Mario Draghi has much to do to convince the effectiveness of the ECB – Boursorama

Mario Draghi has much to do to convince the effectiveness of the ECB – Boursorama

Mario Draghi, President of the ECB, in Frankfurt, Germany, September 4, 2014 (AFP / File / Daniel Roland)

The ECB President, Mario Draghi, has much to do Thursday to convince observers of the effectiveness of its support to the economy of the euro area, after a further slowdown in inflation in the region.

Announced two days before the monthly monetary policy meeting on Thursday in Naples, price increases slowed to 0.3% in September, the lowest in five years, and very far from the goal of just under 2%.

The new slowdown revives fears of deflation in the eurozone, vicious cycle where the economy is slowed by falling prices and wages. And the figure fed “doubt on the effectiveness of the policy” pursued by the ECB, judge Jennifer McKeown, an economist at Capital Economics.

M. Draghi “could begin to feel like King Sisyphus of Greek mythology,” said Carsten Brzeski, chief economist at ING. “Whatever attempts the ECB, the economy of the euro area does not really answer and instead continues flirting with stagnation,” he said.

At its ritual press conference, Mr. Draghi will probably even harder than previous to minimize the risk of deflation time, the guardians of the euro argue consistently do not see

-. rates at the lowest –

Leaded by concerns over the economic health of the euro zone, the euro fell below $ 1.26 Tuesday for the first time in two years.

A decline which, however, is not to displease some. The high level of the euro against the dollar means lower export competitiveness of European companies, was a cause for concern for many European politicians and some central bankers.

from ECB no further action is expected Thursday. The policy rate lowered to 0.05% in early September, can hardly go lower. But analysts will watch for details on the contours of a new program liquidity injections into the financial system.

To thin the credit in the eurozone and stimulate the economy, the ECB wants to buy from October ABS – financial products from the securitization of bank loans – and covered bonds (covered bond).

The device will complete eight very cheap and long-term loans (TLTRO) offered to banks until June 2016, on the express condition that they lend more to businesses and households in Europe.

The institution is ready to bring the size of its balance sheet to its 2012 level, which means swelling of the order of € 1.000 billion, asset purchases and loans combined.

– Bad start –

But this new support program has started badly: loans in the first TLTRO mid-September were disappointing, with only 82.6 billion euros allocated on 400 billion available.

A second operation in December should have more success. But for many analysts, the result of all these measures will not live up to the expectations.

liquidity banks might be abundant, demand for credit, it is not always go due to gloomy economic outlook that does not encourage investment. Banks are also reluctant to take risks, a few weeks the results of bank stress tests.

Recognizing these obstacles, Mr. Draghi claims, in addition to structural reforms, government action on demand, especially through tax cuts. But it can hardly escape the call to do more on its side, namely to buy government debt.

“More measures already announced will have little effect, plus a buyback of government bonds on a large scale will likely” to Commerzbank analysts.

But this option , considered by many to be the last round of central bankers, “is not the solution to the malaise of the eurozone nor the most effective monetary instrument” for the region, say those of Deutsche Bank. It is also frowned upon by the powerful Germany.

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