ECB chief champions QE, warns on bitcoin
STRASBOURG, France: The European Central Bank’s (ECB) bond-buying program, known as quantitative easing (QE), is the most potent weapon available to tackle eurozone inequality, ECB President Mario Draghi said on Monday ( Tuesday in Manila).
“It is true that the richest are the first to benefit from the effects of QE, but at the same time it is the most powerful tool to drive down inequality in the longer term,” Draghi told the European Parliament.
The central bank launched QE in March 2015 to help firms and boost economic growth after emerging from a global economic crisis.
But Dutch central bank governor Klaas Knot, who sits on the ECB’s governing council, indicated last week that the program had run its course, prompting price falls on European government bond markets.
Ending the program would be a major policy shift that could herald the beginning of the end of the cheap money era.
Draghi told lawmakers debating an annual report on the ECB’s 2016 performance that QE had helped create jobs.
He said 7.5 million had been created since the nadir of mid-2013 in the 19-member eurozone and that the area was seeing robust growth.
In response to some lawmakers’ assertion that QE had had negative knock- on effects for some eurozone member-states’ well-being, Draghi said “no country benefited more than another one from our policy.”
His comments came days after the ECB’s monthly policy meeting maintained easy money policies, keeping headline rates on hold and maintained QE at 30 billion euros per month.
However, the bank reduced the monthly purchases from 60 billion euros last October.
The bank also agreed to maintain the current rate at least through to September.
Draghi also turned his attention to the current price slump of top cryptocurrency bitcoin and its fellow digital coins, which he dubbed “very risky” forms of investment, over which investors and banks alike should exercise extreme prudence.
“Virtual money is subject to strong volatility. Their price is extremely speculative,” Draghi said in his Strasbourg address, underscoring the fact the virtual coins are not regulated.
Bitcoin soared to almost $20,000 per unit late last year, but has since slumped some 60 percent off its peak. This prompted several countries, notably China—home to many “miners” of the computer- generated unit—to warn of a regulatory crackdown.
French and German finance ministers Bruno Le Maire and Peter Altmaier indicated last month that Paris and Berlin wanted to regulate bitcoin. They said their countries would be tabling proposals to that effect at a meeting of Group of 20 finance ministers in March.