The European Central Bank said yesterday that it may end up dropping interest rates. Some have already hazarded a guess that they will cut rates this January, yet Draghi, as usual, did not offer a solid response.
He has also decided to extend his restriction on buying European debt until June. This means that since the ECB is not seeing things clearly and thinks that the measures it has taken to date will help stimulate the economy. Draghi's bearish forecast confirms it: inflation is under control, but there are increased possibilities that the recession will continue and if any growth occurs, it will be weak.
This prediction echoes one made by Eurostat, which also said yesterday that the euro zone is in an official recession. The flagging growth in Europe contrasts with a feeble 1% growth across the EU. The euro economies are sucking the life out of the rest of the world economic system. So Draghi warns that it's really important for the European Council to keep the agreements they made last June when it meets next week. He knows that internal division within EU leadership will complicate both political and economic problems in the region, making it hard for nations to get out of the crisis. EU advisors are making dire decisions, which national leaders will likely brag about later as if they were their original ideas.
After a year of watching this sort of spectacle over and over again, the ECB admits that the liquidity that it pumped into Europe has avoided a total meltdown, but the funds have not reached the real economy. In times like these, it's not surprising that Draghi is pessimistic about the year ahead.
