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ECB's Draghi: Populism has weakened European integration

Supporters of Pegida hold flags during a demonstration at Konigsufer Square in Dresden, Germany on February 6, 2016.
Mehmet Kaman | Anadolu Agency | Getty Images

The spread of populist movements is threatening European integration and efforts to find joint responses to immigration, security and other shared concerns, ECB President Mario Draghi said in an interview published on Wednesday.

In some of his strongest recent comments on political developments, Draghi told Spain's El Pais newspaper that EU citizens' main worries were "now immigration, counter-terrorist security measures, defence and border protection".

"All of these are supranational affairs that require a common response. European integration is the appropriate response, but this has become weaker in recent times, partly because of populist movements," he added.

Draghi did not name particular parties. But a string of movements has shaken up the political landscape, including Britain's UKIP, which helped drive the Brexit debate, and France's National Front, which wants its own anti-EU referendum.

With elections coming up in France, Germany and the Netherlands, three countries with rising populist movements, the risk has increased that ruling parties shift focus away from needed structural reforms, keeping a heavy burden on the ECB to prop up growth.

His comments holding up integration as an answer to security concerns came as the European Commission was due to present its biggest plan in more than a decade to revitalise the 96-billion-euro defence industry with a new joint research fund.

Inflation on target 2018-2019

Draghi warned that political uncertainty would increase the longer talks on Britain's exit from the EU continued.

"It will be more difficult for investors and other economic agents in the United Kingdom to make decisions. Now, the impact of course is going to be stronger on the UK than it is on the EU and on the euro area, but certainly the UK is a large economy, so it will have an effect here too."

Draghi declined to comment on the upcoming votes, and a referendum on constitutional changes in Italy, repeating the ECB line on maintaining price stability in the monetary union.

"What we know is we have an objective which is price stability and we have instruments to achieve that. How can we best contribute to confidence and stability? Through fulfilling that mandate," he said.

The bank has cut interest rates to record low levels, providing unprecedented stimulus for several years. It will decide next month whether to extend its 1.74-trillion-euro ($1.85 trillion) asset buys beyond next March to drive growth and inflation.

"And I would say in spite of the many crises of the last six, seven years, we continue to steer the ship towards this mandate, and we foresee that inflation will go back towards our objective of an inflation rate below but close to 2 percent by 2018-2019.," Draghi said, repeating earlier comments from other board members.

The euro zone's central bank has missed its inflation target for well over three years. It will release initial 2019 forecasts on Dec. 8 when it also updates earlier projections.

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