ECB President Mario Draghi said the Bank has “done as much as it can” to stabilize the euro-area economy and that monetary policy cannot support economic growth.
Speaking at the French National Assembly in Pairs on Wednesday, Draghi said the ECB`s monetary policy cannot tackle macroeconomic risks. The ECB has done “a great deal” to support the 17-nation bloc.
ECB president said that monetary policy will stay accommodative, where he believes that an exit strategy from monetary stimulus “remains distant”.
However, Draghi reiterated that the ECB’s primary goal is to maintain price stability, signaling that bank lending is the “main channel” for small and medium business funding.
The ECB, however, stands ready to act again and consider all other instruments, where he highlighted the importance of OMT as monetary policy tool to tackle weak economies.
Therefore, Draghi urged national government to reform their economies, and politicians to cool labor market regulations in order to foster maximum youth employment.
ECB President believes France will again play a “key role” in consensus on the European Union’s next direction, while the euro area still faces many hardships.
“The EU, and the euro area in particular, is faced with important questions about its directions. It needs a new consensus on how to move forward,” Draghi said.
Governments “need to do all they can” to increase potential growth and make their economies more competitive,” he added.
Another interest rate cut remains more likely even after the ECB has cut its key rates to an all-time low of 0.5 percent last month, as the euro area registered a record-long recession in the first quarter of this year.
The ECB so far maintained record-low rates, offered unlimited cheap loans to banks and revealed a plan to buy sovereign bonds issued by indebted countries.
On the other hand, Draghi asserted that a “growth-friendly” fiscal consolidation is “necessary to contain debt levels,” and “relying less on tax increases would help sustain citizens` disposable income.”
The euro dropped more than 0.4% against the dollar following Draghi`s speech in Paris today.