Summing up the recent meeting of the ECB, President of the bank Mario Draghi has noted two major factors that pose significant downside risks to the euro area. First, the ECB head has expressed concerns about global uncertainty which is weighing on economic sentiment. Secondly, he has referred to a reduced role of the single European currency in the global financial arena. More generally, there is a dramatic economic decline among a large number of European countries which have reported a deterioration in economic indicators. “Over the past few months, incoming information has continued to be weaker than expected on account of softer external demand and some country and sector-specific factors. The persistence of uncertainties in particular relating to geopolitical factors and the threat of protectionism is weighing on economic sentiment, ”Draghi said.
Speaking about downplayed significance of the euro in the global financial system, the ECB President also blamed the recession in the region’s economy. Over the past several years, the share of the euro in world reserves and debt markets has decreased notably. “Since the global financial and euro area debt crises, however, the euro's international role seems to have gradually eroded. While its importance as the currency of invoice for international trade transactions has remained broadly stable, its role in global foreign reserves and global debt markets has declined. This decline is a symptom of the fault lines in EMU exposed by the crises. Concerns about the resilience of the EMU architecture and about financial fragmentation underpinned this erosion,” Mario Draghi summed up.
