Draghi: sovereign debt and inflation undermine the recovery

The heavy indebtedness of the States and the problem of inflation represent serious risks for global growth, above all in a period in which the crisis is not yet completely over. This was stated by Mario Draghi, governor of the Bank of Italy and candidate for the presidency of the European Central Bank, during a conference in Berlin.
“Above all, overheating of inflation is a clear and current risk,” added the Italian economist. According to Jean-Claude Trichet's probable successor to the ECB presidency, the European response to the crisis was timely and effective, with fiscal policies and "unprecedented" liquidity supplied to the markets which allowed the international financial system to maintain excellent stability.
For the Governor, the losses that have occurred "in terms of production and employment have been significant but not disruptive". However, Draghi underlined that the growth of European economies, with the exception of Germany, remains rather weak. The sovereign debt crisis "of the three countries that account for more than 6% of the GDP of the entire area can still have a large systemic impact in the Eurozone".
This morning Juergen Stark, a member of the ECB's executive board, also spoke on the subject of inflation, declaring in an interview with the Kathimerini newspaper: "We are carefully monitoring the price increase to avoid second-level effects". "The ECB is ready to raise rates again if necessary" - added the German politician - "we are assuming that economic growth will continue and therefore there is less need for accommodating fiscal and monetary policies". (fo)