A day before the European Central Bank’s monthly policy meeting, ECB President Mario Draghi will travel to Luxembourg for talks with incoming European Commission president Jean-Claude Juncker. Oh to be a fly on the wall.
Some in the ECB are concerned that ultra-low sovereign borrowing costs and Draghi’s “whatever it takes” promise has relieved pressure on euro zone governments to carry on with structural economic reforms.
Juncker has signalled he is comfortable with a Franco-Italian drive to focus on growth and job creation rather than cutting debt.
ECB policymakers would probably be happy with that if it came in tandem with reforms to make euro zone economies more competitive. But it is worried about slippage.
Italian Prime Minister Matteo Renzi said last month the Bundesbank should not comment on Italian government policies, after its chief, Jens Weidmann, said Rome should complete structural reforms before calling for increased budget flexibility.
Italian second quarter GDP data are due and forecast to show paltry growth of 0.2 percent, well below Spain’s 0.6 percent which increasingly looks like it is pulling ahead.