ECB still sees risks to eurozone as 'broadly balanced': Draghi

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Frankfurt am Main (AFP)

European Central Bank chief Mario Draghi on Thursday said risks to the eurozone outlook remained "broadly balanced", despite global trade uncertainties and geopolitical concerns.

"Risks surrounding the euro area growth outlook can still be assessed as broadly balanced," Draghi told reporters in Frankfurt.

"At the same time, risks relating to protectionism, vulnerabilities in emerging markets and financial market volatility remain prominent."

Fears of an economic slowdown have risen as markets fret over the possibility of a no-deal Brexit, a budget row between Italy and the European Union, and trade tensions sparked by US President Donald Trump's protectionist tendencies.

A closely watched survey on Wednesday showed that business growth in the 19-nation eurozone fell in October to its lowest point in two years, hit by falling exports.

Draghi acknowledged that recent hard and soft data was "weaker than expected", but said it was not enough to undermine confidence in eurozone growth and rising inflationary pressures.

The ECB last month said it expects eurozone inflation to hit 1.7 percent in 2018, 2019 and 2020 -- nearing the bank's price growth target of close to but below 2.0 percent.

"The assessment of the governing council was: yes, there is a weaker momentum, yes, there are weaker survey data coming out, and maybe some more expected in the future.

"But is this enough of a change to make us change the baseline scenario? The answer is no."

Quizzed on how worried the ECB was about Italy's standoff with Brussels over Rome's purse-bursting budget, Draghi said he did not "have a crystal ball" but said he was "optimistic" an agreement would be found.

In an unprecedented move, Brussels has given Rome three weeks to revise the budget which it says breaks the bloc's financial rules.

The spat has revived fears over Italy's huge debt mountain, which at some 130 percent of gross domestic product (GDP) is second only to Greece's in Europe.

The populist Italian government's insistence on ramping up spending has sent yields on Italian bonds rising, making the country's borrowing costs more expensive.

But so far, Draghi said he saw little evidence of other countries being affected by Italy's woes.

"There may be some spillovers but they're limited. That's the current situation and I will keep you posted as the situation will evolve," he said.