21 June 2016

ECB ready for contingencies following UK referendum, Mario Draghi tells MEPs

Mr Draghi noted that Tuesday's German Constitutional Court ruling on the ECB's Outright Monetary Transactions (OMT), "confirms the previous ruling of the Court of Justice which concluded the OMT programme is compatible with EU law and falls within the ECB's mandate".

"Euro area recovers at moderate but steady pace"

He also argued that the ECB's monetary policy measures are effective: "The recovery of the euro area economy gained momentum at the start of the year. It is expected to proceed at a moderate but steady pace, supported by solid domestic demand and the effective pass-through of our monetary policy measures to the real economy."

The annual real GDP rate is expected to increase by 1.6% this year and by 1.7% in the next two years. Inflation should pick up towards the end of 2016. Thereafter, inflation is expected to increase further to 1.3% in 2017 and to 1.6% in 2018, as a strengthening economic recovery mobilises unused resources, he said. However, the level of total real investment in the euro area remains more than 10% below pre-crisis levels, he added.

On the ECB assets purchase - or quantitative easing - programme , Mr Draghi reported that easing is benefiting small and medium-sized firms, which rely heavily on bank credit, in particular. "Without our policy stimulus, both growth and inflation would be significantly lower", he said.

Convergence between euro area members a "necessary ingredient"

At the same time, he warned that uncertainty remains high and downside risks are still significant due to the continued fragile state of the global economy and geopolitical developments. He also advocated structural reforms and stressed the need for further convergence between the euro area economies: "Convergence is a necessary ingredient. The same countries should not always be debtors, or creditors as that would lead to a transfer union."

On the Stability and Growth Pact, he said that rules must be complied with "across countries and through time" as the Pact is the anchor for stability in the euro area.

On EDIS: "Bankers are now treated the same, depositors aren't"

Asked about the European Deposit Insurance Scheme (EDIS), the so called “third pillar” of the Banking Union that is not yet in place, Mr Draghi said the ECB has no specific role in it. He noted that the negotiations had been halted to first "de-risk" bank portfolios by limiting their sovereign bond holdings, but said a compromise is needed as "now we are treating bankers the same way, but not the depositors".

Full press release

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