{"id":4332,"date":"2019-10-28T09:55:54","date_gmt":"2019-10-28T09:55:54","guid":{"rendered":"http:\/\/euromenaenergy.com\/?p=4332"},"modified":"2019-10-28T09:55:54","modified_gmt":"2019-10-28T09:55:54","slug":"three-words-11mn-jobs-draghis-legacy-for-euro-area","status":"publish","type":"post","link":"https:\/\/emimer.com\/?p=4332","title":{"rendered":"Three words, 11mn jobs: Draghi\u2019s legacy for euro area"},"content":{"rendered":"

Explore what\u2019s moving the global economy in the new season of the Stephanomics podcast. Subscribe via\u00a0Pocket Cast\u00a0or\u00a0iTunes.<\/em><\/p>\n

Three words — whatever it takes — defined Mario Draghi\u2019s time as\u00a0European Central Bank\u00a0president, but he\u2019s prouder of another number: 11 million jobs.<\/p>\n

Hardly a public appearance goes by without Draghi mentioning employment growth in the euro zone as a justification for the extraordinary monetary stimulus he\u2019s pushed through since 2011.<\/p>\n

The focus on jobs might be understandable given that, despite all his efforts, he\u2019s fallen far short on his primary mandate of inflation. That failure forced him into a last-ditch, and controversial, push in September to boost price growth. He leads his last Governing Council meeting on Thursday before retiring on Oct. 31.<\/p>\n

So how has the region\u2019s economy fared under Draghi, with his 2012 pledge to save the euro, and crisis-fighting measures such as negative interest rates and asset purchases? Here are some of the metrics that show his successes and failures.<\/p>\n

Labor Market<\/h3>\n

Employment growth since 2013, when the 19-nation euro zone emerged from its double-dip recession, is unequivocally Draghi\u2019s biggest economic achievement — if you discount that the single currency might not even exist today without his\u00a0commitment<\/a>\u00a0the previous year to protect it when a debt crisis sparked breakup fears.<\/p>\n

The labor market has underpinned the bloc\u2019s recovery, feeding private spending and investment. It has become one of the biggest bulwarks against the recent chaos from the U.S.-China trade war, President Donald Trump\u2019s protectionist rhetoric against Europe, and Brexit.<\/p>\n

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\"ECB<\/div>\n<\/div>\n<\/figure>\n

Looking deeper though, the picture is more complex. Germany has built on impressive job creation that started well before Draghi\u2019s term, after domestic reforms, and was only briefly interrupted by the Great Recession. France can tell a similar tale, but labor markets in Spain and Greece along with some of the smaller euro members still haven\u2019t made up the lost ground.<\/p>\n

Economic Growth<\/h3>\n

Regional differences are equally striking when analyzing economic growth. Aside from Greece and Cyprus — both deeply scarred after\u00a0years of austerity<\/a> and a near-collapse of their financial system — no country has done worse than Draghi\u2019s native Italy in terms of total output per head.<\/p>\n

Inflation<\/h3>\n

The prime reason for the ECB\u2019s record-low interest rates, cheap long-term loans and 2.6 trillion euros ($2.9 trillion) of asset purchases — so far — is its attempts to overcome weak inflation.<\/p>\n

That hasn\u2019t gone well. Consumer-price growth over Draghi\u2019s eight-year term has averaged 1.2% which, unlike with his predecessors, falls short of the goal of \u201cbelow, but close to, 2%.\u201d It was even negative at times — so Draghi can at least console himself with the fact that he beat deflation.<\/p>\n

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\"Draghi<\/div>\n<\/div>\n<\/figure>\n

Subdued price pressures are a mystery, and not only for Draghi. Central bankers around the world have\u00a0puzzled<\/a>\u00a0over why low unemployment and rising wages aren\u2019t translating into stronger inflation as standard economic models predict. The suspicion is that developments such as global supply chains and internet commerce are at least partially to blame.<\/p>\n

The result is dwindling inflation expectations, a dangerous development for a central bank whose credibility hinges on convincing investors and the public that it can deliver on its mandate. The drift has kicked off a debate about whether incoming president Christine Lagarde needs to\u00a0commission a review<\/a> looking at both how the ECB sets policy and whether its definition of price stability, last updated in 2003, is still appropriate.<\/p>\n

Bank Lending<\/h3>\n

One other key indicator the ECB uses to gauge its success is lending by banks to companies and households, and that has responded better to stimulus. At just under 4%, credit is expanding at three times the rate of gross domestic product. Banks say that growth is threatened by negative interest rates, which squeeze their profit margins and might eventually force them to pull back.<\/p>\n

Greece<\/h3>\n

One small economy has taken an outsized chunk of Draghi\u2019s attention. Concerns about Greece\u2019s public finances first surfaced in late 2009, and by 2015 the ECB was enmeshed in a banking crisis and game of\u00a0political brinkmanship\u00a0that threatened to splinter the single currency area.<\/p>\n

Draghi\u2019s kept the country\u2019s lenders alive, by approving emergency liquidity, just long enough to allow a political solution that kept Greece in the bloc. Since then, the economy has started to recover, though lags far behind its peers. Draghi himself said this year that the Greek people paid a high price.Euro\u2019s Future<\/p>\n

For all the furor over a possible \u201cGrexit\u201d and the flirtations of factions in France and Italy with the idea of a future outside the currency union, membership has actually continued to grow. Latvia joined in 2014, Lithuania one year later, and other countries in eastern Europe have\u00a0expressed an interest<\/a>\u00a0in doing likewise.<\/p>\n

At the end of Draghi\u2019s term, a measure of the probability of a breakup of the bloc is near a record low. It might be his ultimate legacy.<\/p>\n

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\"Future<\/div>\n<\/div>\n<\/figure>\n

For Sarah Hewin, an economist at Standard Chartered Bank in London, both Draghi\u2019s role in keeping the euro region intact and his record of \u201chuge\u201d job creation won\u2019t be easily forgotten.<\/p>\n

Those were \u201ctwo really huge achievements during his time,\u201d she told Bloomberg Television on Tuesday. \u201cI think those are the ones that he\u2019ll be remembered for.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

Explore what\u2019s moving the global economy in the new season of the Stephanomics podcast. Subscribe via\u00a0Pocket Cast\u00a0or\u00a0iTunes. Three words — whatever it takes — defined Mario Draghi\u2019s time as\u00a0European Central Bank\u00a0president, but…<\/p>\n","protected":false},"author":1,"featured_media":4352,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[17],"tags":[46,48,57,68,76,77,82,86,87,90,96,99,103,107,109,111,113,137,139,146,148,160,174,183,184,201,202,209,222,230,232,233,244,246,249,256,262,263,267,277,279,280,285,288],"class_list":["post-4332","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-aramco","tag-athens","tag-baroudi","tag-carbon","tag-climate","tag-climate-change","tag-co2","tag-cyprus","tag-decarbonising","tag-democracy","tag-doha","tag-eastmed","tag-egypt","tag-embargo","tag-emissions","tag-energy","tag-energy-peace","tag-gas","tag-gazprom","tag-greece","tag-greenenergy","tag-international-maritime-disputes","tag-lebanon","tag-maritime-boundaries-east-mediterranean","tag-maritime-disputes","tag-offshore","tag-oil","tag-opec","tag-pollution","tag-poverty-alleviation","tag-putin","tag-qatar","tag-rosneft","tag-roudi","tag-russia","tag-saudi","tag-solar","tag-solar-power","tag-straddling-hydrocarbons-reserves","tag-total","tag-trump","tag-turkey","tag-unclos","tag-usa"],"_links":{"self":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts\/4332","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=4332"}],"version-history":[{"count":0,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts\/4332\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/media\/4352"}],"wp:attachment":[{"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=4332"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=4332"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=4332"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}