The European Central Bank has taken the ultimate policy leap, launching a government bond-buying programme which will pump hundreds of billions of new money into a sagging euro zone economy. David Pollard asks if it will have the necessary impact?
The poor old euro zone. Hardly able to get its economy off the ground. Has Mario Draghi finally succeeded in giving it a lift? SOUNDBITE (English) MARIO DRAGHI, ECB PRESIDENT, SAYING: 'The combined monthly purchases of public and private-sector securities will amount to 60 billion euros. They are intended to be carried out until end-September 2016 and will in any case be conducted until we see a sustained adjustment in the path of inflation." It's being touted as a ''big measure'' to reflate the economy. An ''expanded'' asset purchase programme will now total just short of 1.1 trillion euros. Government bonds included for the first time. Greek debt too, possibly, though not until July at the earliest. The GDP argument for QE is clear: euro zone growth is stagnating, inflation went negative last month. Even some ECB members themselves have warned that QE had to be big to have an impact. Is this big enough? Michael Hewson, Chief Market Analyst, CMC Markets. SOUNDBITE (English) MICHAEL HEWSON, CHIEF MARKET ANALYST, CMC MARKETS, SAYING: ''I think he's bought the euro zone a little more time but once again we come back to that familiar refrain, and that's governments have to implement structural reforms. Ultimately, the answer to the euro zone crisis doesn't lie in the hands of central bankers, it lies in the hands of politicians." On the issue of risk-sharing: purchases will be spread around individual states. Around one fifth of any losses to be shared by all states together. SOUNDBITE (English) MARIO DRAGHI, ECB PRESIDENT, SAYING: "We wanted to take a decision that would mitigate the concerns that many participating countries in the euro area have about the unintended fiscal consequences of potential developments in the future." Draghi dismissed recent fevered talk over risk-sharing as ''futile''. But along with doubts over whether printing fresh money will work, Germany has said it could allow spendthrift nations to slacken reforms. SOUNDBITE (English) MICHAEL HEWSON, CHIEF MARKET ANALYST, CMC MARKETS, SAYING: ''I think if you're talking in terms of a single monetary policy, the risk sharing aspect of it is a concern, because it's basically leaving 80% of the risks on the balance sheets of the National Central Banks. Well, obviously in a true monetary union that wouldn't happen." QE is seen as the ECB's last big policy option. If it works, the euro zone might hope for some clear blue sky ahead. If it doesn't, best brace perhaps for a few economic bumps to come.