Mario Draghis parting gift to the eurozone
Mario Draghi isnt going quietly.
It was a major U-turn for the central bank and was heavily pushed by Draghi, whose seven-year term at the helm of the ECB ends next month.
It immediately proved controversial.
Straight after the decision was announced, U.S. President Donald Trump tweeted: “[The ECB is] trying, and succeeding, in depreciating the Euro against the VERY strong Dollar, hurting U.S. exports … And the Fed sits, and sits, and sits.”
Draghi rejected the accusation, saying eurozone policymakers “stick with the G20 consensus and will never pursue competitive devaluation.”
Trump wasnt the only skeptic. German conservative MEP Markus Ferber said: “Draghi is almost out of office and should have abstained from taking any long-term policy decisions that will commit the course of monetary policy in the eurozone for the long run.”
Ferber argued the ECBs policies have benefited “periphery” countries facing issues that need to be tackled politically and not through monetary policy. “To up the dosage of an ineffective medicine has hardly ever proven to be a sensible therapy,” he said.
But Draghi was defiant, saying the package is a “powerful one both in the short and long term” to address economic risks. He also urged national capitals to take action on fiscal policy to go along with the ECBs measures.
“Governments with fiscal space should act in an effective and timely manner,” he said, likely referring to Germany.
Unsurprisingly, before the decision, Bundesbank chief Jens Weidmann rejected the suggestion the current eurozone economic situation warranted such a stimulus push, which includes further cutting already-negative deposit rates and restarting unconventional monetary policies to pump money into markets through bond purchases. Weidmann, who is known for his hawkish stance, was backed by the governor of the Bank of France, François Villeroy de Galhau.
Draghi said the measures — including a tiering system to exclude certain banks excess deposits from negative rates while also envisaging an additional series of cheap loans for banks (known as targeted longer-term refinancing operations) — would benefit lenders. While cheap money tends to Read More – Source