Friday

20th Jan 2017

Berlin-Paris tensions re-emerge as ECB ponders stimulus

  • Draghi (r)- testing the mood ahead of Thursday's ECB board meeting (Photo: Council of European Union)

European Central Bank chief Mario Draghi is testing the mood of EU governments as he ponders whether to unleash a new wave of monetary stimulus to boost the eurozone's struggling economy.

On Monday (1 September), French officials said that Draghi and President Francois Hollande shared the same "worry about growth and inflation" in the eurozone, following talks between the two in Paris.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

Draghi had discussed the bank's options with Germany's Angela Merkel earlier in the day.

The European Central Bank's executive board will meet this Thursday (4 September) amidst a backdrop of increasingly dismal economic figures for the eurozone.

On Monday the Purchasing Managers' Index for manufacturing fell to 50.7 percent in August, its lowest rate in more than a year, although it remained above the 50 point threshold which indicates growth rather than contraction.

Fears about the ongoing Ukraine crisis and the sanctions battle between the EU and Russia have prompted a collapse in business confidence.

Inflation, meanwhile, has hit a low of 0.3 percent, well below the ECB's target rate of 2 percent.

The ECB is poised to follow the path trodden by the US Federal Reserve and the Bank of England by launching a bond-buying programme in a bid to stimulate more economic activity, although it is unclear whether this will start before the end of 2014.

Meanwhile, a new four-year programme of cheap loans for banks if they promise to increase lending to businesses is expected to begin this month.

Policy makers are once again under intense pressure to stave off a spiral of economic stagnation, high unemployment and very low inflation across the eurozone, which threatens to reignite the ideological argument between austerity-focused Germany and the likes of France and Italy, who propose new stimulus measures to drive economic growth.

During a speech in the US last month Draghi called on eurozone treasuries to take fresh steps to boost demand amid signs that the bloc’s already tepid recovery has ground to a halt. He also signalled that the Frankfurt-based bank would do more to tackle low inflation across the bloc.

But while these comments have been welcomed in Paris and elsewhere, they received a cool reception in Berlin.

"I don't think the ECB has the instruments to tackle deflation to be frank," German finance minister Wolfgang Schauble told Bloomberg last week. "Monetary policy can only buy time", he said, adding that the bank had "come to the end of its instruments".

EU should raise own taxes, says report

A group chaired by former Italian PM and EU commissioner Mario Monti says Brexit should be used to create EU-level levies to depend less on member states contributions, and to abolish member states rebates in the EU budget.

Stakeholders' Highlights

  1. Caritas EuropaEU States to Join Pope Francis’s Appeal to Care for Migrant Children
  2. UNICEFNumber of Unaccompanied Children Arriving by sea to Italy Doubles in 2016
  3. Nordic Council of Ministers"Nordic Matters" Help Forge Closer Bonds Between the UK and the Nordic Region
  4. Computers, Privacy & Data ProtectionThe age of Intelligent Machines: join the Conference on 25-27 January 2017
  5. Martens CentreNo Better way to Lift Your Monday Blues Than to Gloss Over our Political Cartoons
  6. Dialogue PlatformThe Gulen Movement: An Islamic Response to Terror as a Global Challenge
  7. European Free AllianceMinority Rights and Autonomy are a European Normality
  8. Swedish EnterprisesHow to Create EU Competitiveness Post-Brexit? Seminar on January 24th
  9. European Jewish CongressSchulz to be Awarded the European Medal for Tolerance for his Stand Against Populism
  10. Nordic Council of Ministers"Adventures in Moominland" Kick Off Nordic Matters Festival in London
  11. PLATO15 Fully-Funded PhDs Across Europe on the Post-Crisis Legitimacy of the EU - Apply Now!
  12. Dialogue PlatformInterview: Fethullah Gulen Condemns Assassination of Russian Ambassador to Turkey

Latest News

  1. 'Be patient,' ECB chief tells Germany
  2. EU cannot copy Australia's offshore asylum model
  3. Brexit men launch anti-EU website
  4. Germany details its 'Marshall Plan' for Africa
  5. IMF predicts 'pain' for UK, as banks prepare London exit
  6. EP deal could help Tusk keep Council job
  7. UN struggles to monitor fate of readmitted Syrians in Turkey
  8. European space chief: Moon village is 'more or less a fact'