Sunday

29th Mar 2020

ECB disappoints despite rates cuts and stimulus programme

  • Draghi: "We are doing more because it works, not because it fails." (Photo: ECB)

The European Central Bank (ECB) decided on Thursday to fix interest rates at a record low of -0.30 percent and to extend for three months its stimulus programme for the eurozone economy.

The bank will continue to buy €60 billion in bonds each month – an operation known as quantitative easing (QE) – to boost growth and target a close to two percent inflation rate. It will extend the scheme to bonds issued by regional and local authorities.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or join as a group

"Today’s decisions reinforce the momentum of the euro area’s economic recovery and strengthen its resilience against recent global economic shocks," ECB president Mario Draghi said at a press conference.

But the move disappointed markets who expected more dramatic decisions.

After Draghi's announcement, London and Milan stock exchanges were down 1 percent, while in Frankfurt and Paris exchanges lost around three percent.

In the meantime, the euro was up two percent against the dollar, as a sign of less attractiveness for investors.

"The ECB wants to systematically surprise investors, but it is now short of tools," an economist at Saxo Bank was quoted as saying by Le Figaro newspaper.

"Deposit rate can be lowered further, QE can be extended, or diversified, but there will be little chance that these measures have enough impact on macroeconomy to durably restart growth," he said.

"We are doing more because it works, not because it fails," Draghi told the press. "The cut we decided today is adequate."

'Sluggish pace of reforms'

"We’re not excluding the use of all other instruments if we were to decide they were the right ones to do,” he added.

Draghi said "there was a very large majority in favour of these measures" at the ECB governing council, thus admitting dissensions between governors.

The ECB chief also implicitly admitted the limits of his policies when he said he expected inflation in the eurozone to reach 0.1 percent in 2015, one percent in 2016 and 1.6 percent in 2017, far from the "below but close to two percent" target set in the ECB mission.

Draghi noted that "the economic recovery in the euro area continues to be dampened by subdued growth prospects in emerging markets and moderate global trade."

He also mentioned "the necessary balance sheet adjustments in a number of sectors and the sluggish pace of implementation of structural reforms."

"In order to reap the full benefits from our monetary policy measures, other policy areas must contribute decisively," he said.

"Given continued high structural unemployment and low potential output growth in the euro area, the ongoing cyclical recovery should be supported by effective structural policies," he said.

Once again, he put the onus on political authorities, for "a swift and effective implementation of structural reforms" as well as "fiscal policies [that] support the economic recovery, while remaining in compliance with the fiscal rules of the European Union."

Deflation fears trigger ECB's 'bazooka'

In a new attempt to revive the economy, the European Central Bank has decided to cut rates further in the negative and to step up its bond buying programme.

No breakthrough at EU budget summit

EU leaders failed to reach agreement on the EU's long-term budget, as richer states and poorer 'cohesion countries' locked horns. The impasse continues over how to fund the Brexit gap.

EU leaders struggling to break budget deadlock

Cuts to innovation, space, neighbourhood and other programme-spending push down the latest budget proposal on the table of EU leaders. Rebates could stay on, to win the support of the net-payers for a deal.

Unhappy EU leaders begin budget haggle

EU leaders arriving at the Brussels summit criticised the budget proposal of EU Council president Charles Michel, as richer member states insisted holding onto their rebates, while poorer countries wanted to avoid deep cuts to their subsidies.

News in Brief

  1. UK health minister tests positive for coronavirus
  2. Orban: coronavirus exposes EU 'weaknesses'
  3. Court orders Netherlands to pay colonial victims
  4. Belgian cat 'infected by coronavirus'
  5. UK PM Johnson tests positive for coronavirus
  6. EU agrees Libya naval mission after Greek solution
  7. US to upgrade its nuclear bombs in Europe
  8. US surpasses China and Italy with 82,404 corona cases

Vietnam sent champagne to MEPs ahead of trade vote

A trade deal with Vietnam sailed through the European Parliament's international trade committee and after its embassy sent MEPs bottles of Moet & Chandon Imperial champagne over Christmas.

Feature

Promises and doubts: Africa's free-trade adventure

The EU is hoping that a continent-wide free trade agreement in Africa will help lift millions out of poverty and help solve issues of security and migration. But its message of values and equal partnership do not resonate with everyone.

Stakeholders' Highlights

  1. UNESDAMaking Europe’s Economy Circular – the time is now
  2. Nordic Council of MinistersScottish parliament seeks closer collaboration with the Nordic Council
  3. UNESDAFrom Linear to Circular – check out UNESDA's new blog
  4. Nordic Council of Ministers40 years of experience have proven its point: Sustainable financing actually works
  5. Nordic Council of MinistersNordic and Baltic ministers paving the way for 5G in the region
  6. Nordic Council of MinistersEarmarked paternity leave – an effective way to change norms

Latest News

  1. EU doctors: bring refugees on Greek islands to safety
  2. Russia's top coronavirus 'fake news' stories
  3. WHO warning on lockdown mental health
  4. Virus: Frontex tells officers to keep guarding Greek borders
  5. EU heads struggle to find joint virus response
  6. Poland's sham presidential election in a pandemic
  7. Von der Leyen warns 'end selfishness' in virus crisis
  8. Chinese ambassador to EU: put trust before politics

Join EUobserver

Support quality EU news

Join us