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European Central Bank announces monetary stimulus package


Six weeks before leaving his post, ECB President Mario Draghi urges Germany to spend its budget surplus.

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European Central Bank (ECB) President Mario Draghi in Frankfurt (West Germany) on 12 September. RALPH ORLOWSKI / REUTERS

Because we must act, and the economy of the euro zone is showing signs of weakness, Mario Draghi announced, Thursday, September 12, a series of monetary stimulus measures: drop in the deposit rate of -0.4 % to - 0.5%, revival of the program of purchase of titles ("Quantitative Easing", or QE, in English) and promise not to increase the rates as long as inflation will not rise.

Article reserved for our subscribers Read also The ECB ready to push its limits to stop the slowdown of the European economy

However, the boss of the European Central Bank (ECB) does not hide a certain annoyance about being the only one to intervene. And asks the European states to commit themselves. "Governments with fiscal space must act quickly," he said at his penultimate press conference before leaving his post in late October.

The Frankfurt institution forecasts only 1.1% growth in the euro area in 2019 and 1.2% in 2020

At barely covered words, he urges Germany to finally use its budget surpluses to revive the economy. He says the board of governors is united on the subject. "There was unanimity to say that fiscal policy should become the main instrument. (...) The 11 million jobs created [since the end of the crisis] , the return of growth [in the euro zone] came mainly from monetary policy. It is now high time for fiscal policy to take over. "

Mr Draghi does not hide his pessimism about the economic situation in the euro zone. If he considers the risk of a recession "low" , he finds that "the slowdown is stronger than expected". The ECB forecasts only 1.1% growth in 2019 and 1.2% in 2020. As for inflation, it remains very far from the official target (being just below 2%), with a forecast of 1 , 2% this year and 1% next year.

A gift to banks

In these conditions, it was essential to take things in hand, believes Mario Draghi. Despite a few divisions within the Governing Council, the ECB resumes its share buyback program, which ended in 2018, without giving an end date. Mr Draghi also reinforces his promise for the future: while he has so far not wanted to raise rates until mid-2020, he now pledges not to do so until "what the forecasts of inflation converge strongly [around 2%] ". As things stand, this equates to several years at a minimum.

Source: lemonde

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