March 8, 2018 / 2:35 PM / 3 months ago

Protracted Italian political deadlock might impact euro economy, says ECB's Draghi

FRANKFURT (Reuters) - Political deadlock in Italy following inconclusive elections has caused few wider ructions so far, but it might impact the euro zone economy if it continued over a longer period, European Central Bank President Mario Draghi said on Thursday.

European Central Bank (ECB) President Mario Draghi holds a news conference at the ECB headquarters in Frankfurt, Germany, March 7, 2018. REUTERS/Ralph Orlowski

No party or bloc won an absolute majority in Sunday’s national election, leaving Italy mired in political uncertainty as EU authorities said urgent action was needed to put its teetering economy back on an even keel.

“The (market) reaction to the Italian elections has been more or less the same (as) the reaction to other ... major political events where most observers were foreseeing much sharper corrections,” Draghi, himself an Italian, told a news conference after the ECB left policy broadly unchanged.

“This is not to underestimate the fact that protracted instability may undermine confidence, and as I said before anything that undermines confidence has a negative effect on both inflation and outlook.”

The anti-system 5-Star movement established itself as by far Italy’s most popular party while the centre-right coalition won most seats, led by the eurosceptic, anti-migrant League.

Writing by John Stonestreet; Editing by Catherine Evans

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