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Mario Draghi, Confident or Not?

Yesterday, the President of the ECB transmitted both positive and negative signals, as well as assurances that again, they will do whatever it takes (unconventional measures with “unintended consequences”) if the situation demands it.

Optimistic recommendations were given by the significant declines of economic and financial fragmentation, the high expectations for improvements on exports (caused by the recovery in global demand), better domestic demand which is sustained by the accommodative monetary policy and the lowered borrowing costs in capital market which signified a breath of air for large corporation as well as for small and medium-sized enterprises which have seen reduced borrowing costs from banks.

On the other side, the pessimism is fueled by the current situation with the real GDP which fell by 0.2% in the first quarter of 2013, weak conditions on the labour market and an alarming unemployment rate.

Considering these conditions, Mario Draghi wants to assure the investors that the E.U. is fighting with the crisis and is determined to win this battle. The ECB has proved the ability to keep the inflation stable and the capacity of maneuver of standard and non-standard measures (the interest rate policy, the OMT program). Moreover, further changes will be applied and important modification of the current financial system will be implemented (important to mention here the banking union). It has been mentioned a comparison with the United State and the necessity of time in order to make the countries of Europe such a powerful economic group that the U.S. is currently representing. In consequences, the message sent by the officials was that we should trust the institutions of the E.U. because they are capable to give the economy the necessary impulse of growth.

Mario Draghi, Confident or Not? by