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Draghi: choppy waters ahead?

Monday, September 29, 2014 - 02:20

More bad news for the euro zone - economic sentiment deteriorated in September to levels last seen in late 2013. As David Pollard reports, inflation expectations also continued to fall increasing pressure on ECB chief Mario Draghi.

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Europe at its most glamorous as a Hollywood heart throb and his bride set off in Venice - on a boat called 'Love'. It's not plain sailing for Europe's economy. Latest figures show consumer confidence slipping to levels not seen since late last year. And inflation expectations down again. It's a glaring contrast to the US. There, strong job numbers this week may give the Fed the green light to halt QE. A measure that's still only being thought about here. Madhur Jha, Senior Global Economist, Standard Chartered. SOUNDBITE (English) MADHUR JHA, SENIOR GLOBAL ECONOMIST, STANDARD CHARTERED: ''The fundamentals of these two economies are quite different. The US is improving, inflation is not so much a source of a concern, growth is picking up. In the euro area, growth is still fragile, there is risk of deflation and again the impact of the Ukraine/Russia crisis and other factors might affect sentiment. And so the ECB has to do a little bit more to support the economy, and that's why you're seeing this divergence of policy coming through.'' Mario Draghi will be in Italy too this week as Naples hosts the latest ECB meeting. For him, the less glamourous task of detailing his latest asset-buying programme. QE could be down the road. In the meantime, Draghi's been calling on core euro area members - like Germany - to boost domestic demand. That might give Europe's growth story a new impetus. But a German Yes to the plan would put Chancellor Merkel in a tight spot. Nomura's senior analyst Alastair Newton. SOUNDBITE (English) ALASTAIR NEWTON, NOMURA: ''On the political front, Alternative für Deutschland, the right-of-centre, anti-European - I don't think that would be too strong a term - party, has averaged around about ten per cent of the vote in three state elections which have taken place this month. That is causing some concern on the right of Merkel's CDU. She may well be dragged away from the centre ground which she's occupying at the moment and into a tougher political stance on some of these issues.'' Some see a compromise possible - with more public spending in exchange for more French and Italian economic reform. Finding a formula to make everyone happy could be a tricky course for Draghi to steer.

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Draghi: choppy waters ahead?

Monday, September 29, 2014 - 02:20