ECB Loosening Is Not Enough
The European Central Bank's negative interest rates and quantitative easing measures cannot by themselves address the pervasive risk aversion holding back the eurozone economy. Eurozone policymakers must, therefore, find the political will to design a comprehensive package of financial and fiscal measures aimed at injecting new energy into the European project.
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LONDON – If indications of disappointing economic growth in the eurozone are confirmed, the European Central Bank will loosen monetary policy further in September. Last week, outgoing ECB President Mario Draghi signaled a further likely cut in the ECB’s rate on commercial banks’ overnight deposits with the central bank, which is already -0.4%. In addition, the ECB is discussing a new program of asset purchases.