EU leaders are set to hold an emergency summit on promoting growth and jobs next month at the suggestion of Italy, highlighting their concerns over the fragile economic recovery in the 28-country bloc.
“In recent weeks economic data have confirmed that the recovery, particularly in the euro area, is weak, inflation exceptionally low and unemployment unacceptably high,” read the statement issued after all 28 EU leaders met in Brussels late on Saturday.
The emergency summit is set to focus on “employment, especially youth employment,” which remains a big thorn in Europe’s side as it seeks to revive a stagnating economy.
Photo: AFP
Italy has been at the forefront of calls for greater flexibility from strict EU rules on budget deficits, alongside countries such as France, arguing that an excessive focus on German-style austerity has hampered Europe’s recovery.
“Europe must be more than the [bond] spread, rules and economic budgets,” Italian Prime Minister Matteo Renzi told reporters after the meeting in Brussels.
The latest inflation data for the eurozone showed that the single currency area was inching ever closer to zero inflation, a worrying situation considering its double-digit unemployment rate, stuttering growth and increasing signs of reform fatigue among eurozone governments.
A spokesman for Renzi said the emergency summit to tackle the economic situation would be held on Oct. 7.
A separate summit for the 18 eurozone members would also be held in the fall.
Meanwhile, financial markets are looking to the European Central Bank (ECB) to open the cash floodgates this week after consumer price data showed the 18-country eurozone is flirting with deflation, analysts said.
Speculation is rising that the central bank’s decisionmaking governing council could signal plans for quantitative easing (QE) at its regular monthly meeting on Thursday.
This is a radical policy — already used by other central banks such as the US Federal Reserve — of buying securities on a large scale to inject cash into the economy.
The central bank has already cut its key interest rates to record lows and made huge volumes of ultra-cheap cash available to banks in a bid to kickstart lending in the singe currency area.
However, the pressure has increased on the central bank to take still more measures after eurozone inflation slowed to a paltry 0.3 percent last month from the 0.4 percent recorded in the previous month. That is worryingly below the central bank’s target of just under 2 percent.
Deutsche Bank economists Mark Wall and Gilles Moec said that the central bank might embark on private QE — in the form of asset-backed securities (ABS) — as early as this week. Such a policy would greatly widen the range of paper assets which the central bank would buy from the balance sheets of financial companies, replacing them with ready cash.
“What we expect is not generic QE with government bond purchases, as other central banks have done,” they said. “We believe the ECB will engage in private QE, that is ABS purchasing as a complement to the [targeted longer-term refinancing operations] TLTRO.”
Additional reporting by AFP
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