The economic recovery of the eurozone, although constant, does not end and is still moderate.

At the moment the desired increase in inflation is mainly supported by the rise of oil, unfortunately the general view that is presented is political uncertainties that will be a risk to financial stability that will also put the euro in danger. It is in this economic skyline that Mario Draghi, the President of the ECB, has justified himself to explain the extension of the debt purchase program beyond March 2017, being this until the end of 2018.

continente_zona_euro_riesgo_político

This will mean an additional injection of 540,000 million euros between April and December of next year, reducing the volume of purchases from 80,000 million euros per month.

Draghi made it very clear that the objective is to ensure that the ECB will continue to be present in the market and also ruled out sharply that the reduction of the volume of purchases from 80,000 million to 60,000 million euros will be the beginning of the end of the Purchases of bonds in the market, in fact, warned that purchases will be prolonged if the situation requires it and if, by the end of 2017, the goal of bringing euro area inflation to the 2% target has not been achieved.

Draghi also acknowledged that the rise in prices, to a large extent, reflects the annual rise in the price of energy but there is no evidence of a rise in inflation that underlies, further arguing that the risks of possible deflation have disappeared so you can go back to the monthly shopping volume that was originally designed.

ECONOMIC FORECASTS

There have been no changes or prospects for improvement with regard to the ECB’s September forecast. Economic growth for the euro zone is expected to continue to rise by 1.7% for this year and 2017 and 1.6% by 2018 and 2019.

On the other hand, the inflation forecast is that prices in 2019 will not yet reach 2%:

– The annual CPI in 2017 will be 1.3%

– From 1,5% in 2018

– And of 1,7% in 2019.

 

ADJUSTMENTS IN DEBT PURCHASES

 

– Purchases of debt that concentrate on assets will reduce their minimum maturity to one year.crecimiento_indices_IPC

– The ECB has also announced adjustments to its purchasing program, which has bought 1.4 trillion euros in bonds, and will be able to buy debt with a yield below the current deposit facility (interest charged to banks to keep their excess liquidity), and that remains at -0.4%.

Although according to Draghi’s statements, bonds lower than -0.4%, which already means buying them at a loss, will not be immediately bought, only this option will be used if necessary.

 

POLITICAL UNCERTAINTIES

 

Although the ECB president did not make any judgment statements on the horizon after the Italian referendum or next year’s elections in France, Germany and the Netherlands, it is known, thanks to the latest report on financial stability, that political risk of the Euro zone is the most burning of the rest.

mario_draghi_zona_euro_deuda_2017WHAT IS DRAGUI RAISING BEFORE THIS SITUATION?

   More reforms and fiscal stimulus.

   Mr Draghi stressed the importance of the governments of the euro area completing the ECB’s monetary             policy   with structural reforms. It also stressed the need to carry out reforms in pensions and budgetary             policies to promote growth, with tax cuts and more public investment and spending, in a clear reference to           countries with   a margin to do so, such as Germany.

 

Trust is the key to completing monetary union,” he said.

 

WHAT SOLUTION IS IT FOR ITALIAN ENTITIES?

Monte dei Paschi rose 4.11%, pending its recapitalization.

For its part, the Italian entity has asked the ECB for a permit to extend the deadline for completing the capital increase, which was forecast by the end of this month.

Italy does not plan to ask for help from the European Stability Mechanism (ESM) to be rescued. It is providing a public capital irrigation for 2,000 million euros in the bank, although the real possibility that the Qatari sovereign fund will contribute 1.4 billion is Getting better.

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