October 1, 2019 / 6:38 PM / 17 days ago

ECB's Draghi calls for euro zone stimulus to boost investment

FILE PHOTO: European Central Bank (ECB) President Mario Draghi testifies before the European Parliament's Economic and Monetary Affairs Committee in Brussels, Belgium September 23, 2019. REUTERS/Francois Lenoir

ATHENS (Reuters) - The European Central Bank’s President Mario Draghi called on Tuesday for euro-area-wide fiscal stimulus aimed at boosting investment, saying the latest steps in this direction are insufficient.

Draghi, who will be replaced by Christine Lagarde next month, was reinforcing his plea for euro zone governments to push the bloc’s economy out of the doldrums, complementing the ECB’s own ultra-easy policy.

“The most effective response...would be an investment-led stimulus at the euro area level,” Draghi said in Athens.

Euro zone finance ministers are not planning any joint spending plan but they said last month they were ready to act if the economy took a turn for the worse.

Draghi praised a euro zone budget due to come into being in 2021 as “a step in the right direction” but he added it was insufficient “in terms of size or design”.

He said public investments at a national level would also help. Citing an ECB study, Draghi said that raising productive public investment in Germany by 1% for 5 years could boost the economy by up to 2% and private investment by up to 2%.

But if that also failed to come through, Draghi reaffirmed the ECB’s commitment to its own stimulus policies, which saw it announce new bond purchases last month and pledge to keep the money taps open for as long as needed.

“Whichever route is taken, monetary policy will continue to do its job,” Draghi said. “The latest decisions of the Governing Council have shown its determination in the face of a continuously weakening outlook for growth and inflation.”

Writing by Francesco Canepa in Frankfurt; Editing by Chizu Nomiyama and Jane Merriman

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