Tuesday

25th Sep 2018

Eurozone bank to keep on printing money

  • The ECB will 'implement in full' its €1.1 trillion stimulus plan for the eurozone. (Photo: Valentina Pop)

The European Central Bank (ECB) will “implement in full” its €1.1 trillion stimulus programme, bank chief Mario Draghi has said.

Delivering a lecture on Thursday (14 May) at the International Monetary Fund in Washington, Draghi told the audience that a prolonged period of recession, low economic growth, and political uncertainty in the eurozone had left businesses and households “very hesitant to take on economic risk” and that “quite some time is needed before we can declare success.”

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

“Our monetary policy stimulus will stay in place as long as needed for its objective to be fully achieved on a truly sustained basis,” he noted.

“While we have already seen a substantial effect of our measures on asset prices and economic confidence, what ultimately matters is that we see an equivalent effect on investment, consumption, and inflation," he added.

The Frankfurt-based bank on Thursday (5 March) announced it would purchase €60 billion of bonds per month as part of an unprecedented quantitative easing programme (QE) set to run until September 2016.

The decision to pump a total of €1.14 trillion into the eurozone economy, together with a sharp fall in the price of oil, has fuelled a distinct rise in economic confidence across the eurozone.

The eurozone economy grew by 0.4 percent in the first three months of 2015 on the back of stronger than expected growth in France and Italy, while the European Commission, which has raised its growth forecast for the year to 1.5 percent, described the “brightest spring in several years” for the European economy.

The currency area also edged out of a four-month period of falling prices in April, although prices remain well below the ECB’s 2 percent target.

The bank plans to continue buying around €60 billion worth of bonds per month, including €50 billion under its Public Sector Purchase Programme (PSPP).

However, the policy is not without its critics.

Extremely low interest rates, caused by the flood of new money into the markets, also means that savers and pension funds get tiny returns, a point conceded by Draghi as a potential concern.

“For pensioners, and for those saving ahead of retirement, low interest rates may not be an inducement to bring consumption forward. They may on the contrary become an inducement to save more, to compensate for a slower rate of accumulation of pension assets.”

The IMF, a supporter of the stimulus plan, has also warned that too much cheap money is fuelling more risky behaviour from investors seeking to make higher returns.

Meanwhile, in an interview with German daily Handelsblatt on Thursday, Bundesbank president Jens Weidmann again criticised the extension of the ECB’s emergency lending programme to Greek banks.

“I don’t think it’s OK that banks which don’t have access to the markets are being granted loans which then finance the bonds of their government, which doesn’t have access to the markets itself,” he said.

Investigation

Cyprus: Russia's EU weak link?

Five years and €10bn after its EU bailout, Cyprus is a weak link in Europe's banking system - amid renewed fears on Russia money-laundering.

News in Brief

  1. Migrant rescue ship heading to French port
  2. EU angry at British tabloids on Brexit
  3. UK to allow EU flights in no-deal Brexit
  4. Greek reporters arrested after story on 'mishandled' EU funds
  5. Austrian minister urges police to out foreign sex offenders
  6. ECB's Draghi set to clarify role in secretive G30 group
  7. Half of EU states at risk of missing recycling target
  8. Commission refers Poland to EU top court over rule of law

Agenda

Brexit and MEPs expenses in the spotlight This WEEK

The EU will be watching closely how the political dynamics of Theresa May's Conservative party conference starting next week will influence Brexit negotiations. MEPs might also be forced to release their office expenses.

Feature

Sound of discord at 'Sound of Music' Salzburg summit

Decisions in the EU are a complicated process of intense negotiations, quid pro quos and horse-trading, until an agreement can finally be reached. But that didn't happen in Salzburg.

Stakeholders' Highlights

  1. NORDIC COUNCIL OF MINISTERSThe vital bioeconomy. New issue of “Sustainable Growth the Nordic Way” out now
  2. NORDIC COUNCIL OF MINISTERSThe Nordic gender effect goes international
  3. NORDIC COUNCIL OF MINISTERSPaula Lehtomaki from Finland elected as the Council's first female Secretary General
  4. NORDIC COUNCIL OF MINISTERSNordic design sets the stage at COP24, running a competition for sustainable chairs.
  5. Counter BalanceIn Kenya, a motorway funded by the European Investment Bank runs over roadside dwellers
  6. ACCACompany Law Package: Making the Best of Digital and Cross Border Mobility,
  7. IPHRCivil Society Worried About Shortcomings in EU-Kyrgyzstan Human Rights Dialogue
  8. UNESDAThe European Soft Drinks Industry Supports over 1.7 Million Jobs
  9. Mission of China to the EUJointly Building Belt and Road Initiative Leads to a Better Future for All
  10. IPHRCivil society asks PACE to appoint Rapporteur to probe issue of political prisoners in Azerbaijan
  11. ACCASocial Mobility – How Can We Increase Opportunities Through Training and Education?
  12. Nordic Council of MinistersEnergy Solutions for a Greener Tomorrow

Latest News

  1. Russian with Malta passport in money-laundering probe
  2. Cyprus: Russia's EU weak link?
  3. Missing signature gaffe for Azerbaijan gas pipeline
  4. Every major city in Europe is getting warmer
  5. No chance of meeting EU renewable goals if infrastructure neglected
  6. Brexit and MEPs expenses in the spotlight This WEEK
  7. Wake-up call on European Day Against Islamophobia
  8. Sound of discord at 'Sound of Music' Salzburg summit

Join EUobserver

Support quality EU news

Join us