BCE archivos - Katoikos

Brussels raises the growth forecast for the Eurozone thanks to a boost from the ECB

The European Commission has upped its growth forecasts for the Eurozone and the entire EU after noting the positive effects of the European Central Bank (ECB) debt purchase programme; cheaper oil prices, and the depreciation of the euro. However, this economic improvement will not be uniform across all the member states. Gross Domestic Product (GDP) for the 19 euro members will be up this year by 1.5%, two tenths higher than estimated in February by the EU executive. For the 28 countries in the European Union, the Commission also revised forecasts upwards by one decimal point to 1.8%

The SSM promises tough but fair treatment of banks

In the European Parliament the head of the Single Supervisory Mechanism (SSM) for the Eurozone banks has committed herself to restraining financial institutions and closely monitoring the models they use to calculate risks. Danièle Nouy has given assurances that “we will be a demanding supervisor, however at all times we shall strive to make our action fair and impartial.” The SMM just published its first report that has overseen more than 6,000 banks in the region since last November.

The ECB enters a new era in monetary policy

The European Central Bank (ECB) is to start buying up sovereign bonds from 9 March. Its president, Mario Draghi, believes that the programme of unprecedented monetary stimulus in the Eurozone will succeed in stemming the threat of deflation in the region. Next week will see an enormous machinery set in motion for the purchase of public debt on a mass scale from the 19 countries in the monetary union. Known as quantitative easing (QE), this has now been renamed by the ECB as the Public Sector Purchase Programme (PSPP) and will consist of bond purchases up to €60bn per month.

Draghi turns on the QE tap

Mario Draghi has fulfilled his promise and put into action the words “whatever it takes” – which he declared at the height of the debt crisis in July 2012 – to save the euro. After the first ECB Governing Council meeting of the year, its president announced the implementation of the much-anticipated Quantitative Easing (QE), a statement that has not only fulfilled but exceeded the markets’ expectations. The Italian banker has led the ECB into unknown territory with a massive sovereign bond-buying plan that will be added to the existing private sector asset purchase program, amounting to a total of €1.14 trillion. The goal is to quell the threat of deflation, and to reactivate economic growth, which remains stagnant in the euro area.

The imminent arrival of QE brings euro-dollar parity closer

The euro has depreciated relative to the US dollar to its lowest level in almost a decade. In the meantime, time is running out for the European Central Bank (ECB) to implement a massive purchase of sovereign bonds aimed at quelling the threat of deflation. This much-anticipated operation, called Quantitative Easing (QE), will most likely be officially announced by ECB president Mario Draghi at the upcoming meeting on 22 January. The European currency has plummeted this year under the 1.1747 dollar threshold, the exchange rate at which it was first introduced in 11 European countries on 1 January 1999. The euro continues to weaken after having lost 12% of its value relative to the US dollar in 2014, the sharpest annual fall since 2005.

The threat of Deflation

In the past inflation was the number one enemy of economists. Nowadays, you might find that the exact opposite is true, and that a fall in prices is now in the spotlight. Deflation has arisen as the main threat to the economy, and the European Central Bank (ECB) is under pressure to take decisive measures against it. Prices in the Eurozone have seen the first year-on-year decline in five years, according to Eurostat.