 |
|
|
|
|
|
|
|
 |
Draghi urges further structural reforms in euro zone
(01-10 22:12)
Selected remarks from ECB president Mario Draghi’s opening statement in Frankfurt, Germany, today.
INFLATION
Inflation expectations for the euro area remain firmly anchored in line with our aim of maintaining inflation rates below, but close to, 2 percent over the medium term.
ECONOMY
The economic weakness in the euro area is expected to extend into 2013. In particular, necessary balance sheet adjustments in financial and non-financial sectors and persistent uncertainty will continue to weigh on economic activity. Later in 2013 economic activity should gradually recover. In particular, our accommodative monetary policy stance, together with significantly improved financial market confidence and reduced fragmentation, should work its way through to the economy, and global demand should strengthen. In order to sustain confidence, it is essential for governments to reduce further both fiscal and structural imbalances and to proceed with financial sector restructuring.
ECONOMIC ASSESSMENT
Following a contraction of 0.2 percent, quarter on quarter, in the second quarter of 2012, euro area real GDP declined by 0.1 percent in the third quarter. Available statistics and survey indicators continue to signal further weakness in activity, which is expected to extend into this year, reflecting the adverse impact on domestic expenditure of weak consumer and investor sentiment and subdued foreign demand. However, more recently several conjunctural indicators have broadly stabilised, albeit at low levels, and financial market confidence has improved significantly. Later in 2013 a gradual recovery should start, as our accommodative monetary policy stance, the significant improvement in financial market confidence and reduced fragmentation work their way through to private domestic expenditure, and a strengthening of foreign demand should support export growth.
The risks surrounding the economic outlook for the euro area remain on the downside.
They are mainly related to slow implementation of structural reforms in the euro area, geopolitical issues and imbalances in major industrialised countries. These factors have the potential to dampen sentiment for longer than currently assumed and delay further the recovery of private investment, employment and consumption.
MONETARY ANALYSIS
The underlying pace of monetary expansion continues to be subdued. The annual growth rate of M3 remained broadly unchanged at 3.8 percent in November 2012, after 3.9 percent in October. M3 growth continued to be driven by a preference for liquid assets, as M1 growth increased further to 6.7 percent in November, from 6.5 percent in October, reflecting inflows into overnight deposits from households and non-financial corporations.
There has been little change in credit growth, which remained weak in November. The annual rate of decline in loans to the private sector (adjusted for loan sales and securitisation) remained at -0.5 percent in November. This development reflects further net redemptions in loans to non-financial corporations. Net redemptions, however, were less pronounced than in previous months, amounting to 4 billion euro in November, after 7 billion euro in October and 21 billion euro in September.
To a large extent, subdued loan dynamics reflect the current stage of the business cycle, heightened credit risk and the ongoing adjustment in the balance sheets of households and enterprises.
To ensure adequate transmission of monetary policy to the financing conditions in euro area countries, it is essential to continue strengthening the resilience of banks where needed. The soundness of banks’ balance sheets will be a key factor in facilitating both an appropriate provision of credit to the economy and the normalisation of all funding channels. Decisive steps for establishing an integrated financial framework will help to accomplish this objective. The future single supervisory mechanism is one of the main building blocks. It is a crucial move towards re-integrating the banking system.
SUMMATION
To sum up, the economic analysis indicates that price developments should remain in line with price stability over the medium term. A cross-check with the signals from the monetary analysis confirms this picture.
Other economic policy areas will need to make further contributions to ensure a firm stabilisation of financial markets and an improvement in the outlook for growth. Further structural reforms should be rapidly implemented to make the euro area a more flexible, dynamic and competitive economy. In particular, product market reforms to increase competition and competitiveness are essential, accompanied by measures to improve the functioning of labour markets. Such reforms will boost the euro area’s growth potential and employment and improve the adjustment capacities of the euro area countries. They will also add further momentum to the progress being made with regard to unit labour costs and current account imbalances. As regards fiscal policies, the recent significant decline in sovereign bond yields should be bolstered by further progress in fiscal consolidation in line with the commitments under the Stability and Growth Pact.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
