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Introductory statement to the press
conference (with Q&A)
Mario Draghi, President of the ECB,
Vítor Constâncio, Vice-President of the ECB,
Malta, 22 October 2015
Jump to the transcript of the questions and answers
Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our
press conference. I would like to thank Governor Bonnici for his kind hospitality and
express our special gratitude to his staff for the excellent organisation of today’s
meeting of the Governing Council. We will now report on the outcome of our meeting.
Based on our regular economic and monetary analyses, and in line with our forward
guidance, the Governing Council decided to keep the key ECB interest
ratesunchanged. As regards non-standard monetary policy measures, the asset
purchases are proceeding smoothly and continue to have a favourable impact on the cost
and availability of credit for firms and households.
The Governing Council has been closely monitoring incoming information since our
meeting in early September. While euro area domestic demand remains resilient,
concerns over growth prospects in emerging markets and possible repercussions for the
economy from developments in financial and commodity markets continue to signal
downside risks to the outlook for growth and inflation. Most notably, the strength and
persistence of the factors that are currently slowing the return of inflation to levels
below, but close to, 2% in the medium term require thorough analysis. In this context,
the degree of monetary policy accommodation will need to be re-examined at our
December monetary policy meeting, when the new Eurosystem staff macroeconomic
projections will be available. The Governing Council is willing and able to act by using
all the instruments available within its mandate if warranted in order to maintain an
appropriate degree of monetary accommodation. In particular, the Governing Council
recalls that the asset purchase programme provides sufficient flexibility in terms of
adjusting its size, composition and duration. In the meantime, we will continue to fully
implement the monthly asset purchases of €60 billion. These purchases are intended to
run until the end of September 2016, or beyond, if necessary, and, in any case, until we
see a sustained adjustment in the path of inflation that is consistent with our aim of
achieving inflation rates below, but close to, 2% over the medium term.
Let me now explain our assessment of the available information in greater detail,
starting with the economic analysis. Euro area real GDP increased by 0.4%, quarter on
quarter, in the second quarter of 2015, following a rise of 0.5% in the previous quarter.
The outcome for the second quarter reflected positive contributions from both domestic
demand and net exports. The most recent survey indicators point to a broadly similar
pace of real GDP growth in the third quarter of the year. Overall, we expect the
economic recovery to continue, albeit dampened, in particular, by weaker than expected
foreign demand. Domestic demand should be further supported by our monetary policy
measures and their favourable impact on financial conditions, as well as by the progress
made with fiscal consolidation and structural reforms. Moreover, the decline in oil
prices should provide support for households’ real disposable income and corporate
profitability and, therefore, private consumption and investment. However, the recovery
in domestic demand in the euro area continues to be hampered by the necessary balance
sheet adjustments in a number of sectors and the sluggish pace of implementation of
structural reforms.
The risks to the euro area growth outlook remain on the downside, reflecting in
particular the heightened uncertainties regarding developments in emerging market
economies, which have the potential to further weigh on global growth and foreign
demand for euro area exports. Increased uncertainty has recently manifested itself in
financial market developments, which may have negative repercussions for euro area
domestic demand.
According to Eurostat, euro area annual HICP inflation was -0.1% in September 2015,
down from 0.1% in August. Compared with the previous month, this mainly reflects a
further decline in energy price inflation. On the basis of the information available and
current oil futures prices, annual HICP inflation rates will remain very low in the near
term. Annual HICP inflation is expected to rise at the turn of the year, also on account
of base effects associated with the fall in oil prices in late 2014. Inflation rates are
foreseen to pick up further during 2016 and 2017, supported by the expected economic
recovery, the pass-through of past declines in the euro exchange rate and the assumption
of somewhat higher oil prices in the years ahead as currently reflected in oil futures
markets. However, there are risks stemming from the economic outlook and from
financial and commodity market developments which could further slow down the
gradual increase in inflation rates towards levels closer to 2%. These risks are being
closely monitored by the Governing Council.
Turning to the monetary analysis, recent data confirm solid growth in broad money
(M3), notwithstanding a decline in the annual growth rate of M3 to 4.8% in August
2015 from 5.3% in July. Annual growth in M3 continues to be mainly supported by its
most liquid components, with the narrow monetary aggregate M1 growing at an annual
rate of 11.4% in August, after 12.2% in July.
Loan dynamics continued to improve. The annual rate of change of loans to nonfinancial corporations (adjusted for loan sales and securitisation) increased to 0.4% in
August, up from 0.3% in July, pursuing its gradual recovery since the beginning of
2014. Despite these improvements, developments in loans to enterprises continue to
reflect the lagged relationship with the business cycle, credit risk, credit supply factors,
and the ongoing adjustment of financial and non-financial sector balance sheets. The
annual growth rate of loans to households (adjusted for loan sales and securitisation)
increased to 1.0% in August 2015, compared with 0.9% in July. The euro area bank
lending survey for the third quarter of 2015 confirms the increase in demand for bank
loans, supported by the general level of interest rates, financing needs for investment
purposes and housing market prospects. In addition, credit standards eased further on
loans to enterprises, notably due to increasing competitive pressures in retail banking,
while tightening somewhat on loans to households for house purchase. Overall, the
monetary policy measures we have put in place since June 2014 provide clear support
for improvements both in borrowing conditions for firms and households and in credit
flows across the euro area.
To sum up, a cross-check of the outcome of the economic analysis with the signals
coming from the monetary analysis indicates the need to firmly implement the
Governing Council’s monetary policy decisions and to monitor closely all relevant
incoming information as concerns their impact on the medium-term outlook for price
stability.
Monetary policy is focused on maintaining price stability over the medium term and its
accommodative stance supports economic activity. However, in order to reap the full
benefits from our monetary policy measures, other policy areas must contribute
decisively. Given continued high structural unemployment and low potential output
growth in the euro area, the ongoing cyclical recovery should be supported by
effective structural policies. In particular, actions to improve the business
environment, including the provision of an adequate public infrastructure, are vital to
increase productive investment, boost job creation and raise productivity. The swift and
effective implementation of structural reforms, in an environment of accommodative
monetary policy, will not only lead to higher sustainable economic growth in the euro
area but will also raise expectations of permanently higher incomes and accelerate the
benefits of reforms, thereby making the euro area more resilient to global shocks. Fiscal
policies should support the economic recovery, while remaining in compliance with the
EU’s fiscal rules. Full and consistent implementation of the Stability and Growth Pact is
crucial for confidence in our fiscal framework. At the same time, all countries should
strive for a growth-friendly composition of fiscal policies.
We are now at your disposal for questions.
***
Question: If I could ask you to develop the last point that you made. Governor
Nowotny last week said that monetary policy may be coming up to its limits and
perhaps it was up to fiscal policy to loosen a little bit to provide a bit of
accommodation. Could you share your thoughts on this and perhaps even touch on
the Italian budget?
And if I could ask a second question that's regarding December, I'm curious, what
will be the triggers? What specific measures will you be looking at in December to
make your decision whether to adjust the programme?
Draghi: On the first issue, I'm really commenting only on monetary policy, and as we
said in the last part of the introductory statement, monetary policy shouldn't be the only
game in town, but this can be viewed in a variety of ways, one of which is the way in
which our colleague actually explored in examining the situation, but there are other
ways. Like, for example, as we've said several times, the structural reforms are
essential. Monetary policy is focused on maintaining price stability over the medium
term, and its accommodative monetary stance supports economic activity. However, in
order to reap the full benefits of our monetary policy measures, other policy areas must
contribute decisively.
So here we stress the high structural unemployment and the low potential output growth
in the euro area as the main situations which we have to address. The ongoing cyclical
recovery should be supported by effective structural policies. But there may be other
points of view on this. The point is that monetary policy can support and is actually
supporting a cyclical economic recovery. We have to address also the structural
components of this recovery, so that we can actually move from a cyclical recovery to a
structural recovery. Let's not forget that even before the financial crisis, unemployment
has been traditionally very high in the euro area and many of the structural weaknesses
have been there before.
On your second question, as you might have seen in the introductory statement, there
was a very rich discussion about all monetary policy instruments that might be used if
warranted. No specific choice has obviously been made yet. So there was a thorough
assessment of the situation, which I'll elaborate further following your questions, and
the conclusion was that we are ready to act if needed; we will examine all incoming
information and we are open to a whole menu of monetary policy instruments. To this
extent, the Governing Council has tasked the relevant committees to work on different
monetary policy instruments that could potentially be used, to examine the pros and
cons of different instruments. In other words, if one had to summarise what was the
attitude or the stance of the Governing Council discussion today, one would say it was
not "wait and see", but it was "work and assess".
Question: Just following on from your previous answer, would it be possible for
you to elaborate a little on the discussion today about the options that you still
think are available to beef up the monetary policy response? And you've said in
the past that rates, particularly the deposit rate, are now at the zero bound. Is that
a statement you'd still stand by, or are rate cuts another potential option available
to the Council?
Draghi: Let me just report to you on the general lines of our discussion today. First of
all, we examined the prospects for a firming up of our recovery and we concluded that
the recovery is continuing, and is projected to continue at the same pace it had in the
second quarter of this year. But we have to distinguish two components: the domestic
part of this recovery and the external part. The domestic part has shown resilience,
mostly driven by consumption, and the drivers of this recovery are the lower oil prices,
our monetary policy and, to some extent, the fact that many countries have achieved
some progress in fiscal consolidation. So the headwinds coming from fiscal policy
would be lower than in the past.
To see how important our monetary policy is, consider that real disposable income and
consumption have grown at the same pace, which implies the growth rate of savings has
been flat. And this is so because interest rates are so low. So we often complain about
interest rates being low for savings, but there is also a positive side to that. On the other
hand, we have an external demand which has shown weakness mainly for the challenges
that emerging market economies are now experiencing, and more particularly China.
On the inflation rate side, the picture is in a sense less sanguine. We see that headline
inflation will stay low for a protracted period of time, although as I just said in the
introductory statement, we expect some pick-up, due mostly to base effects and possibly
projections of higher oil prices. Having said that, the core inflation is basically stable at
0.9%. When we look at the expectations of inflation, which of course is a very relevant
variable for our monetary policy decisions, we see that since our last meeting surveybased short-term inflation expectations have declined, but medium to long-term
inflation expectations, after some decline following our last meeting, have recovered
and are basically unchanged since then. And we see that the latter development is both
for market-based inflation expectations and survey-based inflation expectations.
However, we see some downside risk as far as this picture is concerned. And the
downside risks come from a continuing high output gap, from the possible further fall in
oil prices, from the fact that the nominal effective exchange rate has appreciated in the
last three or four months, if I'm not mistaken, by almost 6%, and, finally, from the fact
that we continue to observe a high degree of correlation between headline inflation and
medium-term inflation expectations, which means a high degree of correlation between
oil prices and inflation expectations. This is a risk because it could lead to a deanchoring of inflation expectations. We are not saying that these risks are materialising,
but they are present and as I observed in the course of the last meeting these risks have
gone up, and we want to be vigilant, as people used to say in the old times.
On the other hand, we see that credit markets are improving, and we can expand on that
in the coming questions. So the overall assessment, as I said, is not wait and see, but it's
work and assess, so the Governing Council is there, ready to act if the convergence of
our inflation path to 2% in the medium term is pushed back.
On the interest rate on the deposit facility, I said before – I don't know whether it was
the last meeting or the meeting before that when I was asked whether it was discussed, I
had said it was not discussed. This time it was discussed. Further lowering of the
deposit facility rate was indeed discussed, and it's one of the instruments of monetary
policy that I referred to when I said all instruments have been discussed.
Question: You talked about the inflation picture being less sanguine. Can you just
explain a little bit more to the public why you think you have to fight so hard
against low inflation? Especially for lower and middle-income people, spending
less at the gas station, spending less at the grocery store is helping their purchasing
power. You've said before, people buy more stuff when inflation is low. Why spend
all this money on government bonds to fight something that a lot of people would
say is a good thing for them and for their budgets?
My second question is, is there a risk that the ECB will just kind of fall into a trap
of QE without end? That you keep doing it, that you keep buying government
bonds? We see it from the Federal Reserve's experience, whether or not they start
raising interest rates. Is there a danger that this stimulus keeps going on and on
and the markets just come to expect it and that you won't be able to get out?
Draghi: Let me respond first to your second question. The projections of recovery both
in output and inflation are based, are conditional on the full implementation of the QE
programme as announced in January and the full implementation of all the credit-easing
measures that have been announced in the course of 2014. So we have to continue on
that. On the other hand, they were also based on a set of technical assumptions
concerning exchange rates, oil prices, external demand, growth in output and so on. And
to the extent that these conditions change and possibly worsen, we will have to adjust
our QE programme or in general our monetary policy stance. That's the sense of our
discussion about downside risks.
On why to fight low inflation: I've discussed this many times. Low inflation on one
hand has a supporting power for real disposable income. On the other hand, it increases
the real value of debt. As we've seen, low interest rates promote consumption and it's
essential for the recovery of growth and economic activity. That's why we're fighting.
But to fight low inflation doesn't mean that we want high inflation. We just want to be
compliant with our mandate, which is to drive inflation back to below but close to 2% in
the medium term. I understand the Vice-President may want to add something on the
first question.
Constâncio: Yes, I would like to add something. Because it's the second or third time
that you asked that question, so let me add something. First, let me remind you that
some years ago in the US there was a commission headed by an economist called
Boskin to examine the measurement of inflation. And the conclusion of the Boskin
Commission was that the way inflation is measured, in particular the type of indexes
that are used, Laspeyres indexes, tend to exaggerate the measurement of inflation, in the
case of the US by 1.5 percentage points. So, if the target would be zero, very likely we
would be targeting a negative inflation rate. So there is a measurement problem with
inflation which justifies that the target for inflation should be above zero.
Second point is the point that the President just reminded you about debt deflation, and
when there is a situation of high indebtedness, when inflation is very low, the burden of
servicing the debt increases and that is very detrimental to the economy. The third point
is that with very low inflation or negative inflation, the real interest rate increases, and
when the nominal rate cannot go below zero it means that the interest rate in real terms
may be above the equilibrium real interest rates that would equal savings to investment
at the level of full employment. So that's another reason why negative inflation rates can
be detrimental.
Then there are the deflation risks – real deflation, not what you implied in your
question, because to have negative inflation for a few months is not a deflation
situation. A deflation situation is a situation of prolonged period, meaning more than
one year, of negative inflation. And in that case you have two phenomena: you have an
increase in real wages, because there is rigidity in nominal wage growth to not go
negative, so you will constrain supply, profits of firms, and you hit growth. And second,
there is also then in such a situation a problem of consumers postponing their
expenditure, if deflation lasts long enough; when we are talking about real deflation, not
just a few months of negative inflation.
So there are a host of reasons why central banks fight deflation, why they spend money,
as you implied – and by the way, just reminding you, there is not just one way of central
banks to spend money to fight low inflation. We and other central banks purchase
securities. The Swiss central bank purchases foreign exchange in order to defend the
level of the exchange rate that they want, and they have a balance sheet which is higher
than ours in relation to the respective GDP.
Question: First of all I would like to ask you a question on what you said on the
deposit rate, that it could be lowered further. Could you explain a bit more the
reasoning behind these discussions, how it could work? And also you had said that
the rates were effectively at the lower bound, so how would this measure up? How
would you explain this move to the market?
And a second question is, if you were to expand QE, do you feel there might be
risks that you run into scarcity, that you might have to extend the pool of
purchasable assets?
Draghi: On the first question, we touched lower bound but, also in this, my answer is
linked to the previous question. When we are at practically zero nominal rates, the real
rates are being driven by the expectation of inflation. So lower expectations of inflation
imply higher real rates – and this is an answer to Brian Blackstone before, that's why we
fight negative expectations of inflation. Whenever expectations of inflation become
more and more negative, we have higher and higher real rates. That's one of the reasons
why we consider other nonstandard monetary policy measures, one of which is the
negative rate on the deposit facility. So there we've decided a year ago that that would
be the lower bound, then we've seen the experience of other countries and now we are
thinking about that. I should say, we've not taken any decision about that. It was an open
discussion on all the monetary policies. We've discussed some other monetary policy
instruments besides this one.
On the scarcity, I've been asked this question many times. We haven't seen yet this
scarcity. Let me say that also the fact that the ECB, the Eurosystem now is a constant
source of demand on the markets, this is helping market makers to show their bid prices
and this by itself increases liquidity. Also we're not chasing bonds that we know are less
available, so that's another thing. And let's not forget that the ECB is also lending bonds
to the market makers and the market participants, so it's also increasing liquidity. But as
I've said many times, we stand ready to adjust the design of our asset purchase
programme according to the needs and when and if needed.
Question: The Governing Council today met in a Member State where the GDP
growth is actually 5.2% in the second quarter, inflation is 1.6% and
unemployment is 5.4%. It's an economic situation which is actually very similar to
the one that we see in Germany. So you've got the biggest country and one of the
smallest countries performing similarly, and all the ones in the middle ranging
quite differently and struggling, despite the accommodative stance of the ECB. Is
this something to do with structural change? And what insights will you be taking
back to Frankfurt after Malta for your future policy deliberations?
Draghi: On this question I'd like to give the floor to Governor Bonnici, but first let me
say one thing about the other countries, why we observe this difference. You're
absolutely right, one of the most important differences is the degree of implementation
of structural reforms in different parts of the euro area. But there are also other
considerations. There are different cyclical positions; there's different exposure to
external shocks. If, for example, a large export market were to experience a recession,
this would reverberate in a different way according to the different countries and
different exports they have to this part of the world.
What sort of economic policies different countries have undertaken to adjust to their
macroeconomic imbalances that they had before the crisis, that's also one other
consideration. Also, probably one of the most important differences across the euro area
is, the degree of indebtedness, both in the public sector and in the private sector, of
different countries. It's quite clear that a high stock of debt hampers growth, so how to
get rid of this, different ways to decrease the indebtedness, also have different
implications. Now I would like to give the floor to Governor Bonnici as far as the
specific experience of the Maltese economy is concerned.
Bonnici: Well, as the President has said, in fact, structural change has a lot to do with
the performance of an economy. And the Maltese economy has gone through quite a
significant structural change over the years, which has enabled the economy to be much
more resilient and dynamic, so new sectors develop as old sectors fall by the wayside. I
think also that the impact of the QE, or the asset purchase programme, has on a country
that has exports of goods and services of 150% of GDP on the exchange rate is also
very important for a small economy. So from tourism to exports of goods, these are
positively influenced. And perhaps also one needs to look at the space, the fiscal space
the government has. The deficit has been coming down, the public sector debt is just
above the EU average, and all these factors give you more space for an economy to be
able to expand, in some ways similar to Germany too, which also has a similar scenario.
Question: You stressed that emerging market developments are a worry for the
Governing Council in terms of the growth outlook. How would you judge if China
slowed down to 4.5% not 6.9%, and how big of a threat is that for the inflation
outlook - not for the growth outlook? And how big a threat for the inflation
outlook is the resilient exchange rate of the euro? That's the first question.
The second one, in the last part of your introductory statement you mentioned the
structural reforms. This is a repetitive point you are making: structural reforms
are very important for countries and just yesterday Eurostat pointed out that the
level of government debt in the euro area countries is growing, and that only three
countries actually fulfil the Maastricht criteria. What would be your comment on
that?
Draghi: The first question is quite important. There are two ways to respond. One is to
look at different channels of propagation of what happens in China towards the euro
area. And then there is a different way. Let me first explore this way. First of all, we
look at all these channels, namely the direct trade channel or indirect trade. On the
direct trade channel, the conclusion is the exposure of the euro area to the Chinese
economy is not very significant. After all, the exports of the euro area to China are 6%
of the total. However, there are some countries where such a figure is higher and
reaches almost 10%, in the case of Germany. Still, I'd say this is not exceptional.
The second is so-called indirect channels, where you have also to account for the
changes in oil prices and commodity prices that a higher recession in China would
imply. The third channel is the financial channel and again we do not see a very
significant exposure of the euro area towards China. But then there is another channel,
which is the confidence channel. We think that so far what happens to the growth in
China hasn't affected confidence in the rest of the world and more specifically in the
euro area. At the latest meetings in Lima, the IMF confirmed the growth projections for
this year as far as China is concerned, which are above 6%. So your perspective is not
something that is on the screens now. Of course, any very large surprise in a very large
economy might have the potential to affect confidence worldwide, and then we would
have to see in which way and how to cope with that.
The other dimension to this is, when we say it concerns the effect of lower oil prices on
our economies in general, we've been saying several times that most of the reasons why
oil prices are low have to do with supply conditions and that demand conditions play
only a minor role. Now, recent analysis suggests that we should be more cautious about
this, because to the extent that the investment in oil production had been geared in the
past on the basis of projections of demand which turned out later to be less than
expected, this is also a demand-induced oil price shock, and has different consequences
on inflation and inflation expectations than it would if it were a shock which was
supply-determined.
Question: I also tried to ask about the channel, how strong is the channel of the
exchange rate for the inflation projections, medium-term projections?
Draghi: Regardless of what happens in China. Of course, one of the downsides I
mentioned before, one of the downside risks to our inflation projections comes from the
exchange rate. As I've said before, the nominal effective exchange rate has been
appreciating over the last few months – four, five months – to a somewhat significant
level. But let me restate: the exchange rate is not a policy target for the ECB. It's never
been; it's not now. However, it's significant, as I've just said, for price stability and for
growth.
Question: Mr Draghi, you told us today that there is an open discussion in the
Governing Council about a possible next step from the ECB and you told us that
no decision has been made so far. Did you already see maybe a form of preference
among the Governors, or maybe specific opposition regarding the options the ECB
could use should it become necessary to bolster its policy? A form of preference or
a specific opposition regarding the options the ECB could use?
And the second question, could you tell us if there was a discussion today for acting
today? You said that a new rate cut was discussed today: I'd be interested to know
if you could elaborate a bit more on the argument raised for postponing an action
to the next meeting.
Draghi: Well, the answer to the first question is no. There was no explicit preference
towards one instrument or another instrument. All of them were considered. Let me add
one thing about the possible changes, possible cuts in the rate on the deposit facility: the
issue there is how come we announced a year ago that that was practically the zero
lower bound and now we're thinking of going into further negative territory? Well, let
me state quite clearly that the credibility of a central bank is measured by its ability to
comply with its mandate and to this extent any instrument could be potentially used.
Given the conditions prevailing a year ago, that was the statement. Today things have
changed, but this doesn't necessarily imply that we are going to use this instrument. The
discussion was wide-open. So let me cope with this credibility argument immediately.
Second, I would say there were a few members of the Governing Council who hinted at
the possibility of acting today, but I wouldn't say it was a prevailing theme of our
discussion today.
Question: Allow me to touch again on the issue of structural reforms.
Unfortunately, not all countries take it as seriously to act in this manner like the
country we're in at the moment. Would you go so far to say that if structural
reforms are not taken more seriously and more stridently by the relevant
governments, QE won't be able to fulfil its total amount, will not be able to be so
successful as you would like it to be?
And if this is so, my second question, does it make any sense then to adjust QE or
even to expand it?
Draghi: No, I never said that QE would not yield its benefits if there were no structural
reforms. I would say that structural reforms will transform what is a cyclical recovery
produced, amongst other factors, by our monetary policy into a structural recovery later
on. It's quite apparent that the monetary policy measures that we've been undertaking
over the last year and a half, two years, especially, but even before, have significantly
improved the financial markets, the credit markets and the money markets. And now it's
time we see these improvements being translated into a recovery which is resilient,
especially in its domestic component.
So no doubts whatsoever about the effectiveness of our monetary policy, regardless of
whether structural reforms have been implemented or not. Let me also add that we
shouldn't have a too negative picture of how structural reforms have been implemented,
because there has been some progress in several of our countries about that. It's not that
countries didn't do anything. So more can be done, there's room for improvement, but
quite a few reforms have been undertaken in several of our euro area countries.
Question: Is there concern in the Governing Council that the asset purchase
programme could be insufficient to create conditions that support growth and
avoid the threat of deflation?
Draghi: Our judgement today is that the monetary stance that has been designed with
the monetary policy measures announced in January, with the credit-easing measures
announced in the course of 2014, is essential for producing recovery in output and
convergence of inflation towards the objective of being below but close to 2% over the
medium term. These objectives are predicated on the full implementation of this
monetary policy. That's the current assessment. However, if we were to see that the
technical assumptions underlying these projections have worsened, or the downside
risks are increasing and further on materialising, we may well change the size, the
composition, the design of all our monetary policy instruments as needed.
Question: Could you comment on the possible political uncertainty in Spain and
Portugal and if that could derail the process of reform that you've alluded to so
many times today? And is it a worry for the ECB, the fact that some of the parties
that may be called to form a government, especially in Portugal, reject the euro?
Draghi: Well, the answer is no, I can't comment. But a more gentle way of saying no
would be the following: uncertainty, for economics, is bad. It's bad for consumption; it's
bad for investment. Political uncertainty, however, is part of democracy.
Question: I have two questions. The Chinese President, Xi Jinping, is currently
paying a state visit to the United Kingdom. What are the positive effects that this
visit will bring to the trade between China and Europe and what's your
expectation on the further development of economic relationships between China
and Europe in the future?
Draghi: I just can't comment on this. These are political statements.
Question: What are the positive effects that you think that China and Europe, in
economic relationships, what further developments do you expect?
Draghi: I think China is a very significant partner of the euro area and will remain so.
And if anything, will become a stronger and stronger economic partner of the euro area
in the future.
Question: How do you assess the economic impact from the emissions scandal of
Volkswagen to the eurozone economy?
Draghi: My answer is going to be very short: it's very, very early to say. There will be a
time when we'll have full visibility on the economic impact, but it's very, very early to
say now.
Question: I wanted to see if the Governing Council had any discussion or views on
the migrant crisis and what potential impact that would have, depending on the
decisions made on potential resettlement in Europe.
Draghi: There was a brief discussion on the migrants. It was very brief, because it's
very, very early to say what the impact could be on the eurozone’s economy. We are at
the time when we can only make inferences, really, from standard economic thinking.
It's clearly a very significant increase in labour supply; however, there's also probably a
need of significant investments in this labour supply, and also to see how these public
investments in knowledge, education and so on are going to be financed is also going to
make a big difference. So I would say, as I said before on the occasion of a different
question, it's very early to have full visibility on the economic consequences of this
phenomenon, and even more so to know what impact this might have on our monetary
policy decisions. The key important thing, however, is that we should be able to cope
successfully with this humanitarian crisis of unprecedented size.
Question: Earlier we heard Governor Bonnici's take on how Malta is doing. I
would like to ask for your opinion as President about how Malta's doing
financially and economically, and the way it's implementing its policies and how
Malta's following the advice and the guidelines brought forward by the ECB.
Draghi: I'm sorry to say, but I'll revert again to Governor Bonnici for an answer to this
question. But I'm saying this not because I want to avoid the answer, but because I think
he's the most fully qualified for answering this question.
Bonnici: . Well, Malta's following the asset purchase programme. It's right on target.
And also when you read the press release that we've issued about structural change and
the need to have growth-friendly fiscal policy, I think it's on the right track. There is the
type of fiscal policy that is reducing the debt; it's forecasted next year to be 1.1% of
GDP lower, and I think that is pretty good. At the same time the debt burden is going
down, and the expenditure is going into areas, from education to other areas that
essentially improve the quality of the labour supply. So, in general I think Malta's
performing reasonably well for its own future. It's a good performance.
European Central Bank
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