It is time for protectionisms and sovereignisms. That is the number one danger to growth. And Mario Draghi, president of the ECB, launches an appeal to the European Parliament: in such uncertain times, "it is more important than ever that Europe remains united". Quantitative easing, he says to reassure markets and governments, will end in December, but this "does not mean that our line will stop being expansionary: monetary policy will have to continue to accompany economic growth for a certain period". And again: "Not there are systemic risks deriving from monetary super-accommodation”, assures the central banker. Then a dig at the Italian government: "For now, only words".
CONFIDENCE ON THE RECOVERY OF INFLATION
As far as inflation is concerned, Draghi lets it be known that the ECB's confidence in the rise in prices towards the target level is "increasing", i.e. at a rate below but close to 2%.
In detail, core inflation has recovered from the lows it fell in 2016, while the use of production capacity by firms has improved, as has the labor market.
Furthermore, "the expected inflation trend appears to be self-sustaining", underlined the number one of the ECB, explaining that it should therefore be able to continue even without the net purchases of securities by the Eurotower.
EUROPE STAYS UNITED: COMPLETING THE BANKING UNION
Draghi then launched an appeal for European unity: “In times of increased global uncertainty – he said – it is more important than ever that Europe remains united. The efforts we have already made have made the economic and monetary union more resilient to shocks. However, it is still incomplete and remains vulnerable. To sustain confidence and continue economic expansion, we need further integration and convergence between states”.
In particular, Draghi reiterated the need to complete the banking union with "a common insurance scheme on deposits" that definitively averts "the risks of destabilization and self-fulfilling prophecies in the form of bank runs". The provision “would also reduce the risk of financial fragmentation and thus support the effectiveness of the common monetary policy, contributing to stability. Risk reduction and risk sharing are mutually reinforcing”. Not only that, according to the number one of the ECB "Sharing risks greatly helps their reduction". Draghi also gave an example: in the United States, the Federal Deposit Indurance Corporation successfully resolved 500 banks without causing financial instability, also because there was the parachute of the American government. Translated: a single bank deposit guarantee scheme (which Germany does not want) “would avoid the risk of destabilizing self-fulfilling prophecies in the form of bank flight and financial fragmentation”.
BANKS: THE RECOVERY REDUCES NPLS, THE SINGLE RESOLUTION FUND IS URGENT
As for the current situation of the banking sector, "with the economic recovery that continues, impaired loans will be washed away - added the number one of Eurotower - They will drop substantially, first of all because customers start to repay their debts and then because the banks will be able to sell them”.
On the other hand, for Draghi the creation of a single resolution fund by the European Stability Mechanism should in any case take place "as soon as possible", and the new instrument should be equipped with "rapid and efficient decision-making procedures" to respond to any shocks reduce the risks of a future crisis.
