The upsurge in anti-European sentiment in the crisis-hit countries of the eurozone is “very understandable” the president of the European Central Bank, Mario Draghi, conceded yesterday.
Mr Draghi said rising popular frustration was natural given the weak economic performance of the eurozone and spiking joblessness since the global financial crisis began in 2008.
“It’s very understandable that people are eurosceptical because things are not going well” he said, speaking at a press conference in Naples. “In this part of the world things are not going well because you have pervasive unemployment and you have very weak economic activity with... in some countries, a recession that seems to never end”. He added: “You can’t expect people to be enthusiastic about that”.
The unemployment rate in the single currency has shot up since 2008 and now stands at 11.5 per cent, almost double the rates in Britain and the United States. In Spain and Greece the rate is 24.4 per cent and 27 per cent respectively.
Eurozone GDP growth was zero in the second quarter of 2014 and output in the bloc is still below where it was six years ago. Italy contracted by 0.2 per cent, putting Mr Draghi’s home country into its third recession in seven years. Even Germany, the powerhouse of the single currency in recent years, registered a contraction.
Yesterday protestors gathered outside Naples’ Capodimonte palace, where the ECB was holding its meeting. One of the group’s banners read: “Job insecurity, poverty, unemployment, speculation. Free us from the ECB”.
There has been an surge in support for parties hostile to the single currency and the European Union such as the National Front in France and the Five Star movement in Italy, which made big gains in European Parliament elections in May.
The ECB kept its suite of interest rates on hold after yesterday’s meeting, but it unveiled more details of its plan to buy up asset backed securities and covered bonds in order to head off the threat of deflation in the single currency zone. Consumer price inflation in the eurozone dipped to just 0.3 per cent in September, well below the central bank’s target of just under 2 per cent.
The ECB said that its asset purchases will commence as soon as this month and that the programme will last two years. Mr Draghi refused to give an exact figure for the size of the impending purchases but he has said in the past that the central bank aims to expand its balance sheet back up to the levels of 2012. That would imply around €1trillion of acquisitions.
The objective of purchasing the bonds would be to ease credit conditions in the single currency and encourage bank lending.
Analysts said that the ECB might, in the end, still need to implement its own Quantitative Easing progamme to jumpstart growth in the manner of the US Federal Reserve, and the Bank of England. “If the eurozone enters a third recessionary period and upwards price pressures continue to evaporate, Draghi will be forced to look at his final policy option and put sovereign bonds firmly on the shopping list” said Ranko Berich of Monex Europe.
Despite acknowleding the weak economic perforance of the eurozone Mr Draghi insisted that the ECB had “done a lot” to support growth. “Just go back with your memory to the last three years, even four or five years. We’ve done really a lot to improve the financing conditions. And now, of course, we are waiting,” he said.Reuse content