In his his monthly news conference in Frankfurt on Thursday, Mario Draghi has openly acknowledged that there has been a debate about interest rates. And the conclusion that has been reached is that the recovery is still very weak and that, therefore, a new discount of the money’s price is possible.
The ECB’s president said this after reckoning that risks continue to shrink. According to the latest growth projections, the euro zone’s GDP will contract by 0.4% in 2013, two tenths less than expected in June. Eurostat has confirmed that the euro zone economy grew by 0.3% in the second quarter after 19 months of falls. And the third quarter is expected to be even better.
If the economic outlook for the coming months is better, why is Mr. Draghi considering a reduction of interest rates? Answer: because the signals perceived in the medium term, especially for 2014, are of a weak and slow recovery. In fact, the ECB estimates a growth for 2014 of only 1%, one tenth fewer than its previous forecast.
Aside from monetary policy, the maximum representative of the ECB talked of “good news” about the banking union expected for the next few days, reiterating that this is a key issue key to leave the crisis behind. Everyone seems to agree: politicians, central bankers, economists and even the rating agencies (such as Fitch in its latest report).
The usual question about the Spanish banking sector was of course asked to Mr. Draghi. On this occasion, he gave a helping hand: “There are very few issues that remain.”