Is Draghi's change of course too timid?

The European Central Bank plans to cut its bond purchasing by half as of January. But at least until September 2018 it will continue to buy a maximum of 30 billion euros worth of bonds each month. The base interest rate has not been touched. Some commentators praise ECB chief Draghi for his cautious change of direction in monetary policy. For others it doesn't go far enough.

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Expresso (PT) /

Draghi right to be cautious

Draghi's decision is exactly right in view of the political turbulence in Europe, Expresso concludes:

“The recent rise of right-wing parties in the Czech Republic, Austria and Germany, the decline in popularity of traditional parties and the resurgence of independence movements in Europe (in Spain, for example) demand extreme caution in the management of the ECB's ongoing loose monetary policy. ... The most worrying thing, however: if the aid provided by the ECB is reduced - particularly if the European economy stops growing - it could have catastrophic economic and political repercussions for the east and south of Europe.”

NRC Handelsblad (NL) /

Economy needs to go cold turkey

The ECB needs to finally set the date for the end of its bond-buying programme, NRC Handelsblad urges:

“It's like with most painkillers: the root of the problem isn't being dealt with. This is rightly being criticised, above all by countries like Germany and the Netherlands. ... When the economy is being stimulated artificially governments of states with bad balance sheets don't see the need to eliminate the structural imbalances in their system. ... The ECB's monetary policy tricks will lead to dependence. This cannot be the goal. So it's good that a detox programme has been announced. But Draghi still hasn't said when the bond-buying will end definitively. Clarity on this point would be desirable. It's high time the 'real' economy started doing its job.”

Les Echos (FR) /

Gradual policy shift the right move

Draghi has learned the right lessons from the history of monetary policy, Les Echos writes in praise:

“The US was too quick to tighten its loose monetary policy in the 1930s, with the result that it only aggravated the Great Depression. Japan committed the same mistake in the 1990s. The Fed is now taking its time with raising interest rates and shortening its balance sheet. Mario Draghi has learned the lesson: he'll take his time before announcing the end of the cheap money era. It's even possible that the Italian will never be the one to raise the ECB's interest rates. His mandate ends in exactly two years. And the question of his succession will soon arise.”

Financial Times (GB) /

Unorthodox decisions deserve respect

The Financial Times is full of praise for the head of the ECB:

“Mr Draghi, like the Fed's Ben Bernanke before him, deserves great credit. He first made the intellectual case for unorthodox monetary policy intervention and then implemented it by manoeuvring his way through the tricky politics of the eurozone, facing down critics inside both the ECB and some of the EU finance ministries. Thursday's announcement showed both the fruits of Mr Draghi's efforts and his skill in leaving the bank room to keep monetary policy appropriately loose for years to come.”

Süddeutsche Zeitung (DE) /

Draghi must react quicker

The change of direction at the ECB is far too hesitant for the Süddeutsche Zeitung:

“People are buying houses that they won't be able to afford in the long term. Euro states are losing an incentive to get their budgets in order. And a bubble is brewing on the capital markets. What if it bursts? And because the ECB can only find adequate volumes of bonds to buy in highly indebted Eurozone states, the proportion of its bonds from countries like Italy, France and Spain is steadily growing. ... The guardians of money are taking huge risks, so huge that even some of the players are getting worried. So it's right to stop now. ... It will be many years until the dangers have been banished, until money and interests have regained their control function for good management. It would have been better to take stronger action sooner.”

De Tijd (BE) /

Threat of a bubble looms

Constant stimulus for the markets is a risky policy, De Tijd warns:

“The ECB isn't pushing the gas pedal as hard as it was, but it's still pushing it. ... The real economy could get along without special support measures. But does the same go for the financial markets? ... They're addicted to the free money. If the ECB suddenly cuts off the supplies for the economy, major withdrawal symptoms could be the result. Draghi has no interest in causing a crash on the financial markets. That could have a negative impact on the real economy. ... But his course of action is not without risks. The ECB is continuing to blow air into the already pretty full balloons of the financial markets.”