Draghi Blames Prolonged Uncertainty for ECB Risks Materializing

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Mario Draghi said prolonged economic uncertainty means risks to the euro-zone economy have solidified, which is why the European Central Bank is almost ready to add stimulus.

Elaborating on earlier comments that policy makers would act “in the absence of improvement” in the economic outlook, the ECB president stressed that the language is a deliberate change from less than two weeks ago. Then, the Governing Council said it would respond “in case of adverse contingencies.”

“This is because of this lingering uncertainty that is by itself a materialization of risk,” Draghi said in a panel discussion in Sintra, Portugal. “Given that this is the situation, that’s why during the speech today I said the Governing Council stands ready to act.’’

The euro dropped after his morning speech at the ECB’s annual forum. That prompted a tweet from U.S. President Donald Trump who said such suggestions of stimulus make it “unfairly easier” for European companies to compete with the U.S.

Draghi said on the panel that “we don’t target the exchange rate -- keep this in mind.”

His recently-retired chief economist, Peter Praet, also had his say, telling Bloomberg Television that the ECB shouldn’t be blamed for reacting to the economic consequences of the global trade dispute.

“You have a lot of uncertainties on the external side, so you should not put the blame on the ECB’s policy when the international environment has deteriorated very much, also related to uncertainties related to trade,” Praet told Matt Miller in Sintra. “I think it would be very good to stabilize the international business environment.”

Policy makers are contending with persistently weak inflation and a slowdown of growth, with Germany, Europe’s largest economy, particularly affected by rising global protectionism.

“I think we should not exaggerate the impact of the communication of today on the exchange rate,” Praet said. “The exchange-rate issues are really second-order sort of issues.”

To contact the reporters on this story: Paul Gordon in Frankfurt at pgordon6@bloomberg.net;Joao Lima in Lisbon at jlima1@bloomberg.net;Piotr Skolimowski in Frankfurt at pskolimowski@bloomberg.net

To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Jana Randow, Lucy Meakin

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