Featured Posts

Chase Bank Limits Cash Withdrawals, Bans International... Before you read this report, remember to sign up to for 100% free stock alerts Chase Bank has moved to limit cash withdrawals while banning business customers from sending...

Read more

Richemont chairman Johann Rupert to take 'grey gap... Billionaire 62-year-old to take 12 months off from Cartier and Montblanc luxury goods groupRichemont's chairman and founder Johann Rupert is to take a year off from September, leaving management of the...

Read more

Cambodia: aftermath of fatal shoe factory collapse... Workers clear rubble following the collapse of a shoe factory in Kampong Speu, Cambodia, on Thursday

Read more

Spate of recent shock departures by 50-something CEOs While the rising financial rewards of running a modern multinational have been well publicised, executive recruiters say the pressures of the job have also been ratcheted upOn approaching his 60th birthday...

Read more

UK Uncut loses legal challenge over Goldman Sachs tax... While judge agreed the deal was 'not a glorious episode in the history of the Revenue', he ruled it was not unlawfulCampaign group UK Uncut Legal Action has lost its high court challenge over the legality...

Read more

ECB chief Mario Draghi drags his feet

Category : Business

Mario Draghi’s impressive start as head of the European Central Bank has not been repeated as he fails to act on eurozone crisis

Mario Draghi got off to a good start as president of the European Central Bank. Faced with a rapidly deteriorating situation in the eurozone, the Italian acted speedily late last autumn to head off what was threatening to be a serious credit crunch for Europe’s banks.

That was then. There was little sign of the all-action Super Mario at the press conference that followed the meeting of the ECB’s governing council in Barcelona. Instead, this was the ECB of old: cautious, conservative and complacent.

Reports suggested that Draghi ruled out a further easing of monetary policy, but this was not strictly true. The ECB may cut its key lending rate from its current level of 1% but it will require fresh evidence of the weakness of the eurozone economy before it does so.

But just how much bad news does the ECB need? Unemployment in the eurozone is already nudging 11%, the highest level since the single currency was created. In Spain, youth unemployment is now above 50%. This week’s surveys of purchasing managers have been dire. Pressure has been mounting in the Italian and Spanish bond markets.

If that’s not enough, then there are plenty of economists – although perhaps not the ones employed by the ECB in Frankfurt – who are convinced that things are going to get a lot worse.

The recession already gripping the crisis-stricken countries of southern Europe will spread northwards into the core economies, including Germany, putting pressure on a shaky financial system. The ECB risks squandering the time it bought with its three-year, long-term refinancing operations (LTRO), the offer of cheap money to help banks through their acute cash-flow problems.

On past form, the ECB will respond – eventually. It will probably provide additional LTROs and is likely to cut interest rates once the crisis gets bad enough. But a good central bank is proactive and pre-emptive; it should anticipate events rather than react to them. And the current threat is not the chimera of higher inflation but a long, arctic winter of the eurozone.

Post a comment