Sunday

5th Feb 2023

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

Become an expert on Europe

Get 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.

Latest News

  1. Greece faces possible court over 'prison-like' EU-funded migration centres
  2. How the centre-right can take on hard-right and win big in 2024
  3. Top EU officials show Ukraine solidarity on risky trip
  4. MEPs launch anonymous drop-box for shady lobbying secrets
  5. Hawkish ECB rate-rise 'puts energy transition at risk'
  6. MEPs push for greater powers for workers' councils
  7. How Pavel won big as new Czech president — and why it matters
  8. French official to take on Islamophobia in EU

Stakeholders' Highlights

  1. Party of the European LeftJOB ALERT - Seeking a Communications Manager (FT) for our Brussels office!
  2. European Parliamentary Forum for Sexual & Reproductive Rights (EPF)Launch of the EPF Contraception Policy Atlas Europe 2023. 8th February. Register now.
  3. Europan Patent OfficeHydrogen patents for a clean energy future: A global trend analysis of innovation along hydrogen value chains
  4. Forum EuropeConnecting the World from the Skies calls for global cooperation in NTN rollout
  5. EFBWWCouncil issues disappointing position ignoring the threats posed by asbestos
  6. Nordic Council of MinistersLarge Nordic youth delegation at COP15 biodiversity summit in Montreal

Stakeholders' Highlights

  1. Nordic Council of MinistersCOP27: Food systems transformation for climate action
  2. Nordic Council of MinistersThe Nordic Region and the African Union urge the COP27 to talk about gender equality
  3. Friedrich Naumann Foundation European DialogueGender x Geopolitics: Shaping an Inclusive Foreign Security Policy for Europe
  4. Obama FoundationThe Obama Foundation Opens Applications for its Leaders Program in Europe
  5. EFBWW – EFBH – FETBBA lot more needs to be done to better protect construction workers from asbestos
  6. European Committee of the RegionsRe-Watch EURegions Week 2022

Join EUobserver

Support quality EU news

Join us