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Draghi opts for more of the same as another crisis looms

The European Parliament’s Committee on Economic and Monetary Affairs held a meeting with Mario Draghi, President of the European Central Bank President in Brussels today to discuss, amongst other things, the ECB’s perspective on economic developments across the eurozone in light of the Brexit referendum.

Commenting on the meeting, GUE/NGL MEP and member of the ECON committee Matt Carthy said:

“This dialogue is taking place in the aftermath of the Brexit vote – a development which will cause serious economic problems in the north of Ireland if it is forced – against the will of the people – to leave the EU Customs Union.”

“Now we hear that the ECB intends to establish a ‘task force for economic reform’ to push structural changes – reforms that have so far only had a deflationary impact and caused an increase in poverty.”

Earlier, Carthy had directly questioned the ECB head over the legitimacy of his mandate in creating such a body. 

The Irish MEP also asked Draghi about the implications of the ECJ’s ruling last week that citizens affected by austerity can sue the ECB and the other Troika institutions over their decisions if they believe their fundamental rights have been violated.

Speaking on the possibility of another financial crisis developing, the Irish MEP said:

“We see a looming crisis in the Italian banking sector. Just this morning, news emerged that Deutsche Bank’s shares have fallen to a new low over doubts the bank will be able to pay multibillion-dollar fines for mis-selling mortgage-backed securities. The IMF has already said Deutsche Bank is the biggest risk to the global financial system due to is inter-connectedness with international banks.”

“In anticipation of the next crisis arising from these banks, we need effective action from the ECB to increase economic resilience and demand in the eurozone,” added Carthy.

“We know the ECB’s stimulus measures are not working. The Quantitative Easing programme has failed to meet its goals of higher levels of inflation in the eurozone so I welcome the fact that the ECB this month decided against extending the programme,” Carthy added

“We need to make direct payments to households and invest in public infrastructure rather than subsidising banks and corporations. When will this proposal, sometimes called 'helicopter money' – which has the support of many leading economists – finally be examined seriously by the ECB?”

Summing up after the hearing, Mr Carthy commented:

“Mr Draghi continues to bury his head in the sand on the many and varied crises developing in the eurozone. As usual he failed to meaningfully engage with questions from MEPs about the need for a comprehensive public investment programme, and his comments that the upheaval caused by a Brexit has been 'contained' is an entirely inadequate response for the leader of the ECB,” he concluded.