ECB strategy

Bonds Away!

ecb_bloomberg-DISTORTED
But will the sun still be shining on the ECB after the program?
  • Why it matters

    Why it matters

    The ECB’s proposed bond-buying strategy has the potential to re-energize Europe’s stagnating economy.

  • Facts

    Facts

    • The ECB is considering a mass purchase of government bonds.
    • Critics say the program will be ineffective and disincentivize root and branch reform.
    • The ECB is already battling low interest rates.
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  • Audio

    Audio

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It’s increasingly probable that the European Central Bank will embark on a program to buy huge amounts of government bonds, a process known as quantitative easing. This is arousing great fear in Germany.

Critics say it will be ineffective, hurt savers,  and stop governments from making much-needed reforms.

These worries are, for the most part, unfounded. Germans should be more concerned about the damage done to their own and other European economies if the ECB’s monetary policy fails.

An ECB program to purchase government bonds can be successful, if a series of conditions are met.

It will be very difficult to drop already very low interest rates for countries and function more like the U.S. Federal Reserve Bank’s second purchasing program after 2010.

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