The eurozone economy grew by 0.6 percent in this year’s first four months, compared to 0.4 percent in last year’s final quarter. Growth is expected to continue this year, although at a lower pace.
Draghi stressed that it was “essential that the bank lending channel continues to function well” in the eurozone. He said that non-performing loans (NPLs) - bad loans that weigh on banks' results - were a “significant problem for future profitability and for the capacity and the ability the banks have for lending." The problem is acute in Italy, where banks are faced with up to €360 billion of bad debts. Draghi, a former governor of the Bank of Italy, said the Italian banks issue was “a big problem” that will take time to address. He said the solution was to create a market to trade NPLs and that governments should pass legislation to foster its development. He also suggested that public money could be used as a backstop “when in times of exceptional circumstances the NPL market is not well functioning” and to avoid fire sales. He said the measure would be “useful” but should be agreed with the European Commission.
He stopped short of saying a public backstop should be put in place to solve the Italian banking crisis. Eurozone politicians outside Italy have so far said this was not necessary. Pressed to comment on the possibility that Spain and Portugal could be sanctioned by the EU for their excessive deficits, Draghi said the decision was “entirely in the hands of European Commission”. The EU executive “has the responsibility, the power and the knowledge to take a decision,” he said.
No comments:
Post a Comment