ECB Policies

Playing With Fire

European Central Bank (ECB) President Mario Draghi exchanges views during a Monetary Dialogue with the European Parliament's Economic and Monetary Affairs Committee in Brussels, Belgium, November 12, 2015. REUTERS/Eric Vidal
All eyes are on European Central Bank president Mario Draghi.
  • Why it matters

    Why it matters

    The European Central Bank’s expansionary monetary policies could hurt the euro zone’s economy instead of support it, the author argues.

  • Facts


    • The 19-nation euro-zone region has been marked by high unemployment and falling prices in some of its countries, for instance Spain and Greece.
    • On Thursday, the ECB is expected to announce further monetary expansion measures to fend off deflation and support economic growth.
    • The central bank is running a bond-buying program worth €1.1 trillion or $1.2 trillion and has kept its main interest rate at a low of 0.05 percent since September 2014.
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Monetary policy in the euro zone has been extremely expansive for a long time. But true to the motto “The more you have, the less you see,” quite a few representatives of the European Central Bank’s governing council are pushing for more monetary relief.

In order to prepare the ground for it, they paint a bleak economic picture and refer to persistent deflationary threats.

This pessimism is exaggerated. The euro-zone economy has been growing for the last two-and-a-half years, albeit rather weakly. The current low inflation rates are due largely to the sharp fall in oil prices.

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