SILVER BULLET?

Doom, Gloom and the ECB’s Big Bet

Draghi-Weber-Imago
Mario Draghi and UBS Chairman Axel Weber. The support of bankers for the ECB's policies has waned.
  • Why it matters

    Why it matters

    Europe’s recovery from a six-year economic crisis is at stake. Banks warn the ECB’s stimulus will not reach the real economy.

  • Facts

    Facts

    • ECB President Mario Draghi announced last week that the central bank would start buying €60 billion ($67.6 billion) in public and private bonds monthly.
    • Banks fear the flood of capital will put new pressure on their profit margins through extremely low interest rates.
    • Many economists believe the stimulus could work by pulling the euro lower and, in turn, boosting European exports.
  • Audio

    Audio

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Is it really worth it? That’s the question that many banks in Europe are asking after the European Central Bank last week launched a massive and historic quantitative easing program to buy government and private bonds.

It is the latest sign of cracks forming in the once-invincible veneer of a central bank. Bankers and markets in Europe are asking themselves: Just how much control does a central bank really have over the path of the economy?

Even many critics of the ECB’s new €1.1 trillion bond-buying program concede that the Frankfurt-based institution has had no real choice in the matter – it must do what it can to prevent debilitating deflation and boost Europe’s anemic growth.

But at the same time, many bankers around Europe fear the stimulus program won’t be worth the effort.

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