Brussels, 06/06/2013 (Agence Europe) - At the meeting of its Governing Council on Thursday 6 June, the European Central Bank decided not to change euro interest rates and not to decide on the possibility of using special funding to boost the financing of small businesses, deciding to wait and see how existing measures get on before deciding anything new.
After the meeting, ECB President Mario Draghi said about interest rates that, after a “very rich discussion”, there had been “consensus in the assessment that changes not enough to grant immediate action.” “We'll monitor the situation very closely and stand ready to act”, he said.
The ECB says that GDP in the eurozone will fall by 0.6% in 2013, but then grow by 1.1% in 2014. Despite the fact the forecasts have been reduced marginally, Draghi expected “gradual recovery at low level gaining ground in the second part of this year”, with inflation of 1.4% in 2013 and 1.3% in 2014. Asked whether there was the risk of deflation, he said the bank could see nothing of the sort in any eurozone country, pointing out that oil prices have fallen, although it was not clear whether this was structural or simply transitory.
Describing the fall in prices as good news for savers, Draghi stressed the inevitable nature of budget consolidation through public spending cuts, despite the painful effect of this in the immediate future, in order to return to healthy, sustainable growth, but regretted that, instead of this, countries were increasing taxes that are already “very, very high.” He said, however, that he understood why they were doing so, given the urgency of the situation.
Small businesses. The ECB held a wide debate about special measures to help small businesses get better access to finance, such as setting negative interest rates for the bank deposit facility. It says it is prepared to do this technically, but said it was important to study the unintended consequences of such a measure.
Commenting on banking union, Draghi said he was confident about Europe's ability to set up a bank resolution mechanism in time for when the bank supervisory mechanism comes on stream. After the summer break, the ECB, in its role as European supervisor, will study the accounts of the 140 banks directly under its responsibility. He said the ECB was not expecting anything like what it saw two or three years ago.
Speaking ahead of a hearing at the German Constitutional Court in Karlsruhe next week on the OMT special sovereign bond buy-up scheme, Draghi said that OMT, which exists on paper but has never needed to be put into practice, is “probably the most successful measure taken in a long time. OMT has brought stability for markets in Europe and worldwide.” (MB/transl.fl)