European Central Bank (ECB) President Mario Draghi told the European Parliament on Monday the eurozone would have been in deflation if the ECB hadn't taken measures such as its massive bond-buying or quantitative easing program. "If we hadn't taken action the eurozone would have been in discernible deflation, and growth would be 1% lower," Draghi said in answer to questions from MEPs.
As well, Draghi said "countries should benefit from growth-friendly budget policies (to be achieved via) more efficient public sectors and by moving towards a more growth-oriented taxation system".
"Budget policies should contribute to growth," Draghi said.
"At the same time, they should fully respect Stability Pact requisites," he added.
"This is important to maintaining confidence in the framework of EU rules," the EU central banker said.
Eurozone inflation is proving weaker than December forecasts, Draghi said earlier. "Conditions have changed since December," Draghi told the European Parliament. Internal demand is driving a moderate recovery, but uncertainties over emerging economies, market volatility, and geopolitical risks may drive prices lower, he said. "European cohesion is being tested," he added. The EU faces challenges that "require a strong European response," Draghi said. "There is still political uncertainty over the European project," he went on. "A solution firmly anchoring Great Britain to the EU, while at the same time allowing the eurozone to integrate further, would help shore up confidence," Draghi told MEPs.
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