ECB′s Draghi warns over eurozone slowdown, trade war risk | Business| Economy and finance news from a German perspective | DW | 26.04.2018
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ECB's Draghi warns over eurozone slowdown, trade war risk

The European Central Bank chief says after a period of higher than expected growth, "some moderation" should be expected. Mario Draghi spoke after ECB policymakers kept eurozone interest rates on hold.

European Central Bank chief Mario Draghi on Thursday pointed to "some moderation" in the 19-member eurozone's growth rate since the start of the year, noting that "these declines were sharp and in some cases the extent of these declines was unexpected."

"Following several quarters of higher than expected growth, incoming information since our meeting in early March points towards some moderation while remaining consistent with a solid and broad-based expansion of the euro area economy," he told reporters in Frankfurt.

Draghi, however, remained positive about the region's economic outlook for 2017.

Read more: Eurozone unemployment hits lowest level in a decade

Economists have predicted first quarter growth of 0.5 percent, compared to 0.7 percent in the last quarter of 2017.

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Losing ground

The eurozone economy turned in a robust 2017 performance, with annual growth hitting 2.5 percent, the best in a decade. But a slew of recent data suggests the eurozone area has lost some of its momentum.

A key survey of eurozone business activity, the purchasing managers' index, was flat in April at 55.2, while the latest surveys from Germany, Europe's number one economy, point to a drop in confidence among consumers, businesses and investors. German industrial orders and production data have also disappointed.

If growth slows significantly, the central bank could face pressure to extend its 30 billion euros ($36 billion) in bond purchases. The stimulus is set to run at least through September. Draghi gave no indication of a change unwinding the program during Thursday's news conference.

Concerns about the strength of the economy have been aided by concerns about protectionist threats, geopolitical risks and global trade tensions.

Europe's exporters nervous

Draghi warned that rising protectionism was starting to pose a "more prominent" risk to the eurozone outlook after US President Donald Trump fanned fears of a global trade war.

Read more: Does Donald Trump eye a weak dollar?

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Eurozone showing sustained growth

While the trade tensions have so far mostly been limited to "rhetoric," the ECB chief warned "obviously" [they] can't know what are going to be the direct effects of potential retaliation if the US threats become reality.

"What is certainly known is that these events have a profound and rapid effect on confidence, on business confidence, on exporters' confidence, generally speaking, and confidence can in turn affect the growth outlook."

Trump is widely expected to end a temporary exemption for European steel and aluminum imports from new tariffs imposed by the US two months ago, which runs out on May 1.

Read more: German carmakers among the biggest losers in US-China trade row?

The US leader has also vowed to impose tariffs on billions of euros in Chinese imports, prompting Beijing to threaten retaliation.

Earlier on Thursday, the ECB left its interest rates unchanged, meaning the short-term interest benchmark remains at zero and the deposit rate at minus 0.4 percent.

mm/aos (AFP, AP, dpa)

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