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MNI EXCLUSIVE

Interview With WTO Chief Economist Koopman

By Luke Heighton
     FRANKFURT (MNI) - The eurozone remains on track to meet the ECB's growth
and inflation targets, President Mario Draghi said Thursday, but maintaining and
deepening the EU is necessary to support the financial stability of its member
states.
     Draghi said he expected broad-based growth to continue, and euro area
inflation to continue to converge towards the ECB's objective of below, but
close to, 2% over the medium term.
     He reminded listeners that support for the euro among euro area citizens
remains strong, and -- in an apparent reference to both Brexit and the ongoing
crisis between Brussels and Rome -- said shared institutions made all member
states stronger.
     Here are the key points from his speech in Dublin:
     --The financial stability environment in the euro area overall "remains
favorable", but has become "somewhat more challenging in recent months." Sources
of risk from outside the EU have grown since May. A stronger U.S. dollar and
heightened trade tensions triggered renewed stress in a number of emerging
market economies.
     --Stress test results published last Friday showed euro area banks are
increasingly resilient to financial shocks, though there is still a need to
guard against liquidity risks in the non-bank financial sector that could be
transmitted to the broader financial system.
     --While there is currently no compelling evidence of overstretched asset
valuations at the euro area level, there are localized risks. However, euro area
monetary policy is not the appropriate tool with which to address them.
     -- On Brexit, it is essential to prepare for all possible outcomes,
including a no-deal scenario, the direct trade effects of which for the euro
area as whole would be limited. Overall risks to euro area financial stability
are limited, although a cliff-edge Brexit could have an adverse impact in
certain areas of centrally-cleared derivatives markets.
     -- The eurozone's continued economic strength and financial stability
depends on the completion of the banking union and the creation of a single
capital market.
--MNI Frankfurt Bureau; +49-69-720-146; email: luke.heighton@marketnews.com
--MNI London Bureau; +44208-865-3829; email: Jason.Webb@marketnews.com
[TOPICS: M$E$$$,M$X$$$,M$$EC$]