By Emily Cadman and Claire Jones
Hello and welcome to the FT’s live blog on Mario Draghi European Central Bank’s press conference.
Earlier the ECB kept its main refinancing rate on hold at 0.50 per cent as it tries to support the eurozone’s fledgling recovery. Mr Draghi will discuss the rate decision at a press conference in Paris at 1:30pm BST, when he is also expected to address the central bank’s stance on providing more liquidity to commercial banks as the maturity of two previous sets of cheap loans looms.
Blue sky thinking reaches Frankfurt (Getty)
Mario Draghi, European Central Bank president, has revived the idea of “reform contracts” — a policy that emerged in Brussels wonk circles last year and entails the EU contractually binding eurozone countries to economic reforms.
Speaking in Berlin on Monday, Mr Draghi told an audience of businesspeople that the eurozone needed two things to achieve sustainable growth: stabilisation and greater competitiveness.
To achieve the latter, he mentioned the need for “better ways of measuring economic performance – for example, more structural indicators of competitiveness.” And went on: Read more
After ditching its long-standing policy of never commenting on future interest rates in order to launch “forward guidance” last week, the European Central Bank has landed itself into something of a pickle as to what it really means when it says rates will stay at or below their current level for an “extended period”.
Mario Draghi, ECB president, was pressed on the question immediately after launching the policy last Thursday and said:
Well, I said an extended period of time is an extended period of time: it is not six months, it is not 12 months – it is an extended period of time.
That is from the official ECB transcript and has punctuation that helps to suggest that Mr Draghi was refusing to say it was any given period of time. However it was also clearly open to misinterpretation and that is why a certain amount of briefing took place after the press conference in which officials made clear that what Mr Draghi meant to do was avoid giving an answer on a time frame, rather than suggest rates would be low for at least 12 months.
So today’s comments by Jörg Asmussen, a member of the six-person ECB executive board and close ally of Mr Draghi, were all the more surprising. Read more
Last week anti-capitalist protesters outside the European Central Bank were dominating (at least the local) news in Frankfurt, this week it was the turn of the policymakers inside the building. The ECB is keeping its rates on hold at 0.5 per cent and Mario Draghi, president, has been quizzed on where the eurozone is headed.
The ECB staff’s quarterly economic forecasts have been tweaked, so this year’s contraction is greater than previously forecast at 0.6 per cent and next year’s growth forecast creeps up to 1.1 per cent (but then a year is a long, long time in economic forecasting.)
What else have we learnt? Read more
Mark Carney, the incoming governor of the Bank of England, was grilled by MPs and his ECB counterpart Mario Draghi faced awkward questions. By Tom Burgis, Ben Fenton and Lina Saigol in London with contributions from FT correspondents. All times are GMT.
Wondering where all of that cheap cash that the European Central Bank doled out earlier this week has gone?
Well it would appear a sizeable chunk of it has ended up back at the central bank.
Yesterday the amount of cash that eurozone banks held on deposit at the ECB hit a new record high for the year of €346.994bn. That’s €133bn higher than at the start of the week. Read more
Showing masterly timing, Mario Draghi, Italy’s central bank governor - fast becoming the frontrunner to succeed Jean-Claude Trichet as European Central Bank president - has a full-page interview in today’s heavyweight Frankfurter Allgemeine Zeitung.
Its publication comes as Angela Merkel’s government scrambles to decide who it should back for the ECB job after Bundesbank president Axel Weber self-destructed last week.
Under the headline “everyone should follow Germany’s example,” Mr Draghi not only draws lessons from Germany’s impressive economic rebound. He says exactly the sorts of things a German would want to hear from a central banker – the importance of combating inflation and of pursuing stability-orientated politics, how national governments should take responsibility for sorting out their own finances, etc. Read more
European Central Bank action to calm tensions in eurozone bond markets must remain firmly controlled, otherwise the euro’s monetary guardian risks “losing everything we have”, one of its most senior policymakers has warned.
Mario Draghi, Italy’s central bank governor, says in an interview with the Financial Times that large-scale purchases of government bonds could threaten the ECB’s freedom to act without political interference and break European Union rules. Read more
Growing divergence between countries’ economic policies is threatening the global recovery, Mario Draghi has said.”The economic recovery is strong in the emerging countries, weak in the United States and uneven in the euro area. The economic policy responses are divergent,” said the Italian central bank governor. As some countries intervene in currency markets and imbalances grow, floating exchange rates are “feeling the gap,” he added, concluding: “The world recovery itself is at risk.”
Mr Draghi, who is a contender to succeed Jean-Claude Trichet as ECB President next year, said the only option is for countries to co-ordinate their economic policies more closely. That co-ordination could include limiting current account imbalances, avoiding protectionist policies, encouraging flexible exchange rates and reducing the volatility of capital inflows to emerging markets. He also indirectly supported calls for semi-automatic sanctions in the eurozone. Read more
“Only one person can now stand in the way of Axel Weber, and that is Axel Weber.” This from an entertaining article by Wolfgang Munchau, who points to Professor Weber’s recent opposition to the ECB on matters such as bond buying and the mooted permanence of the European Financial Stability Fund. The Bundesbank president, widely considered a front-runner to succeed Jean-Claude Trichet next year, wants the ECB to phase out its asset purchase scheme, wants an early exit from low interest rates and favours the eventual phasing out of the EFSF. “It is,” says Mr Munchau, “hard to find someone who is more out of tune with the EU’s majority view on economic governance.” Mr Trichet seems to agree.
ECB governing council decisions are formed by consensus and not by vote. So the role of president is of peculiar importance, in building and communicating consensus – a decision reached by very human means, and not simply by a tally of hawks and doves. Mario Draghi – another front-runner – may possess more of these skills. But, Mr Munchau concludes, if the race for presidency turns into a two-man fight, the likely victor will be a third man, “nobody knows who, but most probably a northern European with a hawkish mindset. There is a long tradition in the EU that the top jobs do not go to those best qualified, but to those who happen to have the right nationality at the right time.” Well worth reading in full.