18th Mar 2018

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.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

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".

Merkel in Paris for eurozone reform talks

Angela Merkel - who started her fourth term as Germany's chancellor earlier this week - is wasting no time on big issues like eurozone reforms. On Friday she is meeting Emmanuel Macron where the two will seek common ground.

EU insists on US tariffs exemption

Europe is "an ally, not a threat", the EU Commission says - as the US is poised to impose duties in steel and aluminium. Common action on Chinese steel overcapacity could help diffuse the crisis.

VW dismisses complaints on Dieselgate fix

'I think customers who want to get information (...) are able to receive information if they want," VW management board member Hiltrud Werner told EUobserver. Consumer groups disagree.

News in Brief

  1. Sweden emerges as possible US-North Korean summit host
  2. Google accused of paying academics backing its policies
  3. New interior minister: 'Islam doesn't belong to Germany'
  4. Hamburg 'dieselgate' driver wins case to get new VW car
  5. Slovak deputy PM asked to form new government
  6. US, Germany, France condemn 'assault on UK sovereignty'
  7. MEPs accept Amsterdam as seat for EU medicines agency
  8. Auditors: EU farm 'simplification' made subsidies more complex

Stakeholders' Highlights

  1. Counter BalanceConmtroversial Turkish Azerbaijani Gas Pipeline Gets Major EU Loan
  2. World VisionSyria’s Children ‘At Risk of Never Fully Recovering', New Study Finds
  3. Macedonian Human Rights MovementMeets with US Congress Member to Denounce Anti-Macedonian Name Negotiations
  4. Martens CentreEuropean Defence Union: Time to Aim High?
  5. UNESDAWatch UNESDA’s President Toast Its 60th Anniversary Year
  6. AJC Transatlantic InstituteAJC Condemns MEP Ana Gomes’s Anti-Semitic Remark, Calls for Disciplinary Action
  7. EPSUEU Commissioners Deny 9.8 Million Workers Legal Minimum Standards on Information Rights
  8. ACCAAppropriate Risk Management is Crucial for Effective Strategic Leadership
  9. EPSUWill the Circular Economy be an Economy With no Workers?
  10. European Jewish CongressThe 2018 European Medal of Tolerance Goes to Prince Albert II of Monaco
  11. FiscalNoteGlobal Policy Trends: What to Watch in 2018
  12. Human Rights and Democracy NetworkPromoting Human Rights and Democracy in the Next Eu Multiannual Financial Framework

Latest News

  1. Brexit and trade will top This WEEK
  2. Dutch MPs in plan to shut EU website on Russian propaganda
  3. Four years on – but we will not forget illegally-occupied Crimea
  4. Evacuated women from Libya arrive newly-pregnant
  5. Merkel in Paris for eurozone reform talks
  6. Commission rejects ombudsman criticism over Barroso case
  7. Western allies back UK amid Russian media blitz
  8. Meet the European Parliament's twittersphere