Mario Draghi has signalled fresh help from the European Central Bank for the struggling eurozone economy amid signs that the terrorist attacks in Paris have led to a collapse of spending by French citizens and “an avalanche of cancellations” from tourists.
With the big Paris department stores, Printemps and Galeries Lafayette, reporting footfall down by between 30% and 50%, Draghi all but confirmed that the ECB would step up its efforts to stimulate growth and lower unemployment.
Analysts believe that the attacks on Paris removed any lingering doubts that the central bank would act on 3 December. Draghi is expected to announce that the ECB will increase its quantitative easing programme from €60bn (£42bn) to €80bn a month, with the additional possibility of cuts in interest rates.
Draghi told a banking conference in Frankfurt that the recovery in the eurozone was the weakest since 1998, the year before the single currency was launched.
He added that it took between five and eight quarters for the countries now making up the eurozone to recover their pre-recession level of real output after the slumps of the 1970s, 1980s and 1990s, but it would take until early 2016 - 31 quarters - before it returned to the levels of output before the global recession of 2008.
“Putting the whole picture together, we have a situation where we cannot yet say with confidence that the process of economic repair in the euro area is complete.”
Consumer confidence in the eurozone picked up between October and November, but the survey was almost complete before the Paris attacks.
Didier Chenet, president of the national union of hoteliers, restaurateurs and cafe-owners, told Le Figaro his members had seen “an avalanche of cancellations” since Saturday. Paris hotels in particular have been badly hit: “They are spending their days picking up the phone to hear customers saying they are no longer coming.”
Georges Panayotis of the specialist MKG Group consultancy said: “Things are going to be very difficult for the tourism industry in the coming days and weeks. The sector is going to suffer. I think it could be worse than after Charlie Hebdo. What happened is huge; the whole world’s eyes are on Paris.”
Luxury hotels like the Georges V or Plaza Athenee could be hardest hit since their clientele is very sensitive to security. “Tourist flows to Europe are likely to fall sharply in the coming weeks, in the crucial period running up to Christmas,” analysts at investment firm Bryan, Garnier said in a note.
The CDF traders’ confederation described “a significant falloff in sales” of around 10% for smaller, mainly local firms and as much as 50% for big stores.
This article was written by Larry Elliott Economics editor, and Jon Henley in Paris, for theguardian.com on Friday 20th November 2015 19.02 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010