Draghi: Increase in Consumption Poses a Risk to the Economy

The President of the European Central Bank (ECB), Mario Draghi, warned EU member state leaders that planned increases in consumption, despite the current acceleration of activities, pose a risk to the economy in the medium term.

In a regular briefing of heads of state and government, Draghi stated on Thursday, according to informed sources, that the European economy is growing at an unchanged pace based on consumption.

Investments, including those in residential real estate, are growing at a pace not seen since before the financial crisis, and the positive picture is rounded off by a decline in private sector debt and an improvement in capital indicators in the banking sector, noted the ECB chief.

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However, he warned of four medium-term, mostly external risks. At the top of the list are protectionist trends in trade, which he believes could directly impact the economy and undermine confidence.

His warning coincided with the preparation of the EU leaders’ response to tariffs threatened by U.S. President Donald Trump against the 28-member bloc.

The second risk is the loosening of financial regulations, with the ECB chief reminding that such a policy was among the triggers of the financial crisis.

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The third risk, according to him, is changes in asset prices, which pose a threat to the European economy due to its significant transatlantic exposure. He cited the wave of stock sales in U.S. markets at the beginning of the year as an example.

Finally, he mentioned fiscal policy, which he says is now “pro-cyclical,” especially in the United States, but also in the EU where many countries plan to ease austerity measures and increase consumption even though their economies have already begun an upward trajectory.