3/16  Among the emerging economies, China remains beset by the difficulties of managing in an orderly fashion its much-needed economic rebalancing and deleveraging process, despite the significant stimulus measures approved this year by its authorities. China is important for the global economy: it accounts for almost one-fifth of global GDP, in purchasing power parity terms, and it has contributed almost 1 percentage point to annual average global GDP growth since 2005. And clearly, an additional slowdown in its growth rate would have major global implications, through the trade and financial channels, and through the prices of commodities, for many of which it is the main source of demand.1 Some of the emerging economies with the greatest vulnerabilities, such as Argentina and Turkey, have been particularly affected by the financial tensions and continue to face significant challenges. In Argentina especially the situation has worsened considerably in recent weeks, against a backdrop of great political uncertainty. As mentioned, the slowdown in activity has been particularly acute as regards trade. Various factors are behind this downturn. They include most notably the impact of trade conflicts, especially between the United States and China, and the uncertainty associated with Brexit. The trade conflict has unfolded in various phases. In spring 2018, higher US tariffs on different products (mainly imports from China) came into force, with the countries affected retaliating accordingly. Moreover, the US government threatened to extend and step up tariff rises (including, in particular, those on vehicle imports, a sizeable portion of the bilateral trade with Europe).
In the event that the downwards risks I have mentioned weaken the inflation outlook over the medium term more fundamentally than we currently project, we would not hesitate to act. Should more monetary policy impulse become necessary. The ECB is determined to use all available instruments to achieve its mandate over the medium term. As for potential risks to financial stability, we do not see them materialising at present but we will naturally be monitoring them closely. Over the past two years, national authorities across Europe have been active in developing and implementing macroprudential policy measures but their effectiveness still has to be tested. Before addressing my second topic, let me mention Greece again. The comprehensive agreement that has been reached involved a long and complication discussion. But if, as we all hope, the new programme is completely  BIS central bankers’ speeches  1  implemented, it will put Greece in a strong position to grow again and to reap the full benefits of participating in our common currency. The negotiations over the summer once again confirmed that Europe’s institutional framework is not yet commensurate with the requirements of sharing a single currency. A more complete union is necessary. From the ECB’s perspective, two elements are of particular importance. First, despite the best efforts of everyone involved, the crisis has revealed the need for a political centre to economic and monetary union.