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16/04 – Draghi says QE is working

Most media report on yesterday’s ECB monthly press conference, during which President Mario Draghi stated that the bank remains committed to maintaining its bond-purchase quantitative easing (QE) programme, despite concerns over negative yields and the recent economic revival in the euro area. He claimed that the programme initiated last month is already having positive results, arguing that “there are clear evidences that the measures of monetary policy we put into operation are effective”.

Mr Draghi did however acknowledge the risk posed by ultra-loose monetary policy and outlined the measurements by which the ECB will assess the effectiveness of quantitative easing, the WSJE explains. According to Les Echos, Mr Draghi said he was actually “surprised” by the current debate on a possible reduction of the QE’s scope just a month after it has begun. “That would be like asking to stop a marathon after the first kilometre,” he said. He therefore swept aside the risk of not finding enough securities on the market to carry out the programme, and confirmed full implementation of the plan to keep buying government bonds and other debt at a rate of €60 billion a month at least until September 2016.

However, he added that the programme could be adjusted should circumstances change. Rai Tre reports that the IMF confirmed Mr Draghi’s comments, and according to the British press, Draghi’s announcement caused European debt markets to reach record highs. In a column for Les Echos, economist Nouriel Roubini thanked the ECB for its quantitative easing policy, which “may even stop the deflationist pressure.” In a column in De Tijd, economist Carsten Brzeski says it would be crazy for the ECB to already stop its programme; even though the inflation is increasing, the economic damage after years of recession and high unemployment cannot be solved in a matter of months.

Il Sole-24 Ore‘s Donato Masciandaro claims that Mr Draghi’s comments are “a clear message” to the so-called “hawks”, those economists and central bankers who have always criticised the ECB’s extraordinary measures. Jens Münchrath writes in Handelsblatt that six weeks after the ECB launched its QE programme, the effects are “astonishing” yet the programme remains risky and long-term consequences are difficult to predict.

In another article in Il Sole 24 Ore, Adriana Cerretelli warns that the ECB seems “unable to see the speculative bubble coming,” member states seem “unable to launch and implement the structural reforms the ECB and the EU called for”, and politicians seem “unable to understand that the situation is still difficult”. Dienas Bizness comments that with all these unconventional measures attention has not been paid to euro’s interest rates, but they remained unchanged during this meeting at a record-low level of 0.05%.

Mr Draghi is also cited in several newspapers explaining that “Greece would continue to enjoy the full support of the central bank’s emergency liquidity assistance, a €74-billion funding lifeline keeping the country afloat, so long as Athens can strike an agreement with its creditors”. Many newspapers including The Times and Diario Economico mention that the conference was interrupted by a young woman who jumped on the stage while Mario Draghi was reading the decisions of the Governing Council, throwing confetti at him and protesting against the “ECB’s dictatorship”.

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