Monti Says Europe Will Take Action in Case of Deflation Danger

Former Italian Prime Minister Mario Monti, the economics professor who imposed austerity in 2011, said European policy makers will be ready to act if deflationary risks materialize in the region.

German inflation accelerated less than economists forecast in April, increasing pressure on the European Central Bank to add stimulus in the euro area. ECB President Mario Draghi has signaled he’ll use unprecedented measures, from negative interest rates to quantitative easing, if needed to avert the risk of deflation in the 18-nation currency bloc.

“I’m not too worried,” Monti said in an interview today with Bloomberg Television’s Erik Schatzker at the Milken Institute Global Conference in Beverly Hills, California. “Should there be really a deflationary danger in Europe, I think the instruments will be there for the ECB, for example, to react and also for the political authorities of Europe to become for a while a bit less tight on fiscal policies.”

The Trouble With Falling Prices

Monti also said he sees a stronger European willingness to take actions against Russia over its role in eastern Ukraine’s unrest, though countries’ resolve may vary depending on their dependence on Russian natural gas imports.

In the short term “it’s a matter of how much to scale up the sanctions, and therefore how far is to be measured in terms of economic sacrifices for Europe,” he said. “But I think this Ukraine crisis has a much broader and deeper message, that is Europe is no longer in the comfortable state of mind of believing it is in a secure place.”

To contact the reporters on this story: Sandrine Rastello in Washington at srastello@bloomberg.net; Lorenzo Totaro in Rome at ltotaro@bloomberg.net

To contact the editors responsible for this story: Chris Wellisz at cwellisz@bloomberg.net Mark Rohner, Gail DeGeorge

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