Mario Draghi today in Berlin, in a speech to the Frankfurter Allgemeine Zeitung, spoke of a plan to strengthen the capital of the banks on which at the moment there is "very strong pressure due to lack of capital and funds". A plan that passes through three paths: the capital increase, the sale of assets and the reduction of loans but, Draghi said, credit crunching would be the worst solution. The invitation therefore is to avoid the reduction of credit to the real economy. The president of the ECB instead hopes for the reduction of dividends in favor of the strengthening of the institutions. Pushing banks to recapitalize is not a simple process, Draghi said, and financial institutions should consider cutting dividends.
On the front of the Eurozone economic growth 'substantial downside risks' exist. Under current conditions, "the impact of the interest rate cut is weakened," she said. The eurozone will experience an inevitable short-term economic contraction and the effects can only be mitigated by a return of confidence: ”in the medium term, sustainable growth can only be achieved with structural reforms postponed for too long”.
Draghi, who stressed the importance of a firewall to combat threats to market stability, then reiterated that the purchases of securities by the ECB are not "eternal or infinite". The answer must come primarily from national governments which, however, he underlined, are moving along the right path.
