During the press conference following the ECB meeting Mario Draghi has clearly indicated that monetary policy will remain accommodative as long as needed and that it could become rapidly more accommodative that it is currently. We can then expect a lower refi rate : – 25 bp to 0.5%. But the deposit facility rate will not change at 0%.

Mario Draghi also said that the ECB was thinking to unconventional measures to improve the situation and the credit access for SME. The ECB wants to take these measures in cooperation and coordination with other institutions and agencies. The central bank also wants to go straight to the point by using all other countries’ experiences  to improve these measures efficiency. This way of doing shows that the ECB may have a toolkit problem and not be able to change the picture without the help of other institutions.

Every listener of the press conference now expects that the framework will change rapidly. And it is necessary as the economic situation is weak and is getting worse.

In his introductory statement Mario Draghi said that the large negative GDP change number (-0.6% non annualized) during the 4th quarter was explained by a weak internal demand momentum. Further in this statement the ECB president said that the main downside risk for the rebound expected during the second half of this year was again a weak momentum of this internal demand.

The chart below shows the level of private internal demand for the Euro Area. It is the sum of households consumption and of investment (at constant prices). The point is clear. Private internal demand has declined by -6% since the Q1 2008 peak. Since the local peak in Q1 2011 the drop is -3%.

So the question we can have is the following: due to the internal demand profile what can imply an upside change that could validate the rebound expected by the ECB?

Consumer confidence is low, employment change is negative for many quarters, companies’ surveys reflect a negative environment (PMI surveys are on a downside trend since February and at a very weak level showing activity contraction) and now there is political uncertainties in different countries (Italy or France).

Then the question is: what could change companies’ behavior and create incentives that could imply investment? What could drive consumers expenditures higher as unemployment is on an upside trend (12% in February). In other words the question is to know what could change now internal demand on the upside.

To change the picture a rapid change in economic policy is probably needed as private internal demand is the main growth driver. But if a U-turn cannot be seen rapidly, the situation in the Euro Area will not be easily manageable.