FRANKFURT, Germany: Global trade conflicts, including U.S. threats to impose tariffs, are holding back the eurozone economy, the European Central Bank’s president said Wednesday as he underlined its readiness to deploy more stimulus if needed.
Mario Draghi said that while an improving jobs market and rising wages are helping the economy, global uncertainties like trade disputes and Brexit are hurting it.
“Global headwinds continue to weigh on euro area growth,” he told a news conference after the central bank kept its key interest rates on hold.
Draghi was speaking hours after U.S. President Donald Trump threatened to pile tariffs on another $11 billion worth of goods from the European Union, ratcheting up tensions as the two sides negotiate trade terms.
“The fact that these threats are being voiced with some frequency is certainly undermining confidence,” Draghi said.
The 19-country eurozone, which relies heavily on exports, has also suffered from uncertainty created by a separate U.S. dispute with China over trade.
And Britain’s looming departure from the EU – with leaders meeting Wednesday to agree on a delay – has further created concerns about new tariffs and barriers to trade in Europe.
The eurozone economy has sagged under the pressure of these ongoing concerns, which seem to have eroded business confidence. One-off factors have also hurt activity, including troubles in the auto industry.
The European Commission forecasts growth of 1.3% for all of 2019. Unemployment is down to 7.8% from a peak of 12.1% in 2013, helping domestic demand for goods and services.
Draghi said the ECB was ready to use all its policies to help growth, should it be needed.
The ECB, which only at the end of 2018 was ending a major monetary stimulus program, has had to revise its plans and offered the economy more help.
In March it extended the date for the earliest interest rate increase to the end of the year. It also promised a new round of cheap loans to banks to help them lend to business and support growth.
The ECB has joined the U.S. Federal Reserve in pausing the withdrawal of stimulus measures deployed over a decade to bounce back from the global financial crisis, as central bankers around the world ponder which way the economy is headed.
The Fed has already started raising rates but has backed off plans for further rate increases in 2019.—AP