The head of the European Central Bank indicated a first interest rate increase could be postponed if unexpected trouble strikes the 19 countries that use the euro as their currency.
Mario Draghi warned in a speech Friday the current economic expansion remains "resilient" as unemployment continues to fall and consumers remain willing to spend. But he cautioned that slowing world trade is proving to be a drag on the eurozone economy.
Draghi said the bank wasn't changing its plan to phase out a 2.5 trillion-euro ($2.8 trillion) bond-buying stimulus program at the end of the year. But he indicated that the central bank could respond to unexpected weakness by putting off interest rate increases longer than planned.
The bank has in the past said that interest rates will remain at their current record lows until at least "through the summer" of 2019. Draghi on Friday added a caveat that that the schedule for interest rate increases "is contingent on economic developments." He said that if economic conditions worsen, "our reaction function is well defined" — a signal that the bank could respond to unexpected trouble by delaying rate hikes beyond the fall of 2019.
"There is certainly no reason why the expansion in the euro area should abruptly come to an end," Draghi said in a speech in Frankfurt. A gradual slowdown is normal as economic expansions mature, he said. He noted that the eurozone expansion is still "relatively short in length" at 22 quarters, compared to the average of 31 quarters for the five periods of growth since 1975.
And he said that recent weak economic growth figures have been affected by one-off factors such as strikes and disruption from carmakers failing to get vehicles certified under new emissions tests.
Draghi said the bank was sticking with its plan to phase out its bond purchase stimulus program the broader economy, at year-end. The purchases are a way of pushing newly created money into the banking system, and, it is hoped, the wider economy.
The bank's benchmark interest rate for lending to banks is zero, and it imposes a minus 0.4 percent rate on deposits that it takes from commercial banks. The negative rate is a penalty aimed at pushing banks to lend excess funds rather than let them pile up at the central bank.
PARIS (AP) — French President Emmanuel Macron warned Thursday that Europe could “die” if it fails to build its own robust defense as Russia’s war in Ukraine rages on, or if it fails to undertake major trade and economic reforms to compete with China and the U.S.
Macron urged Europeans to become more ambitious in a fast-changing world to face the challenges of war, fierce trade competition, energy scarcity, climate change and increasing authoritarianism.
In a nearly two-hour speech at Sorbonne University in Paris, Macron said that the continent is divided and “too slow and lacks ambition” at a time when the 27-member European Union needs to become a superpower, defend its own borders and speak with one voice if it wants to survive and thrive.
“Our Europe today is mortal,” Macron said. “It can die and that depends solely on our choices,” he added. He called on people to make those choices now because, “it’s today that Europe is between war and peace.”
Russia's full-scale invasion of Ukraine, now in its third year, is an existential threat and Europe isn't armed enough to defend itself when “confronted by a power like Russia that has no inhibitions, no limits,” Macron said.
‘Our ability to ensure our security is at stake," Macron said. “Russia mustn’t be allowed to win.”
Europe now has the “good fortune” of having the Biden administration’s commitment to supporting Ukraine, Macron said. But, in a year of key elections around Europe, in the U.S. and elsewhere, support may fragment or disappear entirely, he added.
“Europe must become capable of defending its interests, with its allies by our side whenever they are willing, and alone if necessary,” Macron said.
Strong armies, a European rapid intervention program and force, tanks, a missile shield and other weapons, produced in Europe, will need the support of “a joint diplomatic force that will speak with one voice and build bridges with Africa and Latin America,” the French leader said.
“Only then will Europe show that it's not a United States’ lap dog, and that it also knows how to talk to other regions of the world,” he said.
France has been a firm supporter of Ukraine in its fight against Russian aggression, and Macron has often clashed with other Western leaders as he has insisted that Europe must stand by the country at any cost. The French president alarmed European leaders by saying recently that sending Western troops into Ukraine to shore up its defenses shouldn’t be ruled out.
Referring to trade practices of China and the U.S., Macron said “the two world powers have decided not to respect the rules of global trade” by shoring up protections and subsides while Europe’s industry remains open and is stuck in overregulation.
“Let’s do the same, we are in competition,” Macron said.
“We must buy faster, we must produce more and we must buy more that is made in Europe. That is key,” Macron said.
Thursday's speech came less than two months before a pivotal European Parliament election.
Macron, an avid advocate of a united and assertive Europe, also rallied support for his centrist Renaissance party before the June 6-9 vote as far-right parties lead the moderate coalitions in the polls. He called for safeguarding democratic values as the “authoritarian model” was becoming “more popular” across the continent.
The war in Ukraine and immigration are top priorities for European Union voters, according to polls. Far-right parties have gained support by criticizing Macron’s government policies on both issues. Macron acknowledged divisions on immigration policies, including on asylum and deportation rules for those who have arrived to Europe illegally.
He emphasized the need for an effective response and Europe-wide coordination for curbing illegal immigration, closer cooperation with immigrants' countries of origin and a unified, relentless fight against human traffickers.
Macron criticized the idea of striking an agreement, as Britain as done, with countries in Africa and elsewhere to transfer immigrants there.
“This is a betrayal of our values that ultimately leads us to dependency on other counties,” Macron said.
The British government earlier this week approved a law allowing the deportation of some migrants who enter the country illegally to Rwanda.
Macron lost his majority in France’s most influential house of parliament, the National Assembly, after the 2022 election to the far-left coalition and the far-right National Rally party.
The social situation in France remains tense as Paris prepares to host the Olympic Games this summer, amid protests from teachers and police officers, and farmer demonstrations in recent weeks. The protests follow huge rallies last year against Macron’s ultimately successful proposal to increase the retirement age from 62 to 64.
Barbara Surk reported from Nice, France. Lorne Cook contributed to this report from Brussels.
French President Emmanuel Macron delivers a speech on Europe in the amphitheater of the Sorbonne University, Thursday, April 25 in Paris. 2024. French President Emmanuel Macron will outline his vision for Europe as a more assertive global power at the backdrop of war in Ukraine, security, and economic challenges in a speech ahead of pivotal election for the European Parliament in June. (Christophe Petit Tesson, Pool via AP)
French President Emmanuel Macron delivers a speech on Europe in the amphitheater of the Sorbonne University, Thursday, April 25 in Paris. 2024. French President Emmanuel Macron will outline his vision for Europe as a more assertive global power at the backdrop of war in Ukraine, security, and economic challenges in a speech ahead of pivotal election for the European Parliament in June. (Christophe Petit Tesson, Pool via AP)
French President Emmanuel Macron delivers a speech on Europe in the amphitheater of the Sorbonne University, Thursday, April 25 in Paris. 2024. French President Emmanuel Macron will outline his vision for Europe as a more assertive global power at the backdrop of war in Ukraine, security, and economic challenges in a speech ahead of pivotal election for the European Parliament in June. (Christophe Petit Tesson, Pool via AP)
French President Emmanuel Macron delivers a speech on Europe in the amphitheater of the Sorbonne University, Thursday, April 25 in Paris. 2024. French President Emmanuel Macron will outline his vision for Europe as a more assertive global power at the backdrop of war in Ukraine, security, and economic challenges in a speech ahead of pivotal election for the European Parliament in June. (Christophe Petit Tesson, Pool via AP)
French President Emmanuel Macron delivers a speech on Europe in the amphitheater of the Sorbonne University, Thursday, April 25 in Paris. 2024. French President Emmanuel Macron will outline his vision for Europe as a more assertive global power at the backdrop of war in Ukraine, security, and economic challenges in a speech ahead of pivotal election for the European Parliament in June. (Christophe Petit Tesson, Pool via AP)
French President Emmanuel Macron delivers a speech on Europe in the amphitheater of the Sorbonne University, Thursday, April 25 in Paris. 2024. French President Emmanuel Macron will outline his vision for Europe as a more assertive global power at the backdrop of war in Ukraine, security, and economic challenges in a speech ahead of pivotal election for the European Parliament in June. (Christophe Petit Tesson, Pool via AP)
French President Emmanuel Macron delivers a speech on Europe in the amphitheater of the Sorbonne University, Thursday, April 25 in Paris. 2024. French President Emmanuel Macron will outline his vision for Europe as a more assertive global power at the backdrop of war in Ukraine, security, and economic challenges in a speech ahead of pivotal election for the European Parliament in June. (Christophe Petit Tesson, Pool via AP)
French President Emmanuel Macron delivers a speech on Europe in the amphitheater of the Sorbonne University, Thursday, April 25 in Paris. 2024. French President Emmanuel Macron will outline his vision for Europe as a more assertive global power at the backdrop of war in Ukraine, security, and economic challenges in a speech ahead of pivotal election for the European Parliament in June. (Christophe Petit Tesson, Pool via AP)
French President Emmanuel Macron arrives to deliver a speech on Europe in the amphitheater of the Sorbonne University, Thursday, April 25 in Paris. 2024. French President Emmanuel Macron will outline his vision for Europe as a more assertive global power at the backdrop of war in Ukraine, security, and economic challenges in a speech ahead of pivotal election for the European Parliament in June. (Christophe Petit Tesson, Pool via AP)
French President Emmanuel Macron delivers a speech on Europe in the amphitheater of the Sorbonne University, Thursday, April 25 in Paris. 2024. French President Emmanuel Macron will outline his vision for Europe as a more assertive global power at the backdrop of war in Ukraine, security, and economic challenges in a speech ahead of pivotal election for the European Parliament in June. (Christophe Petit Tesson, Pool via AP)
French President Emmanuel Macron delivers a speech on Europe in the amphitheater of the Sorbonne University, Thursday, April 25 in Paris. 2024. French President Emmanuel Macron will outline his vision for Europe as a more assertive global power at the backdrop of war in Ukraine, security, and economic challenges in a speech ahead of pivotal election for the European Parliament in June. (Christophe Petit Tesson, Pool via AP)
French President Emmanuel Macron speaks during a media conference at an EU summit in Brussels, Thursday, April 18, 2024. European Union leaders on Wednesday debated a new "European Competitiveness Deal" aimed at helping the 27-nation bloc close the gap with Chinese and American rivals amid fears the region's industries will otherwise be left behind for good. (AP Photo/Omar Havana)
