Eurozone economy Inflation: ECB president softens stand on easing govt deficit

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In a bid the boost the sluggish European economy, European Central Bank (ECB) President Mario Draghi has indicated his acceptance towards easing rules on government deficits.

“Something has to be done to get the Eurozone back on track. Low rate of inflation and increasing pace of unemployment are big concerns for the European economy, said Draghi while addressing the annual conference of Federal Reserve Bank of Kansas City in Jackson Hole, Wyoming.

Draghi’s comments come in the light of the recent unemployment report that indicated that the USD 13.5 trillion Eurozone economy has come to a screeching halt during the second quarter due to the rigid period of high jobless rates.

Eurozone’s inflation fell to 0.4 percent, while rate of unemployment was at 11.5 percent in July this year.

According to Draghi, the European countries should conduct within the regulations set up by European Union (EU). Talking especially in terms of Germany, the largest economy in the Eurozone, Draghi said it could boost economic growth by carrying more investments and reducing taxes. However, he stressed that massive bond purchase program, like the one in the US, would not be a good idea for the Eurozone.

Taking into account Europe’s initial conditions and legal constraints, Draghi said, “I believe there is good scope for fiscal policy playing a greater role alongside monetary policy.”

The ECB president also expressed concern over the slow pace of hiring of workers.

“The most recent GDP data confirm that the recovery in the euro zone remains uniformly weak. The subdued wage growth even in non-stressed nations indicates their poor demand,” Draghi said while adding, “In such circumstances, it seems likely that uncertainty over the strength of the recovery is weighing on business investment and slowing the rate at which workers are being rehired.”

The countries coming under the eurozone are Austria, Belgium, Cyprus, Estonia, France, Finland, Greece, Germany, Ireland, Luxembourg, Latvia, Malta, Portugal, the Netherlands, Slovakia, Slovenia and Spain.