ECB may act if gov­ern­ments don’t re­form faster

The Myanmar Times - - International Business -

THE Euro­pean Cen­tral Bank (ECB) may be forced to bol­ster its mon­e­tary stim­u­lus pro­grams if gov­ern­ments fail to act to boost their economies, board mem­ber Benoit Coeure said.

“If there is not much tak­ing place on the struc­tural re­form front, if there’s not much tak­ing place on the fis­cal pol­icy front ... then the ECB will do more,” Mr Coeure told a Geneva panel dis­cus­sion.

The ECB’s gov­ern­ing coun­cil is to meet on Septem­ber 8, af­ter mem­bers chose to take no new mea­sures at a July meet­ing weeks af­ter Bri­tain’s shock vote to quit the EU.

With more data on the eco­nomic fall­out of Brexit avail­able by early Septem­ber, some ob­servers ex­pect pres­i­dent Mario Draghi to an­nounce new mea­sures.

Mr Draghi said in July that the bank was “ready, will­ing, and able” to in­ter­vene if nec­es­sary.

But Mr Coeure warned that “the more we do, the more side ef­fects will ma­te­ri­alise”.

Head­line in­ter­est rates in the euro­zone have been neg­a­tive since 2014, even though the ECB has in­tro­duced bil­lions in stim­u­lus.

Th­ese in­clude buy­ing 80 bil­lion eu­ros (US$90.7 bil­lion) of gov­ern­ment and cor­po­rate bonds each month un­der its “quan­ti­ta­tive eas­ing” pro­gram, and of­fer­ing banks cheap loans in a bid to pump cash into the fi­nan­cial sys­tem.

Crit­ics have pointed to the schemes’ pun­ish­ing ef­fects on savers and pen­sion funds even as growth has re­mained ten­ta­tive.

One re­cent data point al­layed fears of a Brexit blow to the con­ti­nent.

The Markit Pur­chas­ing Man­agers In­dex (PMI) read­ing for the sin­gle cur­rency area rose to a seven-month high of 53.3 points in July.

The in­dex mon­i­tors com­pa­nies’ will­ing­ness to spend money and a read­ing above 50 sug­gests the econ­omy is ex­pand­ing. –

Photo: EPA

Benoit Coeure wants coun­tries to boost their economies.

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