ECB's Visco urges broad EU government action to boost investment
MILAN (Reuters) - European governments must take broad-based policy steps to fuel investment needed to revive economic growth after the European Central Bank's efforts to boost lending in the euro zone, ECB Governing Council member Ignazio Visco said on Thursday.
The ECB last week cut its main interest rate close to zero and announced additional measures to boost lending, promising to buy asset-backed securities and covered bonds from banks to encourage lending and promising other steps if needed.
Visco, who is also governor of the Bank of Italy, said the "wide-ranging" actions of the ECB would not be enough on their own to revive growth and ensure stability and a broad response from governments was needed.
"At the heart of the problem is the weakness of aggregate demand, in particular investment," he said in a speech at the Eurofi financial forum in Milan.
The comments echo growing calls for an investment drive across the EU to support the faltering economy. Germany, the EU's biggest economy, has faced increasing pressure to beef up public spending investment on its infrastructure.
Noting that public and private investment in the euro area had fallen by 20 percent in inflation-adjusted terms since the beginning of the financial crisis in 2007 to the end of last year and by even more in Italy, Visco said better financing conditions for investment were vital.
In particular, he singled out the need to cut the cost of capital for companies by easing lending standards and using additional funds released by the ECB to increase lending.
Reviving securitisation with common rules across the EU and developing capital market finance to make firms less dependent on bank lending as well as supporting infrastructure investment would be needed, he said.
Visco noted that the outlook for growth was weak and inflation had been declining faster than expected, with a headline rate of just 0.3 percent across the eurozone in August, far from the ECB's target of close to 2 percent.
In some countries, inflation had turned negative and medium-term inflation expectations had fallen sharply and it was vital they were not "disanchored" by prolonged low inflation, Visco said.
"If needed, further monetary policy actions can be undertaken," he said.
(Writing by James Mackenzie)
