Draghi Urges "Significant" Fiscal Response to an Economic Slump
Comment of the Day

July 25 2019

Commentary by Eoin Treacy

Draghi Urges "Significant" Fiscal Response to an Economic Slump

This article by Catherine Bosley and Jill Ward for Bloomberg may be of interest to subscribers. Here is a section:

and Jill Ward for Bloomberg may be of interest to subscribers. Here is a section:

Despite years of exceptional ECB support, the euro-area economy is in the throes of a slowdown in growth and inflation remains weak. In Germany, typically the region’s stalwart, manufacturing is mired in a slump as trade tensions weigh on exports and auto factories struggle to cope with changes in the industry.

With borrowing costs at historic lows, Draghi has repeatedly stressed the need for structural reforms, and he reiterated that call at a press conference in Frankfurt on Thursday.

“Monetary policy has done a lot to support the euro area and continues to do a lot,” he said. “If there were to be a significant worsening in the euro-zone economy, it’s unquestionable that fiscal policy, a significant fiscal policy, becomes of the essence.”

Just before Draghi spoke, German Finance Minister Olaf Scholz brushed off warning signals for Europe’s largest economy, saying the government has no concrete plans to spur economic growth.

“We are not in a situation that makes it necessary or wise to act as if we were in a crisis, we are not,” he said in an interview with Bloomberg Television.

Eoin Treacy's view

There was a little “sell the rumour to buy the news” evident in Euro trading this morning. The rally did not hold through the close and looks like little more than some steadying in the region of the previous lows.

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