Europe hurt by US trade threats, central bank says

President of European Central Bank Mario Draghi waits for the beginning of a press conference following the Governing Council meeting in Frankfurt, Germany, Wednesday, April 10, 2019. (AP Photo/Michael Probst)
President of European Central Bank Mario Draghi speaks during a press conference following the Governing Council meeting in Frankfurt, Germany, Wednesday, April 10, 2019. (AP Photo/Michael Probst)
President of European Central Bank Mario Draghi speaks during a press conference following the Governing Council meeting in Frankfurt, Germany, Wednesday, April 10, 2019. (AP Photo/Michael Probst)

FRANKFURT, Germany — The head of the European Central Bank warned that global friction over trade — such as U.S. threats to impose more tariffs — is holding back the economy and underlined the bank's readiness to deploy more stimulus if needed.

Mario Draghi said Wednesday that an improving jobs market and rising wages were helping the economy in the 19 countries that use the euro but 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 and policy promises 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. Trump has targeted countries that sell more to the U.S. than they buy, saying he is protecting American companies and jobs.

Yet the trade disputes have unsettled the global economy. The International Monetary Fund on Tuesday cut its growth outlook for this year to 3.3% from 3.5% and its chief economist said the global economy was at "a delicate moment."

Britain's looming departure from the EU - with leaders meeting Wednesday to discuss proposals for a delay - has further created concerns about new barriers to trade in Europe.

The eurozone economy has sagged under the pressure of the uncertainty stemming from those ongoing concerns. One-off factors have also hurt activity, including troubles in the auto industry.

The European Commission forecasts eurozone growth of 1.3% for all of 2019, from 1.8% last year. Unemployment is down to 7.8% from a peak of 12.1% in 2013, helping domestic demand for goods and services.

Draghi said that the ECB, the chief monetary authority for the European Union member countries that use the euro currency, was ready to use all its policies to help the economy, should it be needed.

The ECB, which only at the end of 2018 wrapped up a major monetary stimulus program, has had to shift its stance and offer 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.

Must Read

Huawei executive warns Australia risks economy...

Jun 27, 2018

A Huawei executive says Australia could damage its economic future if it bans the Chinese...

Australian prime minister warns of recession risk...

Jan 29, 2019

Australia's prime minister has raised the prospect of the nation suffering its first economic...

Canada determined to diversify despite Keystone...

Mar 25, 2017

Canada's natural resource minister says his government is happy the Keystone XL pipeline has...

Trudeau: Canada could stop dealing with Boeing...

Sep 18, 2017

Canadian Prime Minister Justin Trudeau is warning that his government could stop doing business...

Canada hoping its tariff threat will prompt US...

Jun 2, 2018

Canada's finance minister says he is hopeful the threat of retaliation against U.S. trade measures...

About Us

Banking Reporter is the largest-circulated online business news in the United States, bringing a whole new genre of business journalism more up close and more incisive.

Contact us: sales[at]bankingreporter.com

Subscribe Now!