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Greece's strategic geographical advantage...
Greek crisis: Alexis Tsipras vows ‘credible’ reforms as deadline looms
THE AUSTRALIAN JULY 09, 2015 7:55AM
Jacquelin Magnay
European Correspondent
It has been the elephant in the room of discussions between Greece and its European lenders, but now the imposing bulk of ‘’geographical considerations’’ is being keenly felt in the final frantic hours of deal making before this Sunday’s last-ditch summit deadline.
In his speech to the European parliament yesterday, Alexis Tsipras quietly mentioned Greece’s geographical advantages, but it was largely overlooked because of his earlier reference to his country being a failed “austerity laboratory”. But now, Greece has finally lodged, in writing, a request for an undisclosed sum of money from Europe’s emergency fund — the European Stability Mechanism to tide the country over for the next three years, enabling it to pay debts to the European Union, International Monetary Fund and the European Central Bank.
In return the Greek government is promising to undertake immediate tax and pension reforms, but again insisting on some form of debt sustainability — the major sticking point of the lenders. Yet the political costs of allowing Greece to slide out of the euro is finally beginning to overshadow the economic ones.
Tsipras played the Russian card when he called the prime minister Vladimir Putin hours after last Sunday’s stunning referendum roundly rejecting further European led austerity measures against the country. Germany, which must get approval from the Bundestag for new disbursement of funds to Greece, has hardened its position, even though the US president Barack Obama has called the German Chancellor Angela Merkel to stress his preference that Greece remains tied tight to Europe. The last thing the US, and Europe wants, is the sight of Russian warships in the Mediterranean, courtesy of Greece’s invitation to use its waters.
France has been one of Greece’s key allies in the past five months of talks, and yesterday the Prime Minister Manuel Valls warned of the geopolitical consequences if other European countries maintained a hard-nosed position.
He told the France National Assembly that keeping Greece in the eurozone and in the ‘’heart of Europe’’ would be of the ‘’utmost geostrategic and geopolitical importance’’. As well as the Russian threat, Greece is the frontline barrier to Europe for tens of thousands of Syrian and Afghanistan migrants — most of which have transit through Turkey.
US Treasury secretary Jacob Lew has noted too how the IMF — which said Greece needed a €50bn bailout and haircut of debt relief in a leaked document — had correctly focused on the unsustainability of Greek debt. He said yesterday that the lenders risked making a mistake for Europe.
“There are a lot of unknowns if this goes to a place that completely melts down in Greece,’’ Lew said.” I think that is a risk that the Europeans and the global economy don’t need. I think geopolitically it would be a mistake.’’
All the while, Tsipras, with his smiling charm has demanded all of Europe share in the current financial pain of Greece. To the Greeks he relayed that Europe has finally realised the Greek problem was theirs. And to the parliament, he said, “This is not a Greek problem, this is a European problem. European problems require European solutions.’’ This is Tsipras at his most subtle. He may well have said ‘’look at a map’’.
UK pound surges as BoE hints at rate rise
Date
July 15, 2015 - 4:17PM
Mark Mulligan
Markets and economy reporter
The latest jump in the UK currency was sparked by comments from Bank of England governor Mark Carney that officials were edging closer to an interest rate rise
The British pound has surged to six and a half year highs against the Australian dollar amid growing signs that the Bank of England may beat the US Federal Reserve in lifting interest rates this year.
In late local trade, the Australian dollar was fetching 47.7 British pence, its lowest exchange rate since the final days of 2008.
The Aussie has been steadily declining against the UK currency since September last year, although it finally broke down through the psychologically-important 50 pence level in late-May.
The fall can be attributed to broad weakness in all commodity currencies against a strengthening US dollar, coupled with growing support for the pound from rapidly improving economic fundamentals.
The Bank of England's move towards monetary tightening while the Reserve Bank of Australia keeps the chances of a further cut alive is likely to consolidate the trend.
On Wednesday, the Aussie firmed slightly against the greenback after data from China showed that gross domestic product at Australia's biggest trade partner grew 7 per cent year-on-year, above market expectations and in-line with official targets.
In late trade, the local unit was fetching US74.69¢, compared with US74.43¢ at the same time on Tuesday.
The latest jump in the UK currency against the Aussie and a range of other currencies was sparked by comments from Bank of England governor Mark Carney that officials were edging closer to their first interest rate rise in more than eight years.
The key bank rate has been stuck at 0.5 per cent since March 2009, just as the recessionary fallout from the global financial crisis started to bite the world's fifth biggest economy.
"The point at which interest rates may begin to rise is moving closer given the performance of the economy," Mr Carney told a parliamentary hearing in London on Tuesday.
The comments, Mr Carney's first on monetary policy in weeks, came shortly after data showed Britain's inflation rate fell back to zero in June, led by prices for food and clothing.
However, like at the US Fed, RBA and a range of central banks grappling with disinflation and deflation, the policy-making focus is increasingly on the job market, where real inflationary pressures are expected to be strongest.
"Wages are beginning to grow, interest rates are at historically low levels, and so households should begin to manage their finances with the assumption that there should be an upward adjustment in interest rates," Mr Carney told the parliamentary hearing.
Data due out later on Wednesday (AEST) will show earnings rose an annual 3 per cent in the three months to May, compared with 2.7 per cent in April, according to a Bloomberg survey of economists.
The UK unemployment rate is also expected to have steadied at 5.5 per cent, its lowest since 2008.
Migrants stake all in game of cat and mouse
Rory Mulholland ; Greg Walton
1063 words
31 Jul 2015
The Daily Telegraph
DT
English
The Daily Telegraph © 2015. Telegraph Media Group Ltd.
Thousands laying siege to the tunnel risk death every night, but refuse to be deterred from reaching El Dorado across the Channel Battle in Calais
"BEWARE - Do Not Add To Recent Deaths - Danger of Death," says the sign in English, French, Arabic and several other languages posted on the barbed wire fence around the Channel Tunnel terminal.
But the stark warning is not enough to deter the hundreds of migrants who try night after night to find a breach in the fence, believing that they will find a better life at the other end of the tunnel.
The situation in the French port has reached fever pitch in recent days, and the situation is only likely to get worse as camps swell and those caught attempting to get through the fence are released to try again.
The nightly ritual at the terminal sees around 2,000 migrants try to break through. Theresa May, the Home Secretary, has voiced concerns that migrants may be rushing to make their attempt to cross the Channel before more secure fencing - paid for by Britain - goes up in the next few days.
Those waiting for the cover of darkness looked panicked by the idea of tighter security.
Others have blamed the surge at Calais on improved weather conditions in the Mediterranean, meaning more people have been able to reach Europe via Libya and Egypt. Uhrad, 30, an Eritrean accountant who reached the Calais migrant camp last night, said that having made it this far, they would not be deterred by tightened security.
Summing up the determination at the port, he said: "You know people will make away - they will dig under the fence. The ferries became too diffi-cult so now they are trying the trains. People will swim if that's too difficult."
By around 2am yesterday the port was buzzing with activity, with French riot police watching from a distance, ready to move in when they saw migrants climbing over or cutting their way through the double fence that is lined with barbed wire at the top, bottom and the space in between. "I don't care if they put a fire there. I'll still get over it," said 28-year-old Darood, who claims he had fled his native Ethiopia after most of his family members were killed. He watched keenly as a train carrying lorries lumbered by under the floodlights just a few dozen yards away, about to be swallowed up by the tunnel.
Darood failed to make it through yesterday, but said he would keep trying until he finally reached the country that he and most of the other migrants here see as some sort of El Dorado.
Many have made it, and many more are likely to do so as police admit they have been overwhelmed by the growing numbers of migrants who have turned their attention away from Calais ferry port - after security was improved there - to make their desperate dashes at the tunnel terminal.
"It's like trying to swat moles," said Claude Verri of the UNSA police union. "All we can do is take them out of the terminal area and then leave them there. And then five minutes later they can be back inside again."
Police said yesterday that overnight they had arrested around 300 people trying to break into the tunnel terminal.
But all they do is take migrants who have breached the fence, or were caught trying, and put them on a bus that at dawn deposits them at a roundabout on the edge of Calais.
From there they head back to the Jungle - the vast migrant shanty town among sand dunes several miles away - and rest for the day before planning their next assault on the terminal.
This is the cat and mouse game between the police and migrants. Every time a hole in the fence is made, workers fix it. Lines of officers try to push the migrants back.
There was a moment of tension but the confrontation was mostly good-humoured, with one officer's appeal to the migrants to "Come back tomorrow" being met with laughter. "We want to go today," someone shouted back.
"If we had no problems in our countries we wouldn't be here," said Abdurahmen, a young Sudanese man who said he had taken a perilous journey through Libya and across the Mediterranean on a rickety boat to reach Europe.
"None of us want to live like this. I just want to live in Britain, make a family, take my kids to school."
Exactly how many eventually get to England no-one knows, but officials say that they prevented 18,000 stowaways from entering the country between January 1 and May 21.
Some migrants die in their attempt. At least 10 have lost their lives since June, through electrocution or by falling off trains or lorries.
The latest death, officials said, was that of a migrant who leapt on to a Eurotunnel shuttle train but smashed his head on the platform. He died on Tuesday from his injuries.
The massive migrant presence and wildcat strike action by ferry workers have this summer crippled Calais and caused travel chaos for holidaymakers and truckers alike as ferry and train services are repeatedly brought to a halt. Many people of Calais express sympathy for the plight of the migrants, many of whom are women and children, but say their town has suffered enough and the crisis must be resolved.
"Calais is suffocating. The tourists have stopped coming here because all they see on the telly is stories about migrants and they are afraid to come," said Gilles Duvauchelle, the owner of Le Bounty café in the town centre.
Several customers at the bar nodded in agreement, with one woman saying that Britons used to come in large numbers to stock up on wine and French food in the hypermarkets on the edge of town. But now they have dwindled to a trickle, she said.
"The government is incompetent," said Mr Duvauchelle. "When migrant camps build up in Paris they move them on. But when they're here in Calais, they don't give a damn."
'It's like trying to swat moles. All we can do is take them away. Five minutes later they're back'
Telegraph Media Group Ltd.
Document DT00000020150731eb7v0005m
Europe's refugee tragedy threatens to split east and west
The magnitude of the refugee crisis is threatening the very future of the European Project.
NaN of
[img=620x0]http://www.afr.com/content/dam/images/g/j/c/k/2/9/image.related.afrArticleLead.620x350.gje6gb.png/1441258848461.jpg[/img]Protesters in Vienna demonstrate for a change in Europe's refugee policy. Reuters
by James Chessell
When the decomposing bodies of 71 refugees were found inside an abandoned poultry truck on the side of the main highway to Vienna last week, it seemed as if this summer's migrant crisis in Europe could not get any worse.
Austrian police at the scene a few kilometres from the Hungarian border described the smell of death as "overpowering". The bodies were only discovered because a man mowing the grass nearby had noticed rancid liquid dripping out of the back of the refrigerated lorry. Among the dead were four children, including a baby girl.
Yet in the past 48 hours the sense of catastrophe engendered by Europe's biggest influx of migrants in five decades has intensified.
Added to the catalogue of horror, tragedy and desperation were shocking images of a three-year-old boy lying face down in the surf near the Turkish resort of Bodrum. He was one of at least 11 Syrians drowned trying to reach the Greek island of Kos.
[img=620x0]http://www.afr.com/content/dam/images/g/j/e/8/x/r/image.imgtype.afrArticleInline.620x0.png/1441258141718.jpg[/img]A paramilitary police officer carries the lifeless body of a migrant child after a number of migrants died and a smaller number were reported missing after boats carrying them to the Greek island of Kos capsized, near the Turkish resort of Bodrum early Wednesday, Sept. 2, 2015. (AP Photo/DHA) TURKEY OUT AP
Photos of a Turkish border guard with the boy's lifeless body taken on Wednesday morning were the top trending pictures on Twitter under the hashtag #KiyiyaVuranInsanlik (humanity washed ashore).
As the bodies began to wash up on the Turkish beach, hundreds of migrants gathered outside Budapest's biggest railway station demanding to be let in so they could travel west to Germany and beyond.
"Merkel, we want to leave!" shouted the crowd holding their children aloft, in a plea to German Chancellor Angela Merkel. The station had been closed as part of efforts to protect the Hungarian capital from what Budapest's mayor described as an "uncontrolled flood".
On the border between Morocco and the Spanish enclave of Ceuta, an African man was found squeezed behind the engine block of a car choking on petrol fumes. Ceuta is the same place where people traffickers tried in May to smuggle an 8-year-old boy from the Ivory Coast across the border hidden inside a suitcase.
In Norway, more than 130 Syrian refugees have begun to cycle across the border from Russia. It is illegal to enter Norway on foot or by car if you don't have the right papers. However, bicycles are allowed. And somewhere under the English Channel, passengers on the 7:13pm Eurostar service spent the night on board the train while police cleared migrants from the track. They did not arrive in London until 10:50am the next morning.
The magnitude of the refugee crisis is threatening to overwhelm Europe. One of the crowning achievements of the "ever closer" union formed out of the rubble of World War II – alongside democracy and free markets – was the creation of the passport-free Schengen travel zone. Comprising 22 European Union countries and Iceland, Liechtenstein, Norway and Switzerland, Schengen has arguably been a united Europe's most popular founding principle – particularly for the millions of people who emerged from behind the Iron Curtain.
Yet a significant change in the pattern of migration has left Europe's system for dealing with asylum seekers in tatters. Last year, the majority of migrants made their way to Europe through Libya before landing in Italy or Malta. While the journey by sea was by no means safe, refugees had a relatively straightforward journey through safe countries once they made to land.
This year the numbers have not just grown – German and Hungarian officials both registered a new daily records for new arrivals on Tuesday – as people flee conflicts in Syria, Afghanistan, Iraq and parts of Africa. More migrants are entering through Greece and Hungary because Libya is stricken by civil war. As a result refugees are forced to make the dangerous journey through the Balkans relying on criminal gangs in order to reach preferred destinations such as Germany or Sweden. Greece's ability to deal with boatloads of refugees is poor.
FUTURE OF EUROPE AT STAKE
This influx has put Europe's open borders under extreme pressure and exposed simmering tensions between the continent's east and west about how to handle immigration. Europe's response to its biggest challenge since the fall of the Berlin Wall will not just have huge ramifications for the relationships within the union but could decide whether countries such as Britain remain part of Europe at a time when populist anti-EU sentiment is on the rise. The very future of the European Project is at stake.
"It is clear the Schengen Agreement is crumbling, as recent events are putting so much pressure on the political agreement," Nigel Farage, leader of the anti-EU UK Independent Party leader told The Telegraph.
"Schengen has now hit the buffers of the real world and is falling apart. In a crisis, national interests always prevail over European ideology."
The risks to a united EU have been laid bare this week. Unlike Australia, where the Abbott government response to asylum seekers has focused on "stopping the boats" and cracking down on people-smugglers, the debate in Europe has been mostly confined to the issue of how EU members should accept the new arrivals.
Increasingly frustrated by what she sees as a shirking of responsibility by eastern nations to accept their share of often-Muslim migrants, Merkel has warned that the Schengen area could be in jeopardy unless the EU agrees on quotas.
"I believe that our values in Europe are based on the dignity of every individual, without saying 'We don't want Muslims, we are a Christian land'" she said on Monday.
The foreign ministers of Europe's three biggest nations – Germany, France and Italy – backed these words on Wednesday in an open letter calling for an an overhaul of asylum law and a "fair distribution of refugees throughout the European Union".
In some ways Germany has assumed a similar role to the one it played during the Greek bailout talks earlier this year when it pushed a smaller, poorer country to adopt rules it was not initially prepared to follow. This approach leaves Berlin open to accusation it is exerting too much power.
Certainly, the response from former Communist countries has been lukewarm at best.
Hungary's conservative prime minister, Viktor Orban, is expected to travel to Brussels on Thursday to declare that his country will not accept Muslim migrants even if it means breaking EU rules against discrimination.
Hungary, which has struggled to process more than 130,000 refugees this year, has erected a 175-kilometre-long razor-wire fence along its southern border. Slovakia, Poland and the Czech Republic are also unlikely to back a system of permanent quotas expected to be announced by European Commission president Jean-Claude Juncker next week.
This raises the prospect of a showdown between eastern and western European members in the coming weeks. European Commission vice-president Frans Timmermans, of the Netherlands, warned that Brussels would punish countries with the loss of funding and voting rights if they failed to follow the EU's asylum rules.
Timmermans said Europe's divided response could lead to a "worrying rise in anti-Muslim hatred" and said he would fight "highly sensitive challenges to the rule of law".
At the same time, German officials have warned Britain – whose share of European asylum claims has fallen since 2008 – that it must take its fair share of migrants or put its bid to win back powers from Brussels in jeopardy. Ahead of an "in-out" referendum on the UK's membership of the EU, British Prime Minister David Cameron has said he will only support the status quo if the EU has less influence in domestic matters.
The loss of German support would almost certainly mean any attempt by the Conservative Party's Cameron to renegotiate the rules would fail and give the "out" camp a boost. But Cameron has repeatedly promised to curb the number of immigrants entering the UK and issued a strong response to Berlin on Wednesday.
"We have taken a number of genuine asylum seekers from Syrian refugee camps and we keep that under review, but we think the most important thing is to try to bring peace and stability to that part of the world," Cameron said during a visit to Northamptonshire.
"I don't think there is an answer that can be achieved simply by taking more and more refugees."
Cameron concluded his remarks by saying Europe faced "big challenges but we will meet them". The EU's response to the migrant crisis thus far does not suggest his prediction will be proven right.
ECB ready to spur growth
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European Central Bank president Mario Draghi at a meeting in Luxembourg earlier this month. Picture: AFPSource: AFP
[b]The European Central Bank shared the US Federal Reserve’s worries about the health of the world economy, ECB chief economist Peter Praet said in an interview with a Swiss publication over the weekend.[/b]
In the interview with Neue Zuercher Zeitung, Mr Praet signalled that the ECB was prepared to expand its stimulus measures to ensure inflation returned to the bank’s target near 2 per cent.
“If we judged that shocks were sufficiently severe and persistent to weaken the inflation outlook for the euro area, we would not hesitate to act,” he said.
His comments came two days after the Fed decided to keep its policy rate near zero. In a statement the Fed said: “Recent global economic and financial developments may restrain economic activity somewhat.”
Dow Jones newswires
ECB chief to signal more stimulus to lift eurozone
- THE TIMES
- OCTOBER 19, 2015 12:00AM
[Image: 464271-1c59b024-7545-11e5-aecd-070d43501fda.jpg]
ECB president Mario Draghi is expected to signal another wave of stimulus. Source: Supplied
[b]European Central Bank president Mario Draghi is expected to signal this week that he is ready to launch another wave of monetary stimulus to boost the eurozone economy.[/b]
European rate-setters meet on Thursday in Malta to decide whether the economy needs another shot in the arm. Analysts expect the ECB to keep rates on hold, but think it will signal another phase of quantitative easing, or QE2, before the end of the year.
Despite initial hopes that QE1 had boosted the euro area, policymakers fear it has not done enough to banish the threat of deflation. Eurozone inflation dipped 0.1 per cent in September following a 0.1 per cent rise in August, according to data out last week. This was its lowest level since March.
The euro is also 1 per cent higher than at the last ECB meeting in September, which could weigh on exports and therefore inflation. German exports and industrial production both fell sharply in August.
Analysts say Draghi could increase the amount of asset purchases from the current €60 billion a month, or extend the program into 2017.
“Without a quick response from the ECB, we think the new configuration for world demand combined with tightened financial conditions could cost the euro area’s GDP growth 0.2 to 0.3 percentage points,” said Gilles Moec at Bank of America Merrill Lynch.
The Sunday Times
http://www.cnbc.com/2015/10/22/european-...-lows.html
Draghi warns on China, hints at further QE to come in December
Jenny Cosgrave | @jenny_cosgrave
8 Hours AgoCNBC.com
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European Central Bank president Mario Draghi has suggested that the euro zone's trillion-euro bond-buying program will need to be "re-examined in December" as inflation remains stubbornly low amid emerging market weakness.
Draghi said the strength and persistence of factors slowing inflation require "thorough analysis" as he reiterated the central bank's commitment to use all measures available to it to tackle the lackluster growth seen in the euro zone.
[Image: 102358934-459928714.530x298.jpg?v=1435778561]Thomas Lohnes I Getty Images
European Central Bank President Mario Draghi arrives for a press conference following the monthly ECB board meeting in the new ECB headquarters in Frankfurt am Main, Germany, Dec. 4, 2014.
"The asset-purchase plans are proceeding smoothly and continue to have a favorable impact," ECB President Mario Draghi said at a news conference in Malta.
But worries about the strength of emerging market economies and the volatility seen in commodity prices mean the "degree of policy accommodation will need to be re-examined in December," he said. This was widely seen as an indication that the bank's one trillion euro ($1.1 trillion) quantitative easing (QE) program will either be expanded or extended beyond its original September 2016 deadline.
"All eyes are now on the 3 December ECB meeting, when inflation forecasts for 2016 and 2017 are also released. If the 2017 forecast is revised down to around 1.5 percent, there is a strong argument for further easing of monetary policy," said head of euro zone sovereign rates at Aviva investors, Geoffroy Lenoir.
[url=http://www.cnbc.com/2015/10/21/keep-ecb-qe-going-malta-finmin.html][Image: 101259676-175889987.80x60.jpg?v=1386660286]
Keep ECB QE going: Malta FinMin
"Options in those circumstances include extending the duration of QE beyond September 2016 or raising the ceiling for asset purchases, which is already very high at 60 billion euros. Extending QE is the more likely of the two," he added.
The euro slumped to a three-week low against the dollar, falling around 1.3 percent to $1.11 below after Draghi said the ECB was open to a "whole menu" of policy instruments.
Draghi highlighted the challenges that emerging market economies were facing, specifically mentioning China as a key external headwind to the stability of the euro area.
"As it happens, we doubt that the risk from emerging markets is too serious," said senior European economist at Capital Economics, Jennifer McKeown.
"Nonetheless signs of a slowdown in the domestic economy and the continued absence of inflationary pressure warrants stronger policy support. We have penciled in an increase in the monthly pace of asset purchases from 60 billion euros to 80 billion euros, to be announced after the next meeting on 3rd December," she said.
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Europe ends up 2% on ECB hints; euro slips, earnings eyed
Draghi's comments come after the European Central Bank left its key interest rates unchanged at record lows on Thursday.
The 25-member Governing Council kept the main refinancing rate at 0.05 percent at its meeting in Malta, rather than the regular policy meeting venue of the headquarters in Frankfurt.
The rate on overnight deposits also remained at -0.2 percent, meaning banks have to pay to park their deposits wit the ECB. The marginal lending rate also stayed the same at 0.3 percent.
The massive QE program was launched in March this year to help push inflation back towards the targeted 2 percent level and boost liquidity in the 19-country euro zone.
However, bank lending remains low and prices in the euro area fell by an average of 0.1 percent in September. Growth remains uneven, with the economies of Italy, Greece, Finland and Austria seen expanding by less than 1 percent this year.
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Jenny CosgraveWriter / Producer, CNBC.com
ECB president Mario Draghi reignites currency war talk
NaN of
[img=620x0]http://www.afr.com/content/dam/images/g/j/e/s/p/r/image.related.afrArticleLead.620x350.gkge2i.png/1445551301193.jpg[/img]The 'governing council recalls that the asset purchase programme provides sufficient flexibility in terms of adjusting its size, composition and duration," says European Central Bank president Mario Draghi. AP
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by Karen Maley
Global currency wars are back on in earnest, with the euro tumbling after European Central Bank (ECB) boss Mario Draghi signalled the bank stood ready to boost the "size, composition and duration" of the bank's bond-buying program.
The ECB's move to boost its monetary stimulus, which drives down eurozone bond rates and puts downward pressure on the euro, comes as US Federal Reserve board members appear deeply divided on whether to proceed with plans to raise US interest rates this year.
While the Fed dithers, the market has already ruled out an interest rate cut this year, which has pushed lower both US bond yields and the greenback.
But as it grapples with feeble economic activity and inflation falling into negative territory, the last thing the ECB wants is to see the euro strengthening against the US dollar. A stronger euro will act as a drag on eurozone growth, because it will make the region's exports more expensive in global markets. And the ECB cannot stand by idly and watch as the slight progress it has made in terms of boosting economic activity is destroyed by a strong currency.
As a result, Draghi has little choice but to fire up the printing presses even more by signalling that the central bank's €1.1 trillion ($1.7 trillion) bond-buying program could be "re-examined" in December, and by refusing to rule out further interest rate cuts.
Speaking in Malta, Draghi said the European central bank's "governing council recalls that the asset purchase programme provides sufficient flexibility in terms of adjusting its size, composition and duration."
At the moment, the ECB is buying €60 billion of mostly government bonds each month, and many analysts expect this will be increased to €80 billion a month at the ECB's December meeting. The ECB might also cut the rate charged on banks' deposits parked at the ECB, which is minus 0.2 per cent at present, even further.
"The degree of monetary policy accommodation will need to be re-examined at our December policy meeting when the new … projections will be available," Draghi told reporters.
Not surprisingly, the euro sank against the US dollar on Draghi's comments and bond yields, which move inversely to prices, dropped sharply. Benchmark 10-year Italian and Spanish bond yields fell to their lowest level since April, while the yield on two-year German bonds hit a record low of 0.32 per cent.
Speaking at the ECB's governing council meeting, Draghi invoked the customary politeness of central bankers and stressed his policies were not aimed at reaching a particular foreign exchange rate target. He noted the euro had been appreciating "to a somewhat significant level" and noted the stronger currency was putting yet more downward pressure on inflation.
Reigniting inflation is important for Draghi because deflation makes it harder for governments, businesses and households to service heavy debt burdens. What's more, a prolonged period of falling prices hurts spending, and increases the real (after adjusting for inflation) interest rate that households and businesses have to pay.
Investors were impressed by Draghi's clear resolve to provide yet more monetary stimulus, and his statement that the ECB's stance was one of "work and assess", not one of "wait and see".
But Draghi also stressed eurozone governments needed to do more to ensure the region returned to sustainable growth, through investing in infrastructure projects and undertaking structural reforms. Monetary policy, he complained, "shouldn't be the only game in town".
Worries of eurozone downturn from Paris attacks appear unfounded
[img=620x0]http://www.afr.com/content/dam/images/g/l/0/k/d/p/image.related.afrArticleLead.620x350.gl0jzq.png/1447721179019.jpg[/img]Some worry that the Paris terrorist attacks could prompt Parisians to change behaviour and spend less time in cafes and restaurants.
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by Karen Maley
Mario Draghi's virtual promise of more monetary stimulus from the European Central Bank has helped dispel investors' concerns that Friday's terrorist attacks in Paris could trigger an economic downturn in the eurozone.
In the first day of trading after the terrorist attack, France's CAC 40 closed only 0.1 per cent lower on Monday, having rebounded from the 1 per cent drop at the opening, while London's FTSE 100 ended 0.5 per cent higher.
All the same, investors have a wary eye on European tourism-related stocks. Shares of the French hotel group Accor fell almost 5 per cent, while InterContinental Hotels shares dropped almost 2 per cent and Eurotunnel, which operates the Channel tunnel, fell more than 3 per cent.
Airline stocks were also hit hard, with IAG, the parent of British Airways and Iberia, falling 2.8 per cent, while Air France-KLM dropped 5.7 per cent.
Investors were also nervous about luxury stocks, with the Paris-listed LVMH falling 1.4 per cent, as did Hermes. The British luxury goods group Burberry also fell by more than 1 per cent.
But analysts are divided on whether these sectors – hotels, airlines and luxury goods – will suffer a lasting fall.
Some argue that it makes sense for consumers to cut their spending levels, as they set more money aside for an uncertain future.
OPPOSITE WAY
Others believe consumers could react in the opposite way and lift their spending on luxury goods in an attempt to bolster morale. What's more, they point out that with the rise of the internet it is possible now for consumers to buy online, without leaving the safety of their homes.
There is similar disagreement about the effect of the terrorist attack on economic activity.
The French economy has been mired in sluggish growth for much of 2015, although figures released last week showed France's economy expanded 0.3 per cent in the third quarter, slightly better than expected.
But there are fears that Friday's terrorist attacks could derail this nascent recovery, by making French companies even more reluctant to commit to large investment projects.
There are also worries that the attacks could cause Parisians to change behaviour and spend less time in cafes and restaurants. Parisian restaurant owners reported that on the day after the terrorist attacks, turnover dropped more than 60 per cent compared with a normal Saturday. Business picked up a little on Sunday, with turnover only about one-third lower than usual.
History, however, offers little guidance as to the probable impact of Friday's terrorist attacks on the French economy.
After the Charlie Hebdo attack in January, France's economy recorded strong growth of 0.7 per cent in the first quarter. But analysts say the January attack was more contained, whereas November 13 was an attack of unprecedented scale.
AVOID THE CITY
What's more, if Paris were to come under attack again, it's likely foreign tourists would avoid visiting the city and even skip France altogether.
In a report published in October, Moody's Investors Service said terrorist attacks "significantly weaken economic activity, with long-lasting effects on the economy".
Short-term gross domestic product growth in the 10 countries most affected by terrorism shrank between 0.5 to 0.8 of a percentage point in 2013, while investment growth slumped between 1.3 and 2.1 percentage points, the report said.
Four countries – Iraq, Pakistan, Afghanistan and India – accounted for about two-thirds of terrorist attacks in 2013.
In contrast, previous terrorist attacks in developed countries appear to have had a more limited effect on economic activity.
After the September 11 attacks in New York and Washington in 2001, US household spending increased 1.5 per cent in the final quarter of 2001, compared with between 0.2 and 0.3 per cent in the previous three quarters.
Similarly, the Madrid train bombings in March 2004, did not disrupt the sustained expansion then under way in the Spanish economy, while the London bombings in July 2005 had little effect on the British economy.
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