European economy still fragile, says Draghi

Europe is taking the right steps towards recovery, but unemployment rates need to go down, according to the European Central Bank’s chief Mario Draghi.

Addressing small entreprenurs in Berlin on Monday, ECB president Mario Draghi (pictured) said that Europe has made significant progress to stabilising the euro area, but more work needs to be done to achieve higher growth and employment.

Draghi said that there are two main components to the project of making European growth sustainable in the long-term: the first is stabilising the euro area, the second is strengthening it.

“My main message is that we have made significant progress on the first step, stabilising the euro area. But there is still work to do to transform this achievement into higher growth and employment.

“Strengthening the euro area through sustainable policies, higher competitiveness and stronger common institutions is therefore our priority for today,” Draghi said.

While he welcomed the news that the euro area recorded 0.3% GDP growth in the second quarter, Draghi highlighted that  the economy remains fragile.

“Given the overall subdued outlook for inflation extending into the medium term, the ECB’s Governing Council expects the key ECB interest rates to remain at present or lower levels for an extended period of time,” Draghi also said.

As part of his speech, the ECB president also addressed the issue of a stronger monetary union.

“Let me turn to the third key element in our collective efforts to strengthen the euro area – and that is to build a stronger architecture for EMU. There are several areas in which we can make progress, as we outlined in last year’s “Four Presidents’ Report”. For now, I see the priorities as banking union and economic union.

“Banking union serves a range of aims, but in the current circumstances restarting lending to the real economy is the key priority. One barrier to bank lending at present is lack of transparency over bank balance sheets. Having a single European supervisor will help address this, as we plan to conduct a comprehensive balance sheet assessment of banks we directly supervise,” Draghi concluded.

Click here to read full speech.

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