Eurozone on the brink of yet ANOTHER explosive financial crisis, warns banking chief

LEADERS of the eurozone must reform their economies to save the bloc from another explosive crisis, the chief of the European Central Bank (ECB) said today.

Mario Draghi urged euro leaders to make changes to labour markets, as the bloc’s economy continues to struggle with low growth and high unemployment.

The chief said ageing populations are a huge problem for the jobs market that will start to hack away at the eurozone’s potential in the coming years.

Speaking in Brussels today, Mr Draghi said: “We cannot avoid the fact that, over time, the inherent speed limits resulting from the euro area’s unfavourable demographics will start to bite.”

The ECB yesterday started its latest effort to kickstart eurozone growth yesterday.

The central bank is now buying top companies’ debt – corporate bonds – to inject billions of pounds worth of more money into the economy.

The ECB is buying investment grade bonds from telecoms, insurance and utilities sectors, which in sends the bond yields lower – or the amount the company has to pay on its debt.

The bank hopes this will step up investment in the economy.

But many think the plan is riddled with problems.

Michael Hewson, chief market analyst at CMC Markets UK, said: “The ECB appears to think that by intervening directly in corporate debt markets that these companies will then go out and start investing the money in order to promote further growth in the euro area.”

“This conveniently ignores the fact that the ECB having already bought €1trillion worth of European government bonds sending yields to new record lows yesterday and negative in a lot of cases, European companies can already borrow at record low rates but appear reluctant to do so.”

“No amount of cheap credit can solve that problem, without fixing the solvency problems in the European banking sector.”

Worries over Europe’s banks have increased this year, with Italian banks receiving help from an emergency fund to fill cash shortfalls.

Full article: Eurozone on the brink of yet ANOTHER explosive financial crisis, warns banking chief (Express)

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