By Jeannette Neumann
MADRID--The election of Donald Trump as U.S. president heightens global economic and political uncertainty, and the eurozone should respond by deepening ties among member states and bolstering investment, Bank of France Governor François Villeroy de Galhau said.
"We cannot yet predict what Mr. Trump's presidency will really be like, but we can expect a deep political shift, with consequences for American economic policies," Mr. Villeroy de Galhau said at an event on Monday in Madrid. Another unknown is on the horizon, he added: The outcome of the Italian referendum in December. "The first certainty is that we are facing a lot of uncertainty."
The European Central Bank's bond-buying program has been a salve to such uncertainty, Mr. Villeroy de Galhau said.
"Our monetary policy has safeguarded the euro area against the threat of deflation in recent times, and is achieving tangible progress toward our inflation target," he said.
Eurozone inflation is expected to exceed 1% in early 2017, said the French central banker, who is also a member of the ECB's governing council.
The ECB will continue its bond-buying program until at least March, Mr. Villeroy de Galhau said. "In the coming months, we will decide, in a pragmatic approach, about the best evolution after March of all our available tools," he added.
To confront heightened uncertainty following Mr. Trump's election, as well as the U.K. referendum to exit from the European Union, Mr. Villeroy de Galhau called on eurozone policy makers to step up efforts to boost "productive" investment in the eurozone, which investment in research and development and industrial machinery, and which has remained below precrisis levels in the bloc.
Potential boosters to productive investment, the central banker said, include simpler and more stable regulation for entrepreneurs and more equity, rather than debt, financing for businesses.
Earlier Monday in Lisbon, Bank of Portugal Governor Carlos Costa voiced concerns similar to those expressed by Mr. Villeroy de Galhau, citing rising uncertainty amid protectionist tendencies.
Mr. Costa said pushing back on globalization would be a mistake. Economic growth through structural reforms, rather than isolation, is the solution, he said.
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