ECB announces more monetary easing

In view of the bleak economic outlook and weak inflation, the ECB has decided to maintain the benchmark interest rate at the record low of zero percent at least until mid-2020. It also said it would consider buying bonds again if the inflation prospects worsen. Is this the right monetary policy for the times?

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Die Presse (AT) /

Magic money tree: a recipe for disaster

If the ECB does not abandon its policy of low interest rates when the economy is doing well, we will pay dearly for it in the next recession, Die Presse worries.

“So financial repression is here to stay. And it will probably only get worse. And the risks are increasing every year. In the short term of course we can get by 'printing money' as the ECB is doing. But history has shown that making money appear out of nowhere has never created wealth but always ends in catastrophe in the medium term. And to hope that the economic laws of nature don't hold anymore is not a good idea. That has backfired too many times.”

Die Welt (DE) /

Devastating side effects

This latest round of monetary easing is highly dangerous, Die Welt declares:

“At the height of the financial crisis the ECB's unconventional monetary policy was necessary to prevent disaster. But the side effects of the flood of money have become devastating. In a world of zero interest, real estate prices and rents have spiralled, with potentially explosive knock-on effects for society. But savings banks and life insurance companies whose business models no longer work are also in trouble. On the other hand banks and companies that in normal circumstance would have fallen to the competition long ago are being kept alive artificially. But above all the ECB's policy means that the debtor countries of southern Europe are being spared the disciplining effects of the financial markets.”

De Standaard (BE) /

Economy unable to stand on its own two feet

The danger is also coming from London, De Standard concludes:

“For all the help from the ECB the economy is still unable to stand on its own two feet. This can never be good news. If the normal downturn is compounded by an economic shock, for example a no-deal Brexit, we're heading for hard times. The new British Prime Minister Boris Johnson is on a ruthless collision course with Europe. ... So the news from the ECB is somewhat reassuring. ... It's not unreasonable of economists to make the case for using this period to carry out structural reforms without paying too much attention to the budget.”