Today, Mario Draghi was keen to highlight the difference between the U.E. in the mid of 2012 and the E.U. today. If last year investors lost their trust in the Euro zone, which were characterized as highly risky especially in the financial area, now, the situation has stabilized. Even if they operated slower, the ECB proved caution and the ability to make good decisions. The proof is represented by the OMT program which helps to better spread the capital in the Euro area. For these chances to occur, reforms were implemented. In this situation, when the system is being changed, the failure rate of the program drops significantly. Given the positive sentiment of investors, signs of recovery are expected later this year. Further, proceedings for implementing reforms and improving the system will go in three directions: structural reforms, growth-friendly fiscal consolidation and a sound financial system.

Meanwhile, Italy is still part of the weak side of Europe. Retail sales disappointed with -0.1% defining a period of considerable drops in consumer spending. The same for Belgium where business confidence declined in the manufacturing and building industries while Germany maintains its prospects for the business environment in line with expectations.

Doubtless, the worldwide slowdown is dictating the rhythm. The latest review is indicating the beginning of a long road of adjustments until a stable point is reached.

Weak data in trade and domestic activity combined with a weak demand are the factors that caused the second quarter report of economic growth revealing under expectations figures. With U.S. and E.U., China’s major markets, still recovering, the external demand fall significantly while the internal demand wasn’t strong enough to fill the gap. Because of this situation, the price of commodities fell significantly and lead to disadvantages for commodity-exporting countries as Australia. Even if most economists believe that the 7.5% target of growth will be missed for sure, the Premier Li Keqiang was determined to reassures the population that the economy of China is “relatively high and in a reasonable range”.

Recently, officials of the People’s Central Bank of China agreed on the fact that reforms rather than stimulus perform better because of their limited impact on the short term. The Government will avoid major stimulus as the situation in 2008 with 4 trillion yuan and the consequences were the encouraging of lending which lead to a property bubble and the creation of a pile of debt. The current restructuring is oriented towards domestic consumption with the aim of diminishing the dependence on exports and investments for growth.

With a market dominated by inflation, bank-lending and investments all below expectations, the money supply has been increased. Moreover, the private debt has been increased to 168% of GDP this year from 119% of GDP four years ago and high potential for non-performing loans has been observed after lending a record 17.5 trillion yuan in 2009-2010. In this situation, the People’s Central Bank of China decided to step in and lead to the cash crush in the nation’s money market. Thus, seven-day repurchase rate rose by 2.7% and one day rate rose by 5.27%, factors that made lending harder. The idea is that the nation has to learn how to protect itself from financial risks, how to wisely use its financial resources and how to better control the bank lending (lending for projects in industries with overcapacity will be banned). It is considered that the shadow banking is expanding and highly risky investments are made in order to boost profits.

Under these conditions, officials are promising a more prudent monetary policy with focus on reforms of the yuan exchange rate mechanism and interest rate liberalization as well as more flexibility and attentiveness to the international pulse.

With China’s new approach, officials consider that the quality is targeted instead of quantity. The world must be prepared for a slowdown in the economy of China because it’s a price worth paying considering the long term benefits. Plus, the recent optimism about the U.S. and E.U. may be what the world’s economy needs in order to survive to a less productive China.

It looks like the growth impulse was given by the QE3 program and now it’s time to back up and wait for the effects to show. Ben Bernanke announced again the shrinking of the QE3, and based on a Bloomberg survey, the first reduction consists of $20 million somewhere in October. By the time this program will be ended, the improvements will be visible: 2% rate of inflation and less that 7% unemployment rate, in the view of officials. Next year there are important chances to see someone else governing Fed, factor that for sure will influence the QE program. Voices are saying that a member of the Board is ready to take charge of the Fed, and this person is very close to the current Governor and its way of thinking. Anyway, the negative scenarios was discussed as well, and a possible extension is being considered if the economy needs it. With other words, the American style of saying “we will do whatever it takes”.

Meanwhile, the increase in the unemployment rate reported yesterday, showing an increased number of unemployment claims filled may indicate the confidence of more and more people that they should get back to searching a job because there are chances to find one. Likewise, we should be careful to the possible impulses that the wealthier American economy may transmit to other important economies which are waiting for encouragement.

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.