Weak potential growth across the euro zone threatens jobs, investment and confidence, European Central Bank chief economist Peter Praet said, calling on states to tackle long standing structural deficiencies to revive their economies.
“Low potential growth casts a shadow over the long-run economic prospects for the euro area, creating a negative feedback loop,” Praet told a business forum in Brussels.
“Because low potential growth dampens expectations of future income, it curbs consumption and investment today, which further lowers rates of potential growth tomorrow. This can lead to a permanent destruction of productive capacity, including jobs.”
Repeating the ECB’s guidance on monetary policy, Praet added that the ECB remains committed to preserving the “very substantial” amount of monetary accommodation needed to lift inflation back to the bank’s target of close to 2 percent.
Source: Reuters (Reporting by Balazs Koranyi; Editing by Toby Chopra)