Davos: Mario Draghi promises necessary 'instruments' to pull the eurozone out of deflation

Mr Draghi said he was confident growth in the Eurozone was picking up

Mario Draghi has promised he will do what it takes to pull Europe out of deflation (AFP/Getty Images)

Mario Draghi, the President of the European Central Bank, has stressed that he has the necessary “instruments” to pull the eurozone out of the grip of deflation and that the Governing Council is now united in its willingness to use them.

Speaking at the World Economic Forum in Davos Mr Draghi doubled down on the bullish message from his Frankfurt press conference on Thursday, telling delegates that the ECB would be successful in bringing inflation in the single currency back to the target of just below 2 per cent.

“We’ve plenty of instruments and determination and willingness of the Governing Council to act and deploy these instruments” he said.

Asian stock markets jumped on Friday on the back of Mr Draghi’s comments earlier in the week suggesting more monetary easing was coming soon. Japan’s Nikkei rose almost 6 per cent after Mr Draghi said the ECB would “review and possibly reconsider” its monetary policy stance at its next meeting in March.

Eurozone inflation was 0.2 per cent in December, up from 0.1 per cent the previous month. Excluding energy and food, consumer prices were just 0.8 per cent, flat on November, and still well below the ECB’s target.

Mr Draghi said he was confident growth in the Eurozone was picking up but that “on the inflation side things are different”, underlining the need for more stimulus on top of the ECB’s EUR1.1 trillion quantitative easing programme.

Mr Draghi has been in a prolonged battle with the head of Germany’s Bundesbank, Jens Weidmann, over the ECB’s monetary stimulus measures, and accusations have flown in Germany that by buying sovereign debt the ECB is acting illegally. But in a sign of growing self-confidence Mr Draghi said “In the end you’re bound by your mandate – but that should not be used as a pretext not to act.”

Asked about the severe sell-offs in stock markets around the world since the start of the year Mr Draghi appealed for calm.

“There are market vibrations, gyrations, heightened sensitivity to risk, but it’s too early to say perceptions have changed” he said. He said the ECB saw the eurozone’s recovery advancing “modestly but consistently” and added that the extra government expenditure that was necessary to cope with the influx of refugees would provide an additional support to growth. “The government expenditure that will be needed could turn out to be the largest public expenditure project in many years” he said. The arrival of so many refugees, including a million in Germany last year, presented a “challenge and an opportunity” said Mr Draghi. “Our society will be changed by this – in what direction we can only guess” he said.

A much more pessimistic view on Europe was presented by the billionaire financier George Soros in Davos.

“The EU is falling apart,“ he told an audience. ”You have a panic in the European asylum policy. We have passed a tipping point where the influx reduces the capacity of the countries to assimilate or integrate the refugees. Everybody is out for himself.“