EU Media notes that European stock markets have surged and rallied after the collapse of January 5. The upsurge follows the latest negative inflation figures in the hope that the ECB will launch its bond purchase programme on January 22. But some stress that uncertainties in the Greek election of January 25 might prompt Mario Draghi to adopt a wait-and-see attitude.
La Stampa quotes ECB board member Benoît Cœuré claiming that the euro area “is not in deflation.” Mr Cœuré stressed that “it is too early” to understand what the ECB will decide on January 22nd, but that Greece is not a reason to postpone a possible Quantitative Easing. Il Sole 24 Ore warns that the ECB Council could adopt a disappointing compromise solution, like leaving the risk of purchasing state bonds to national central banks, or purchasing only low-risk bonds.
Le Monde is also less positive and says Wednesday was a bad day for ECB President Draghi, as Eurostat figures revealed that euro area inflation fell 0.2% in December. Economists remain divided over whether the fall in prices is worrying. For now, the ECB and the EC do not believe the euro area has entered a period of deflation. But the ECB cannot remain inactive for long and could announce new measures at its 22 January meeting.
Meanwhile, Naftermporiki, Les Echos and El Mundo report on the ECB’s warning to Greece. The ECB Thursday made clear liquidity backing for Greek banks will not be extended beyond February, shrugging off calls from Greek central banking authorities. The ECB said it will only continue to pump liquidity into Greece’s financial system once the incoming government successfully completes the final review of the bailout programme and seals a deal with the troika on a follow-up scheme.
Les Echos comments that Greece poses a double problem to the ECB. Frankfurt condemns the programme announced by Syriza and threatens to block Greek banks’ access to liquidity if the new government doesn’t play the game. Another problem that Greece poses to the ECB is how it can launch a sovereign bond purchasing programme (QE) while Syriza threatens to restructure Greek debt if elected.
To avoid this problem, the ECB could commit to QE in principle, late next month, and thus buy time before finalising the programme’s details, in order to see the Greek situation more clearly. In other comments on the ECB’s next moves, Daniel Stelter from Boston Consulting Group explains in Die Welt that quantitative easing, which is intended to prevent deflation and boost growth, is deceptive. According to Mr Stelter, in the likely scenario that the measures have no effect, the great danger lies in the ECB losing its reputation as the last credible institution in the euro area.© European Union, 2015
