The Eurozone’s economy has performed worse than expected, European Central Bank President Mario Draghi admitted on January 29, only days after the Bank committed to retaining ultra-low interest rates throughout the summer of 2019 due to the fact that the bloc’s growth is rapidly decelerating.
The ECB’s 2019 growth projections for Germany have been halved from 1.9% to just 1% of GDP and Italy has officially entered into a recession after having experienced two successive quarters of negative growth.
While addressing the European Parliament, Draghi expressed his confidence that China’s stimulus measures could boost Europe’s imports and ease the pressure on EU exporters.
Chinese growth has fallen to its lowest level in four years, which had an immediate effect on European business confidence.
Draghi, however, made clear that the ECB could restart its quantitative easing programme if necessary. The need to hold back monetary tightening was underscored by the governor of the Bank of Italy, Ignazio Visco, who noted that Italy’s growth difficulties are “above all cyclical,” urging the ECB to maintain a “substantially accommodating” monetary policy in addition to calls for structural interventions.
Relaunching the European stimulus programme will not be Draghi’s decision as his term is due to expire in the autumn.
Besides the effects of the ongoing trade dispute between China and the US has hit Europe hard as global business confidence has plummeted. Further contributing to the downbeat mood has been the still-unresolved Brexit negotiations, which are adding to growing concerns of a disorderly withdrawal for the United Kingdom.