For how much longer will ECB provide cheap money?
ECB chief Mario Draghi announced on Thursday that the bond buying programme will be continued until at least the end of 2017. From April, however, it will be scaled down to 60 instead of 80 billion euros per month. Draghi is gradually turning off the cheap money supply and Italy in particular needs to take action, commentators warn. Others say the bond buying programme won't end any time soon because Europe's stability is at stake.
Cheap money coming to an end
This is the beginning of the end of the quantitative easing policy, Corriere della Sera warns, casting worried glances at Italy:
“With gentle words the European Central Bank has adopted a harsh tone this time. This is the first time it has done so since Frenchman Jean-Claude Trichet was at the helm and it marks a turning point the repercussions of which will be felt even by Rome's ignorant political class. It is nothing new that Italy's fate depends on the determination of the Eurotower to stick to the low-interest-rate policy. But as of yesterday this will is in doubt, and it makes no difference whether Italy is prepared for this change of direction or not. … The ECB's decision contains another message that Rome's political class would understand if it weren't so preoccupied with its own affairs. … Frankfurt's support in the financing of Rome's debts is likely to cease once Italy holds new elections.”
ECB reacting to crisis in Italy
The timing of the announcement that the bond buying programme will be extended is no mere coincidence, Salzburger Nachrichten points out:
“The dilemma the guardians of the euro face is also underscored by the fact that, without intending to, they have put themselves at the mercy of politics, and to an extent that has become particularly apparent in these days of December. Officially Mario Draghi and his colleagues would never cite the political turbulence in a Eurozone country as the reason behind their monetary policy. But the government crisis in Italy and the wretched state of the banks in Europe's third largest economy are dictating their course. The decision to continue the bond buying programme after April, albeit on a smaller scale, makes this clear.”
Draghi is fighting the populists too
With the expansive monetary policy Draghi is aiming to do more than just oil the European banking system and ease economic recovery, La Vanguardia believes:
“Mario Draghi is trying to prevent the economic situation from deteriorating and giving wings to Geert Wilders, Marine Le Pen or Beppe Grillo. … Even though the crisis is not the only cause for the rise of these forces, without the crisis they indubitably wouldn't have achieved their current levels of popularity nor so much confidence that they can achieve anything, such as for example sinking - rather than reforming - the European Union. Draghi, the guardian of the euro, wants to move closer to his goal of two percent inflation. This is why the ECB left the interest rates at zero percent yesterday. Let us hope that the voters won't sink the EU in 2017.”
Governments should thank Super Mario
Thanks to Mario Draghi the unresolved public debt crisis will remain untackled, Vitor Costa comments in Público:
“Super Mario, as Draghi is often called, has done more than any other leader in the Eurozone to ensure that the project of the single currency continues. Thanks to the ECB's policies Portugal, for example, has been able to return to the markets and use them to finance itself. … Thursday's decision is another step aimed at buying time, for Europe and above all for the Eurozone. The public debt crisis is still on ice. That's it. It is not within Mario Draghi's power to resolve this crisis - or at least he doesn't bear the sole responsibility for doing so. And until the European leaders find a solution, all we can do is thank Super Mario for keeping this problem on hold.”