President of European Central Bank (ECB), Mario Draghi, warned Wednesday about the growing risks to the recovery of the eurozone economy and the euro and stock markets in the region have lost the previous growth, according to the ECB chief.
“Growth in euro area remains low, increasing uncertainties are affecting confidence and fuel an increase in risks to economic outlook,” Draghi said, quoted by Bloomberg.
Euro dropped by 0.2%, to $1.2462, after earlier trading at $1.252, according to the Financial Times. Also, the DAX index of German stock market has reduced its advance from 1.6% to about 0.8%, during Draghi’s speech. ECB has held, however, at the same level the forecast for the eurozone economy this year, anticipating a trend in margin contraction of 0.5% – 0.3%. Next year, the bank expects a growth of 0-2%, revised down slightly from 0 to 2.2% in March. ECB forecast is based on data available in late May.
Draghi said the ECB will preserve until early next year the unlimited liquidity program for three months for banks, in an attempt to mitigate the impact of risks arising from the debt crisis in the euro area. The official did not mention if the ECB plans to offer banks unlimited funds again for three years. The bank carried out in December and February two auctions of funds helped commercial banks to borrow 1,000 billion euros.
ECB president said the euro area does not bear the entire blame for the global economic slowdown. “It’s not just Europe the source of problems that Brazil and China would have,” he said, adding that the responsibility for global economy slowing down can not be transferred only to the euro area.
European countries are not the only ones thast have a high debt relative to GDP, Draghi said. “We have some responsibilities, but other countries have their own problems”, ECB chief said, adding that this will be the main message to the G20 summit on 18-19 June.
“First of all, all countries must solve their own problems. Then they worry about the impact in other regions of the world,” said Draghi. ECB has kept interest rates at a record low Wednesday to1%, in the context of monetary union crisis.
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