ECB president says cohesion being tested by such events as Brexit
“During our last plenary exchange in February, I said that the cohesion of Europe was being tested. Since then the challenges have increased. It is now more than ever important and necessary that Europe responds cohesively and decisively to the challenge that we’re facing,” he said.
Quoting a speech by former Italian prime minister Carlo Azeglio Ciampi to the parliament more than a decade ago, he said “if we act alone we will be at the mercy of events bigger than us,” adding: “I am confident that the foundations on which the EU project is built are strong enough to achieve the objectives that have been entrusted by the people of Europe.”
In a regular update to the parliament on the ECB’s annual review, Mr Draghi said the ECB would continue its current monetary policy stance. Noting the “unprecedented level of monetary support” provided by the ECB, Mr Draghi said the bank was “committed to preserving the very substantial degree of monetary accommodation”
But he said that this must be accompanied by “decisive action” in other policy areas.
Following last week’s instruction by the European Commission that member states should embrace fiscal expansion of 0.5 per cent next year, Mr Draghi said that “more growth-friendly composition of fiscal policies could boost growth.”
On the European banking sector, Mr Draghi said the profitability of European banks remained a challenge to be addressed. While the level of bank equity prices was not a matter per se for policy makers, it could curtail lending to the real economy, he said. “We should therefore consider what factors are behind this and what we can do to resolve them.”
He said legacy and structural challenges were a factor for some banks, and, where over-capacity was an issue, “rationalisation and consolidation must form part of the answer”.
Similarly, he called for the faster resolution of non-performing loans.
Mr Draghi’s comments come after he said last month that Brexit would have an effect on the euro zone economy, though he noted on Monday that the euro zone economy remained “surprisingly resilient” in the face of external shocks including the falling oil price, a slowdown in emerging markets, and Brexit.
Addressing the parliament ahead of Mr Draghi’s address, EU commissioner Valdis Dombrovskis said the ECB’s actions had had a “positive impact on overall financing conditions in the euro area”. But he noted that monetary policy should not be the only tool to boost the European economy, arguing that member states should also play their part through structural reforms and responsible fiscal policy.