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Last Updated : Nov 14, 2016 10:04 PM IST | Source: Reuters

ECB's Constancio says Trump win poses political, economic risks

Financial markets have been pricing in more economic growth since Donald Trump's U.S. election win last week, but U.S. protectionism and domestic political risks could hurt Europe, ECB vice-president Vitor Constancio said on Monday.


Financial markets have been pricing in more economic growth since Donald Trump's U.S. election win last week, but U.S. protectionism and domestic political risks could hurt Europe, ECB vice-president Vitor Constancio said on Monday.


U.S. and European shares have been rising and bond prices falling as investors expect a Trump administration to cut taxes and spend more, boosting growth and inflation.


But Constancio stressed that Trump's pledge to put 'America first' could hurt European and emerging market exports and fuel "political risks", a likely reference to the rise in eurosceptic and nationalist parties in euro zone countries.

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"We should be cautious in drawing hasty, positive conclusions from those market developments because they may not necessarily indicate that the world economy will have an accelerating recovery with higher growth," the European Central Bank policymaker said at an event in Frankfurt.


"So far, those developments point to a U.S. rise in economic growth, but in the context of an 'America first' policy."


Constancio repeated his prediction that the euro zone economy would continue to recover and push inflation "well above 1 percent" by next spring, from 0.5 percent now.


But this is predicated on "the potential negative effects of the present worldwide uncertainty" not materialising, he warned, calling for "more expansionary" economic policies to support growth.


"Indeed, a range of political risks may induce economic shocks," Constancio said.

Italy's constitutional referendum on Dec. 4, on which Prime Minister Matteo Renzi has staked his political career, is widely seen as a key gauge of popular sentiment after Trump's win. A "No" vote could usher the populist, anti-euro 5-Star Movement closer to government.



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First Published on Nov 14, 2016 08:02 pm
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