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06/03 – ECB’s QE programme warmly welcomed

Comments on ECB’s forecasts and policy as well as on Greece’s situation European media widely cover yesterday’s ECB announcements both on its quantitative easing (QE) programme in order to defeat inflation and boost growth economy and its expectations of euro area economic data. Several media – including Les Echos – write that the ECB displayed full confidence that the QE will have a strong effect in supporting growth and bringing inflation close to 2% on the medium term.

Frankfurt said it may continue the QE beyond September 2016 as long as inflation has not stabilised at the required level. The ECB expects a 1.5% growth this year (from 0.9% in 2014), then a 1.9% growth in 2016 and 3.1% in 2017. The INYT says that the QE programme will start on Monday. The US newspaper quotes Mr Draghi, saying at a press conference in Cyprus, that the ECB’s “monetary policy have worked”. The WSJE also reports about Mr Draghi’s statements, underlining there was “absolutely no reason” to change the purchase plan. Along the same lines, “ECB chief happy to claim an early victory”, reads The Irish Times.

 Jornal de Negocios says Mr Draghi dismissed fears of low demand in debt and announced some flexibility in the programme, giving national central banks the liberty to postpone the ECB’s purchase and to compensate in following months. As negative comments, Economics professor David Thesmar writes in Le Monde that the expected macroeconomics effects of the ECB’s quantitative easing plan, such as a weaker euro, a decrease in the cost of public debt and the funding of the private sector will be limited.  In a commentary for Deutschlandfunk, Eva Bahner warns of the ECB’s “historic experiment with an uncertain outcome”. She calls the ECB’s plan to buy €60 billion in bonds monthly a “daring plan”. Yet, even the implementation might face difficulties.

In FAZ, Philip Plickert is concerned that when the ECB will start its bond buying programme next week, it will come “dangerously close” to the “red zone” of monetary financing. He warns that interest rates for crisis countries have dropped to a level which does not reflect default risks. The FT leader writer notes that yesterday’s ECB announcements contained few surprises and urges the bank to continue with QE, despite the “wrong-headed” opposition to it. Despite the optimistic predictions, the ECB stresses out it is ready to implement further measures if necessary.

Economists are divided on the stimulus programme’s duration. Half of them believe the planned money injection will suffice to push inflation up, the other half foresee that the ECB will have to continue purchasing state bonds after September 2016, reports De Tijd. In a positive tone, Citibank economist Guillaume Menuet shares the ECB’s optimism about euro area growth in the coming years and explains why the QE is going to be effective, in being interviewed by Les Echos. He does not believe that the QE will come to an end in September 2016, because inflation projections will take some time to reach 2%. Regular Daily Telegraph contributor Allister Heath today calls the ECB’s decision to proceed with QE “a major breakthrough” that will reverse “then deflationary threat”.

Portugal’s former Finance Minister, Vitor Gaspar, supported the ECB’s president analysis of the euro area’s economic problems, Diário Económico reports. Mr Gaspar agrees with Mr Draghi that Europe needs a more expansionist fiscal policy, especially from surplus countries, a position advocated by the European Commission. While Europe’s home-made problems are far from solved yet, progress is now being made as opposed to during the peak of the euro crisis, writes Michael Laczynski in a commentary in Die Presse based on the ECB’s raised growth forecast.

Meanwhile, another article from WSJE says that the euro slid to its lowest level in more than a decade after Mr Draghi gave details of his plan for a bond-buying programme and made plain that it would be huge and long-lasting. In other news focused on the Greek situation, Les Echos reports that Mr Draghi told the press yesterday that the ECB will resume normal lending to Greek banks only when it sees Athens is complying with its bailout programme. He underlined the “gigantic” €100 billion aid provided by Frankfurt but insisted that “the ECB is a rule-based institution”.

In L’Humanité, Syriza’s head of European policy Yiannis Bournous writes an opinion piece on the consequences of the recent negotiations between the Greek government and Europe “neoliberal elite” As a “new and long period filled with harsh clashes is to start”, Mr Bournous warns that Greece’s interlocutors will try to corner the government into “only trying to limit the damage without being able to launch [its] own alternative initiatives”.

In an interview with Handelsblatt, ESM Managing Director of the Klaus Regling says that he fears that the budget deficit in Greece could return, and that while he hopes that Greece will be able to finance itself independently, it has lost the trust of many international investors. Ethnos says that Mr Regling urged the government to collect the overdue debts, while he expressed his disapproval regarding the statements of Greek PM Alexis Tsipras and Greek Finance Minister Yanis Varoufakis.

Naftemporiki says that EC President Jean-Claude Juncker underlined that the Greek government has to focus on the implementation of the Eurogroup’s agreement. EC Vice-President Valdis Dombrovskis stressed that the negotiations with the Greek authorities continue, adding that the EC is working for the replacement of the Troika by a structure with greater democratic legitimisation. Le Monde reports that Mr Varoufakis has said that repaying the IMF is a priority for the government, saying it would “squeeze blood from a stone” to do so. Croatian media say that Mr Tsipras is not entirely wrong, when he claims that some conservative forces do not want to see him in power, however, but he is wrong to believe that promising not to pay debts, or to increase the minimal salary, are very easy to achieve. ©europeanunion2015

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