FRANKFURT (Reuters) – The financial markets have opted for more economic growth since the victory of Donald Trump in the Us elections last week, but american protectionism and political risks, domestic could harm Europe, said Monday Vitor Constancio, vice-president of the ECB.
The bags in the united States and Europe have risen and bond prices have fallen as investors expect that the management of Trump cut taxes and spend more, boosting growth and inflation.
But Constancio stressed that the intention of Trump to put “America first” could damage the exports of Europe and the export markets and increase the “political risk”, in a likely reference to the increase of the support to the parties, eurosceptics and nationalists in the countries of the euro zone.
“we Should be cautious in drawing hasty positive conclusions of these market developments because they do not necessarily indicate that the world economy will have an accelerated recovery with increased growth,” said the member of the European Central Bank, at an event in Frankfurt.
“Until now, these developments have pointed to an increase in economic growth in the US, but in the context of a policy of ‘America first’”, he added.
Constancio repeated his prediction that the euro-zone economy would continue to recover and boost inflation “well above the 1 percent” next spring, from the 0.5 per cent today.
But this prediction is based on the assumption that not materialize, “the potential negative effects of the current global uncertainties,” he warned, urging economic policy “more expansionary” to support the growth.
“In fact, a number of political risks could induce economic turbulence,” said Constantius.
The constitutional referendum, Italian 4 December, at which prime minister Matteo Renzi has tied his political future, is considered a key indicator of the popular sentiment after the victory of Trump. A vote in favor of the “no” could lead to populist antieuro Movement 5 Stars to be placed close to the Government.
SOVEREIGN DEBT
The ECB does not need to react to the recent and sharp rise in the price of sovereign debt since the election of the united States justify this increase, and it also benefits the banks, said Constantius.
“I don’t see the need to respond specifically to this,” said Constantius in a separate act.
“This is part of a contagion that comes from the US, where there are specific factors justifying the change in the curve of the debt, the increase in the bond to the medium and long term, so it is a contagion, but, as I have also mentioned, is also good for the financial institutions,” he said.
Constancio said that I was not already concerned about the low underlying inflation, but that he would like to see a turning point, reflecting the growth of productivity, and a best result of general inflation.
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