Sunday

3rd Mar 2024

ECB unveils €1.1 trillion stimulus

  • Draghi in Frankfurt on Thursday (Photo: ecb.europa.eu)

The European Central Bank will plough €1.1 trillion into the eurozone economy in a last-ditch attempt to breath life into the European economy.

At its monthly governing council on Thursday (January 22), the bank’s governing council agreed to start buying up to €60bn of government bonds from March in an unprecedented quantitative easing programme. The programme is open-ended, and will run until September 2016 at the earliest.

Read and decide

Join EUobserver today

Get the EU news that really matters

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

... or subscribe as a group

Speaking at a press conference following the governing council meeting, ECB president Mario Draghi said that the bond-buying programme would remain in place “until we see a sustained adjustment in the path of inflation which is consistent with our aim of achieving inflation rates below, but close to, 2%”

Prices across the currency union fell by 0.2 percent in December, the first time the eurozone recorded negative inflation since 2009. Although the fall was largely attributed to falling oil prices, it has heightened concerns about a prolonged period of deflation in the eurozone.

Although the 25-member council did not back the programme unanimously, Draghi said that the ECB’s decision was made with “so large a majority that no vote was necessary”.

The Frankfurt-based bank hopes to boost inflation and drive down the value of the euro against other major currencies in a bid to make the bloc’s exports more attractive.

Quantitative easing (QE) involves central banks buying up government bonds to inject more money into the system - a path trodden in recent years by the US Federal Reserve and the Bank of England in response to the 2008-9 financial crisis.

However, it is regarded as a move of last resort for central banks.

“Today’s QE announcement is historic but it was also the ECB’s last trump,” said ING chief economist Carsten Brzeski.

“The flowery phrase that the ball is now back in the court of Eurozone governments has never been more true than today. Even worse, the ECB will not be able to pick it up again if governments try to play at back,” he said.

Gregory Claeys, a research fellow with the Bruegel think tank in Brussels, described Draghi’s announcement as “a welcome surprise” and “more than the markets were expecting”.

He said that the announcement would likely prompt a swift depreciation in the euro’s value.

Praising the ECB’s boldness, he commented that “there’s no point not using an instrument just so you can say you have another trick up your sleeve”.

Although the programme will not be welcomed warmly by Germany, whose two members of the the ECB’s governing council had indicated their opposition to a QE programme, Draghi offered a major concession to calm fears that German taxpayers would become liable for billions of euros of debt belonging to other eurozone countries.

Only 20 percent of the new bond-purchases will be subject to “risk-sharing”, meaning that national central banks will bear most of the risk of their governments defaulting on their debts.

Meanwhile, the ECB also kept its headline interest rate unchanged at 0.05 percent.

ECB bond-buying will 'not be a cure'

Nobody should mistake an injection of more cash into the eurozone economy for an economic cure, says one of the World Bank authors of a recent bleak report on the eurozone.

EU docks €32m in funding to UN Gaza agency pending audit

The European Commission will release €50m out of €82m in funds for the UN aid agency (UNRWA) operating in Gaza. The remaining €32m will come pending an audit. The commission has received no evidence to support Israeli allegations against UNRWA.

'Outdated' rules bar MEP from entering plenary with child

During a plenary session in Strasbourg, an MEP was denied access to the chamber because he was carrying his young child, due to unforeseen circumstances. The episode shows parliament's rules need to be updated, several MEPs told EUobserver.

'Outdated' rules bar MEP from entering plenary with child

During a plenary session in Strasbourg, an MEP was denied access to the chamber because he was carrying his young child, due to unforeseen circumstances. The episode shows parliament's rules need to be updated, several MEPs told EUobserver.

Opinion

Why are the banking lobby afraid of a digital euro?

Europeans deserve a digital euro that transcends the narrow interests of the banking lobby and embodies the promise of a fairer and more competitive monetary and financial landscape.

Latest News

  1. EU docks €32m in funding to UN Gaza agency pending audit
  2. 'Outdated' rules bar MEP from entering plenary with child
  3. Commission plays down row over Rwanda minerals pact
  4. EU socialists set to anoint placeholder candidate
  5. Why are the banking lobby afraid of a digital euro?
  6. Deepfake dystopia — Russia's disinformation in Spain and Italy
  7. Putin's nuclear riposte to Macron fails to impress EU diplomats
  8. EU won't yet commit funding UN agency in Gaza amid hunger

Stakeholders' Highlights

  1. Nordic Council of MinistersJoin the Nordic Food Systems Takeover at COP28
  2. Nordic Council of MinistersHow women and men are affected differently by climate policy
  3. Nordic Council of MinistersArtist Jessie Kleemann at Nordic pavilion during UN climate summit COP28
  4. Nordic Council of MinistersCOP28: Gathering Nordic and global experts to put food and health on the agenda
  5. Friedrich Naumann FoundationPoems of Liberty – Call for Submission “Human Rights in Inhume War”: 250€ honorary fee for selected poems
  6. World BankWorld Bank report: How to create a future where the rewards of technology benefit all levels of society?

Stakeholders' Highlights

  1. Georgia Ministry of Foreign AffairsThis autumn Europalia arts festival is all about GEORGIA!
  2. UNOPSFostering health system resilience in fragile and conflict-affected countries
  3. European Citizen's InitiativeThe European Commission launches the ‘ImagineEU’ competition for secondary school students in the EU.
  4. Nordic Council of MinistersThe Nordic Region is stepping up its efforts to reduce food waste
  5. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  6. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA

Join EUobserver

EU news that matters

Join us