BRUSSELS: The European Central Bank will press the button on Monday on a €1.1tn stimulus programme that will play a major role in putting the eurozone back on track for sustained growth, its president Mario Draghi said.
The ECB will pump the €60bn a month into the euro economy as the first phase in its quantitative easing programme that Draghi said would combine with low oil prices and recovering consumer confidence to spur growth and propel inflation back up close to its 2% target.
Almost six years after the US Federal Reserve and Bank of England began pumping funds into their economies through their own QE programmes, the ECB is hopeful that driving down the long term cost of credit put continental Europe onto the same path to recovery as the US and UK.
But in a clear prompt for Greece to speed up negotiations over its huge debts, Draghi said Athens would be excluded from the latest attempt to kickstart the flagging eurozone economy until it agrees a new debt deal with Brussels.
He said Greece had already enjoyed a boost in lending by the ECB under its emergency measures, taking the total outstanding debt with Frankfurt from €50bn to €100bn or 68% of GDP. Lending more to Greek banks or to support government spending would be beyond the ECB’s remit, he warned.
Draghi said: “The ECB is a rule-based institution. It is not a political institution.”
The central bank also raised its growth forecasts for the currency zone, predicting it would grow by 1.5% this year, up from a forecast of 1.0% made three months ago. That would be followed by 1.9% growth in 2016 (up from 1.5%).
Draghi said new ECB growth forecasts reflect “the favourable impact of lower oil prices, the weaker effective exchange rate of the euro and the impact of the ECB’s recent monetary policy measure,” signalling that this was now the ECB’s last stimulus action and an improvement of the economic situation now depends on other factors.
Markets took the confirmation of QE until at least 2017 in their stride after analysts said most elements were already known and only the details of the scheme needed to be fleshed out. The euro slipped to a fresh 11-year low while stock markets edged higher, with the FTSE 100 reaching a new record high of 6961.
Draghi said buying assets on a broad-based level was the “final set of measures,” adding that governments needed to pick up the baton.
