News Column

Business Postscript: ECONOMICS

June 8, 2014


The European Central Bank unveiled a dramatic package of measures on Thursday in an attempt to inject life into the eurozone's flagging economy and ward off a damaging deflationary spiral.

ECB boss Mario Draghi cut the deposit rate for the region's commercial banks to -0.1% from zero and cut its main interest rate to a new record low of 0.15% from 0.25%. It also announced a euros 400bn (pounds 325bn) package of cheap funding for banks on condition that they lend it to companies outside the financial sector, and not use it for mortgages.

Draghi has come under pressure recently to make cheaper credit available to households and businesses to boost growth in the 18-member currency zone.

In the last quarter, eurozone GDP growth stumbled to just 0.2% and only avoided a contraction thanks to a strong performance by Germany.

Still, the markets believe that where there is Draghi, there is hope. They are in thrall of the Italian, whose knack of being able to play Jedi mind-tricks compensates for the few tools at his disposal. Draghi said: "If required, we will act swiftly with further monetary policy easing . . . Are we finished here? The answer is no."


Draghi still has the markets in his thrall.

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Source: Observer (UK)

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