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ECB’s Draghi cautions over Ukraine impact

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FRANKFURT, Germany (AP) — European Central Bank head Mario Draghi cautioned Thursday that the crisis in Ukraine could weigh on the fragile economic recovery in the 18-country eurozone.

Speaking Thursday after the bank kept its main interest rate on hold at the record low of 0.15 percent, Draghi said the bank will “closely monitor” the possible repercussions of “geopolitical risks” on the modest economic recovery in the eurozone. The possibility of an escalation in Ukraine has cast a shadow over the eurozone’s fragile upswing.

Draghi said the fallout from Ukraine was “hard to assess” but that sanctions and countersanctions could increase the impact. He said risks to the eurozone’s recovery “are to the downside and certainly one of these risks is geopolitical developments.”

At first glance, Draghi noted that the interconnections between the eurozone and Russian economies were limited, with “less than a handful of names” seriously exposed. However risks could rise “once sanctions on one side and counter sanctions on the other side” are imposed.

Draghi said early analysis focused on higher energy prices as a potential risk for Europe. He also mentioned Iraq, Gaza, Syria and Libya as sources of tension but added that the Ukraine-Russian conflict would be of more significance for the eurozone.

As well as keeping interest rates on hold, the ECB held off from announcing further stimulus measures to boost the recovery. Draghi called the recovery “weak, fragile and uneven” and that the recent economic data suggested a “slowing down in the growth momentum.”

The bank announced a big package of stimulus measures in June and is waiting to see how those work before doing more.

Draghi underlined that the bank’s 24-member governing council was ready to add new unconventional stimulus members if the economy takes a turn for the worse.

Associated Press

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