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Mario Draghi has been relatively upbeat about prospects for growth in the eurozone during his latest monetary policy update this afternoon, but political risks including Brexit and upcoming elections in France are the biggest threat to the sunny outlook, he says.
Asked about the potential impact of upcoming European elections and potential changes in transatlantic relations under the Trump administration, Mr Draghi said the relative importance of geopolitical risks has increased.
We would say that the domestic sources of risk have been more contained, the importance of domestic risk has decreased; the geopolitical global risks’ share of importance, if anything, has gone up.
However, he still remained relatively positive, noting that the currency area has thus far held up well despite the shocks of the last year:
There are certain risks that are unambiguously negative – we know that certain of these events, and I don’t want to point out which one, will produce in the medium term a negative consequence, but so far …we haven’t seen yet a significant economic impact.
We know that these are risk events, we don’t know how those risk events will reverberate on the economic situation.