Banks

Carney: UK is ‘investment banker for Europe’

The governor of the Bank of England has repeated his calls for a “smooth and orderly” UK exit from the EU, saying that a transition out of the bloc will happen, it was just a case of “when and how”. Responding to the BoE’s latest bank stress tests, where lenders overall emerged with more resilient […]

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Currencies

China stock market unfazed by falling renminbi

China’s renminbi slump has companies and individuals alike scrambling to move capital overseas, but it has not damped the enthusiasm of China’s equity investors. The Shanghai Composite, which tracks stocks on the mainland’s biggest exchange, has been gradually rising since May. That is the opposite of what happened in August 2015 after China’s surprise renminbi […]

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Capital Markets

Mnuchin expected to be Trump’s Treasury secretary

Donald Trump has chosen Steven Mnuchin as his Treasury secretary, US media outlets reported on Tuesday, positioning the former Goldman Sachs banker to be the latest Wall Street veteran to receive a top administration post. Mr Mnuchin chairs both Dune Capital Management and Dune Entertainment Partners and has been a longtime business associate of Mr […]

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Banks

Financial system more vulnerable after Trump victory, says BoE

The US election outcome has “reinforced existing vulnerabilities” in the financial system, the Bank of England has warned, adding that the outlook for financial stability in the UK remains challenging. The BoE said on Wednesday that vulnerabilities that were already considered “elevated” have worsened since its last report on financial stability in July, in the […]

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Property

Zoopla wins back customers from online property rival

Zoopla chief executive Alex Chesterman has branded rival OnTheMarket “a failed experiment”, and said that his property site was winning back customers at a record rate. OnTheMarket was set up last year, aiming to compete with Zoopla and Rightmove, the UK’s two biggest property portals. It allowed estate agents to list their properties more cheaply […]

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Categorized | Economy

Draghi: Eurozone will decline without vital productivity growth


Posted on November 30, 2016

It’s productivity, stupid.

European Central Bank president Mario Draghi has become the latest major policymaker to warn of the long-term economic damage posed by chronically low productivity growth, as he urged eurozone governments to take action to lift growth and stoke innovation.

Speaking in Madrid on Wednesday, Mr Draghi noted that productivity rises in the eurozone – as measured by workers’ output per hour – have fallen significantly behind the US in the wake of the financial crisis, with growth falling from 2 per cent to 0.5 per cent in recent years.

Raising productivity is vital to boost future economic growth, improve living standards, and help ease the burden on government public finances. Weak output per hour has also plagued the UK and the US since 2009, posing a major headache for economists who have sought to explain its decline.

Mr Draghi attributed weak productivity growth to non-manufacturing firms’ poor ability to absorb technological changes to improve their efficiency – a situation made worse by weak competition in many sectors.

Should governments fail to undertake reforms to lift productivity, encourage business innovation and liberalise labour markets, he warned income growth in the single currency area “is likely to stagnate and may even decline”.

Ahead of a key ECB meeting next week, the Italian central banker said policymakers were taking action to ensure that low interest rates do not become a permanent feature of the eurozone economy, “but we alone cannot eliminate that risk”, he said.

“Monetary policy is providing support and space for governments to carry out necessary structural reforms. It is up to euro area governments to act, individually at national level as well as jointly at European level”, he said.