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Updated at 5.40pm
THE EUROPEAN CENTRAL BANK will not deliver any extra pre-Christmas stimulus to ailing eurozone economies – even after slashing its growth forecasts for the coming years.
But president Mario Draghi today announced the ECB has “stepped up” preparations for new spending plans as officials decided to keep interest rates on hold at their already record-low levels of 0.05%.
The bank has started buying up covered bonds and asset-backed securities in line with a two-year plan outlined in October to try to kickstart the eurozone’s flagging economies.
An even bleaker output for broader eurozone economies was unveiled after the ECB meeting with region-wide growth “revised substantially downwards” to 1% in 2015 and 1.5% in 2016.
Earlier forecasts for were for 1.6% growth next year and 1.9% the year after.
Ireland, mainly thanks to its strong export links to the stronger economies of the US and UK, is expected to buck the trend and record the highest growth in Europe for both next year and 2016.
Warm the printing presses
Today Draghi’s hinted the ECB would bow to pressure to launch a more radical stimulus plan – that of “quantitative easing”, or effectively printing money to buy government debts and get more money flowing into the European system.
“Early next year the (bank’s) governing council will reassess the monetary stimulus achieved, the expansion of the balance sheet and the outlook for price developments,” he said.
“We will also evaluate the broader impact of recent oil price developments on medium-term inflation trends in the euro area.
Should it become necessary to further address risks of too prolonged a period of low inflation, the Governing Council remains unanimous in its commitment to using additional unconventional instruments within its mandate.”
The move’s biggest opponent in Europe has been Germany, whose representative on the ECB’s board last week said the bank shouldn’t be involved in buying government bonds at this stage.
The country’s officials have themselves been accused of strangling the region’s economies by running a big trade surplus while failing to invest internally.
However Draghi appears ready to step around the European powerhouse, telling reporters after the ECB meeting today that there did not need to be agreement across the board for the bank to launch a money-printing plan.
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Mario, the former managing director of Goldman Sachs, appointed in 2002. This man is not credible.
The recession ( robbery) will not stop until the social contracts of Europe are broken up and countries assets are given to the likes of the Bilderberg group…This was always the plan from the get go.
Prince Draghi faces huge opposition from the Germans. He plans to monetise the debt as they are doing in Japan and the US. Kick the can down the road. We should be having a plan B…
He’s looking a bit green about the gills, European economy isn’t the only thing that’s sick. A bagman, still on GS payroll.
This comes highly recommended …
The Euro is a failure, when it was announced it was going to replace the $ as a world reserve currency lol! , there is more trade done in the Chinese Yuan now. this is what happens when you leave economics to politicians and lawyers. The Euro will continue to cause havoc in countries like Greece and Spain for years to come because their national debts have been revalued in Euros over the years.
Miserable looking git that Mario Draghi.
” If you believe the public comments made by the world’s central bankers, the prices that consumers pay for items are not rising fast enough; in some places like Europe they worry that prices might actually fall (a tragedy for the possessing classes, as their manic one-way long bets might not work then). Central bankers are terrified of this outcome. Setting aside for a second the apparent insanity of this logic for your average consumer, who experiences price rises on a near continuous basis, let’s examine in detail one of the (jokes) gauges economists use for measuring prices: the Consumer Price Index (CPI).”
Why do people think it’s ok to comment negatively on the appearance of male politicians? If someone called Mary Lou McDonald a miserable looking git there would be an outcry on the journal.
Where was the give away budget, did I miss something, Mr Noonan gleefully tells us tax take way ahead if target, were still have austerity
It’s time that all Europeans realised three things:
1) The Euro is broken.
2) The Euro is here to stay.
3) These positions actually aren’t contradictory at all, so stop saying that they are.
1 is self evident. 2 is only debatable if you think that an unstable currency pegged to the sterling is desirable. For some reason, nobody accepts 3. A direct implication of 3 is 4, that the Euro has to be fixed. That means treaty change.
In order to make monetary union work, some kind of fiscal union will have to be worked out. Among other things, Ireland will be forced to stop being a tax haven masquerading as a high-tech economy, and raise its corporation tax. More democracy will have to be breathed into the system, through direct elections to top European positions, and a stronger role for the Parliament.
The only reason that we’re not having this discussion is the fact that Germany is stalling. Yet even the staunch inflationphobe, Wolfgang Schäuble, knows that this cannot go on forever. It would be nice if Irish politicians would actually have a debate about the future of Europe, and our place within the Union before the government formulates its negotiating position – which predictably will consist of trying to get as much money as possible for farmers etc.
If it’s broken then throw it out !
a fiscal union promoting more national democracy?? sounds like an oxymoron to me. the euro has failed miserably. ireland and germany are the only countries in the eurozone that export more outside it than inside it. a devalued currency helps in that respect. the current woes of the euro and the mass emigration we have seen as well as speaking english as our first language has helped our situation. ireland is certainly not representative of the eu as a whole.
there are a lot of Mediterranean countries as well as others that need to devalue their currency further, for them the euro has been an economic straitjacket. what is the europhiles solution? more centralised power and control. it wont happen.
the euro is a beast that needs to die.
The US is able to get by, because bailouts in the US don’t have the same drastic connotations that they have here. Look at California. The US is able to do this because the federal government has a budget and an unquestioned mandate to use it. It also works like that in Canada, and in most functioning currency areas.
That’s the kind of fiscal union that Europe needs. We need to hand over more power to Brussels, to allow it to transfer money through federal programs to help states cope with and adjust to a strong currency. However this power shouldn’t be wielded by unelected technocrats. The EP should have the power to initiate legislation, the Commission President should be directly elected by the people, and states shouldn’t be allowed to use the Commission as a retirement scheme for unpopular ministers, a la Phil Hogan.
Even if bringing back the punt wouldn’t have the disastrous effect that many predict it would have (inflation, high interest rates etc), it wouldn’t give us much additional manoeuver. For over half a century the punt was unquestioningly tied to the Sterling, and after that it was effectively tied to the Deutschmark through the EMS. Having your own currency does not mean that you can do whatever you like. In small economies like Ireland, the choices are almost always dictated by outsiders.
Using fiscal policy reform to correct monetary policy dysfunction is like servicing your car with a pound of sausages.
You cannot equate the US economy (a nation that evolved under a shared gold-backed currency) with Europe’s diverse economies (nations that evolved under a variety of currency systems).
” The manifest unsuitability of a one-interest-rate-fits-all economic policy inside the eurozone is shown by our recent interest rate reductions to get in line for EMU. These further boost soaring house and asset prices here. They are precisely the opposite of what the Irish public welfare needs, although low interest rates suit recession-locked Germany and France.” (1999)
http://www.aislingmagazine.com/aislingmagazine/articles/TAM25/WhyProtest.html
We need to hand over more power to Brussels – your words
you should have put that in the first line of your response. it would have saved me some time. the US is a ticking time bomb. when was the last time they had a balanced budget. were it not for deficit spending and an ever increasing national debt 17.5 thousand billion and growing. they would be a banana republic. look at their labour participation charts and youth unemployment. if things are so good why is the figures so bleak.
It is over 40 years since the US achieved a trade surplus. Since then the US has been consuming more than it produces. While living on the never-never and exporting its currency and treasury bills.
The US economy is unique in this respect. No other nation has the military fire power to invade any wayward OPEC/Arab nations that opts out of their currencies hegemony.
@johnfergus. The US has the largest economy in the world, accounting for over 22% of global GDP. It’s the world’s largest producer of oil and natural gas. AAA+ credit ratings. Most trusted currency in the world. Most of its national debt is owed to Americans not foreigners.
The US has not experience a trade surplus in over 40 years. Its economic strength and affluence is illusory and transitory, while the strength of its economy relies on its ability to intimidate key nations such as Saudi Arabia.
While the US has benefited from 4 decades of money printing an unholy alliance are conspiring against the Dollar hegemony. This includes Russia, China and the EU would also appear to be in league with the unholy.
http://www.innovationfiles.org/think-the-trade-deficit-couldnt-get-any-worse-think-again/
The only reason the US hasn’t imploded is because they have a gun to the head of everyone else…times are a changing thou, BRICS are challenging the petrodollar and the dam is about burst.
Join the queue of pundits that have for decades predicted the demise of the U.S. Economy and its influence. As Sean’s linked article stated The U.S. Is not about to lose it Reserve status anytime soon and neither will the dollar, check out today’s values for BRIC currencies. Most of the U.S. national debt is owed to Americans. China accounts for less than 8% of that.
http://www.dailykos.com/story/2014/05/25/1301968/-Guess-Who-s-America-s-Largest-Creditor-Hint-It-s-NOT-China
Seán, for a start, I don’t think you appreciate how diverse the US economy is.
Second, your argument is that we shouldn’t have joined the Euro in the first place. Few would argue that point with you. However, we we have never been in control of our own monetary policy. That point should be underlined and printed in bold.
Third, using fiscal policy to correct monetary policy is normal – pretty much every government welfare program contains aspects of this.
Fourth, why shouldn’t a large economy like the US need a trade surpluss? I thought that the whole problem of the Eurozone is that every economy is fighting to maintain their surplusses? Begger thy neighbour much?
In America if the powers that be decide to introduce a minimum wage then it is introduced across the 50 States – In Europe this is not the case and is perfect for slave labour conditions in the richer economies ………
Look at the Iirsh children’s allowance flowing through our sovereign to eastern Europe – the children’s allowance is probably worth the price of two or three mortgages in the poorer countries ….
They were cursed the day they hung Ireland out to dry , as the saying goes The crows come home to roost .. No Irish to bail them out this time , lets hope they all go down together .
If the rest of Europe is tanking it kinda brings into question the give-away budget our crowd just brought in. We could be back in the shi!te next year.
@ John lucky that we do the least amount of trade with our fellow eurozone members
All it takes a a slight wobble in the European economy and that’s us seriously goosed again,no matter how much spin Kenny spews.
No matter how you dress it up communism does not work and the EUSSR is doomed to fail just as the USSR did. Anything after signing up to the old Common Market idea was a step too far.
Well said Mort.
The system is broken and the banks have been exposed for what they are.
Are we going to rely on credit expansion as a cure to debt saturation?
To preserve our current monetary system debt must increase.
Are you willing to take on more debt and sacrifice your collateral to save the Euro?
“The wavelike movement affecting the economic system, the recurrence of periods of boom which are followed by periods of depression, is the unavoidable outcome of the attempts, repeated again and again, to lower the gross market rate of interest by means of credit expansion.
There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”
Ludwig von Mises, Human Action, p. 572
I bet Dessie Ellis would show him the way to the Elves workshop !
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