP rose by 3,3% while in the euro area it contracted by 0,4%. Quite exceptionally, was Draghi's message, the country has managed to revive the economy without outside support. At the same time the deficit which in 2009 was 9,4% fell to 2,1% and a further decline is expected. “The euro area benefits from Lithuania's entry in at least two ways – Draghi wanted to point out – First, it showed that adjustment is not only necessary but possible, even without currency devaluation.; secondly, Lithuania's decision to join the euro area has shown that our common currency is attractive”.
In short, little talk. Lithuania's entry is an opportunity to give the European big names a tug on the ears. Because going beyond the economic data, Draghi sinks, the success story shows that the adjustment "is politically feasible": despite the consolidation, the country has practically not been touched by public protests about government measures.
How was this possible? wonders the president of the ECB himself. “In my opinion – he then replied – we can draw an important lesson from the Baltic experience: the government not only acted courageously but also did so immediately. He used the crisis to implement the necessary consolidation and thus managed to convince people of the need for the measures".
There is more. Besides being politically astute, the quick and bold move was key to "strengthen investor confidence" and allow the Baltic countries to recover quickly from the recession. On the other hand, Draghi has been repeating it for some time: growth will restart only after confidence is restored, and it is precisely for impressive program of asset quality reviews and stress tests on European banks, the results of which are expected in October before the ECB assumes the role of European supervisor of the banking system at the beginning of November. But the actions of the ECB alone are not enough. Whether they are called Tltro, Qe or Abs. They buy time. But they do not solve the structural problems.
Again from Vilnius, Draghi raises the alarm on the risks for the Eurozone: "The recovery - he said in an interview with the Lithuanian newspaper Verslo Zinios - seems to have lost momentum recently and there are clear risks posed by geopolitical tensions and insufficient reforms by governments, which instead must act decisively". Some of the factors that the ECB's inflation estimates have underestimated, concluded Draghi, are "high unemployment and the size of unused production capacity".
