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23/01- ECB’s QE announcement: better late than never

There is blanket coverage of the ECB’s much-awaited QE announcement. Several media dedicated their front-page to the announcement. Among media and expert comments, praise dominates, although many point out that the announcement has come late, adding that it is better late than never. Several commentators stress how historical the decision is.

The WSJE speaks of a new era for a central bank that until recently resisted following the easy-money policies pursued by central banks in the US, UK and Japan. Les Echos‘ editorial speaks of “a decisive step to get out of the rut” and a “revolution” meant to turn the page of “an ECB restrained by Germany’s orthodoxy for too long.” Diário Económico’s António Costa says the debt purchase programme is historical in size and in that it will lead to the pooling of 20% of member states’ debt.

Among positive comments, Les Echos’s editorial says Mr Draghi is depicted as the only man to “drive things forwards in Europe”, where political leaders are petrified by Greek elections, the fear of a Brexit, the inadequacy of Jean-Claude Juncker’s investment plan and so on. “There is at least one intelligent banker in Europe: Mario Draghi”, writes Laurent Joffrin in Libération’s editorial. In an article in Sole 24 Ore, Rossella Bocciarelli notes that QE could help the Italian economy to recover, with GDP increasing 0.5% in two years and the country benefiting from around €125 billion that can be used to guarantee liquidity for businesses and households. In a tone of relief, Greek media report that Greece will be included in the ECB’s bond purchasing programme with some delay and under three conditions.

Commissioner Moscovici told CNBC that Mario Draghi “always acts in the interests of the Eurozone as a whole,” but declined to comment further until the full announcement on the QE programme. Among more mixed reviews, several commentators stress the tardiness of the announcement six years after QE was launched in the rest of the world. The FT says it has taken far too long but its belated action is no less welcome.

Libération’s Laurent Joffrin says the EU should have faced the facts and opted for QE measures a long time ago, but “it is never too late to do better.” And monetary policy alone cannot solve all: it will take a solid investment policy following the path marked out by Jean-Claude Juncker, increased salaries and reduced inequalities to revive growth for good. The INYT says the “belated effort exceeds expectations, but doubts about its impact remain.” The newspaper notes that any further economic stimulus steps would need to be by national leaders, involving the sorts of extensive government spending that many countries, including Germany, have been reluctant to pursue.

In another comment, The INYT says the ECB’s announcement is “several months late, timid compared with its counterparts in the United States and Japan, and full of complexity aimed at satisfying his political constituents.” But it may also be the last, best hope to prevent Western Europe from sliding toward another lost economic decade. The WSJE also notes that doubts remain whether the policy will work in Europe’s fragmented economies.

Die Welt’s Thomas Exner says no one can say whether the move will really stimulate the economy, however, the decision is understandable according to the ECB´s own logic, and most likely the lesser evil, as once deflation has set in, it is almost impossible to reverse. El Pais’s leader writer raises a couple of objections to the bond-buying plan: the delays in announcing the programme, and the fact that risk-bearing is not totally mutualised. Among more critical comments,

Handelsblatt’s Sven Afhüppe writes that while the benefits are uncertain, it is guaranteed to cause an array of unwanted side effects. He questions the timing of the decision and says there is no reason to assume that European banks will issue more loans simply because the ECB takes government bonds off their books. © European Union, 2015

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