Eu­ro­zone still at risk de­spite re­cov­ery: ECB

The Phnom Penh Post - - MARKBEUTSSINESS -

SOME eu­ro­zone coun­tries are still “vul­ner­a­ble” to eco­nomic shocks even as a hard-won re­cov­ery from the fi­nan­cial cri­sis so­lid­i­fies, Euro­pean Cen­tral Bank Vice Pres­i­dent Vi­tor Con­stan­cio cau­tioned yes­ter­day.

“We are wit­ness­ing a sus­tained econ­omy re­cov­ery in the euro area,” Con­stan­cio told a fi­nan­cial congress in Frank­furt. But “these de­vel­op­ments should not lead to com­pla­cency. Vul­ner­a­bil­i­ties and chal­lenges re­main in many euro area economies,” he added.

De­spite swelling eco­nomic growth, “the num­ber of young and long-term un­em­ployed is still un­ac­cept­ably high” in many of the sin­gle cur­rency area’s 19 mem­ber coun­tries, the for­mer Por­tuguese cen­tral bank chief pointed out.

At the end of 2016, some 38.4 per­cent of Greeks and 28.4 per­cent of Ital­ians aged 15-29 were un­em­ployed, Euro­stat fig­ures show.

The coun­tries that were strug­gling eco­nom­i­cally were far be­hind eu­ro­zone fron­trun­ners like Ger­many or the Nether­lands, where the rates of youth un­em­ploy­ment stood at 6.2 per­cent and 8.6 per­cent re­spec­tively.

Mean­while, some states re­main highly in­debted even af­ter painful re­forms turned bud­get deficits into sur­pluses, and pri­vate debts are also at a high level.

And the cri­sis has “in­ter­rupted the process of real con­ver­gence” in eco­nom­i­cally weaker coun­tries to­wards the in­come lev­els and liv­ing stan­dards seen in the eu­ro­zone’s wealth­i­est na­tions, Con­stan­cio said.

With con­fi­dence shored up by strong eco­nomic per­for­mance, the ECB de­cided in Oc­to­ber to slash by half the mass bond-buy­ing it has used to buoy the eu­ro­zone.

From Jan­uary, it will buy only € 30 bil­lion ($35 bil­lion) of bonds per month in­stead of the present € 60 bil­lion.

Bond-buy­ing, or “quan­ti­ta­tive eas­ing”, has been used by cen­tral banks around the world to pump cash through the fi­nan­cial sys­tem and into the real econ­omy of busi­nesses and house­holds in the wake of the cri­sis.

But the ECB’s pur­chases have yet to bring in­fla­tion back to its tar­get of just be­low 2 per­cent, re­garded as most favourable for eco­nomic growth.

“We are not yet ful­fill­ing our man­date,” Con­stan­cio ac­knowl­edged.

“Mone­tary pol­icy will have to con­tinue to be very ac­com­moda­tive,” with low in­ter­est rates and other mea­sures to keep the credit taps open, he said.

Mean­while, po­lit­i­cal lead­ers must do their part to bol­ster the eu­ro­zone, Con­stan­cio added, urg­ing na­tional cap­i­tals to press on with “struc­tural and in­sti­tu­tional re­forms”.

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