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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