Déjà vu as bank tries to prevent recession in EU

PRESSURE is growing on the EU to hammer out a Brexit deal after the region’s central bank launched a series of measures to boost flagging eurozone economies.

The European Central Bank (ECB) yesterday restarted quantitative easing – the practice whereby money is pumped into the financial system to stimulate growth.

Signs that the region’s economies are faltering will ramp up pressure on the EU’s chief Brexit negotiator, Michel Barnier, to agree a trade deal with the UK.

The outgoing president of the ECB, Mario Draghi, blamed Brexit uncertainties and the continuing trade war between the US and China for battering the eurozone.

Mr Draghi, 72, who is stepping down at the end of October to make way for Christine Lagarde, conceded that the eurozone was facing ‘more protracted weakness’ than previously expected.

He added that the region was suffering from the ‘prevailing weakness of international trade in an environment of prolonged global uncertainties’. Germany, the eurozone’s bigUnder gest economy, is on the brink of recession. Think-tank the Ifo Institute believes the German economy has contracted again in the third quarter of this year, as demand for manufactured items has slumped, meaning it will have entered a technical recession.

The downgrades for the eurozone came as Mr Draghi was forced to launch a raft of measures designed to prevent the region from grinding to a halt.

The ECB has cut a key interest rate for banks who park their money with it, from minus 0.4 per cent to minus 0.5 per cent. This rate has been negative since 2014 – meaning that rather than gaining interest, banks are being charged to keep their money with the ECB. The hope is that this will encourage them to lend to consumers and businesses, boosting spending and helping the economy.

The central bank will resume its programme of printing money to buy up bonds, at a rate of £19billion per month

Donald Trump tweeted that the ECB was ‘trying, and succeeding, in depreciating the euro against the VERY strong dollar’.

Meanwhile, official data from the UK showed the economy grew by 0.3 per cent in July – a bounce-back from a contraction in the previous three months.