Home Economy Mario Draghi Wastes No Time Stimulating European Economy

Mario Draghi Wastes No Time Stimulating European Economy

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Mario Draghi

Logo_European_Central_BankMario Draghi Embarks Upon a Bold Asset Repurchases Program

The Eurozone is an ocean of economic and political uncertainty. With debate swirling about the possibility of a Brexit on June 23, and ongoing concerns about how best to deal with the debt crisis in Greece, there are indeed many reasons to be concerned. But Mario Draghi is not going to go down without a fight. The ECB chief is focused on reinvigorating the European economy with an unprecedented stimulus program that is bound to have an impact.

So What Exactly is Draghi Doing?

Just recently, Draghi dived into the deep end with corporate bond purchases from Europe’s biggest companies including Telefonica SA, Anheuser-Busch InBev NV, Telecom Italia SpA, Assicurazioni Generali SpA and Renault SA among others. There are scores of other companies across Europe that have been the recipients of ECB ‘quantitative easing’ policies. It is interesting to point out that ECB policy decisions are impacting directly on main street with investors now waiting to take their cues from Mario Draghi’s actions.

On Tuesday 7 June, the average yield on euro notes hit their lowest level in a year at 0.98%. And this is all a direct result of European Central Bank intervention by way of quantitative easing in the bond markets. The fact that Draghi wants to act in a bold way is important: the ECB is one of the most powerful monetary institutions in the world and Draghi’s actions speak volumes. As it stands, the average yield on investment-grade euro-denominated debt is at its lowest level in over a year. So far, the ECB has committed itself to an €80 billion monthly purchase program, and it includes a wide range of assets.

What is Happening with the European Economy?

For now, Draghi is to be believed as he appears resolute about rescuing the European economy. But if consensus forecasts about the scope of the asset repurchases program prove underwhelming then we will likely see a selloff taking place. Presently, the ECB has access to a huge range of assets – 1,049 in total. The value of these assets is in the region of €620 billion, give or take a €60 billion. The next point of call is July 18, 2016 – that’s when the ECBs corporate bond assets will be listed.

 
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William R. Feins , freelance journalist from London, UK; he received his B.A. degree in Economics and his Masters in Sociology. William has always been interested in the mechanics of business and the inspiration of original thinkers, and firmly believes that the former can’t succeed without the latter. In his spare time, he enjoys the ridiculous spectacle of watching table tennis on a big screen (preferably at a pub) and reading weighty tomes about World War II.

24 COMMENTS

  1. I think Mario Draghi has to be well supported by the EU leaders because he actually knows what to do although Merkel won’t agree. The problem is that Germany refuses to spend in infrastructures to increase demand and her country indeed is the only one that can spend money. Austerity should not be the only guideline

     
  2. So printing money of thin air and then buying debt supposedly stimulates the economy. Every country that has tried this in the history of the World collapsed in a hyper inflationary depression.

     
  3. The USD has an interest rate although small, not negative. With the uncertainty of the worlds economy the USD is the best alternative.

     
  4. What if…? The consequences, challenges and opportunities facing Britain outside the EU..

    According to Open Europe’s comprehensive Brexit report, UK GDP could be 2.2% lower in 2030 if Britain leaves the EU and fails to strike a deal with the EU or reverts into protectionism. In a best case scenario,

    under which the UK manages to enter into liberal trade arrangements with the EU and the rest of the world, whilst pursuing large-scale deregulation at home, Britain could be better off by 1.6% of GDP in 2030. However, a far more realistic range is between a 0.8% permanent loss to GDP in 2030 and a 0.6% permanent gain in GDP in 2030, in scenarios where Britain mixes policy approaches.

     
  5. The question will be: ” Does the UK remained a member of the European Union or must leave the European Union? ” . Voters will choose between Staying or Leaving . It was not the first choice . The proposal was initially QUESTION ” Does the UK remained a member of the European Union “. And options were yes or no. However, the Electoral Commission recommended considering that modify the way they were made ​​by supporters could favor permanence . The Government accepts the recommendation and amended belong QUESTION .

     
  6. Europian economy has different problems but also advantage.So lets see what will happen after referendum in UK and in wich direction EU will going.

     
  7. Since we still don’t know wether Britain will quit or not, it is difficult to know how things will be going. Brexit can change a lot of things. Just wait and see …

     
  8. He’s been successively doing everything to save Eurozone from deflation. Hopefully, he’s not just trying out different approaches, but actually knows what he’s doing and what it can lead to.

     
  9. The european community’s economy is in a critical situation, but the future will tell what happens finally

     
  10. Great points and an interesting read, especially for us looking to get an insight into the EU politcal situtation.

     
  11. Nice article, If you would like set the access authorities for those files or programs, such as, to hide or lock them, to deny copy or delete etc, and likewise want to monitor their utilization, the File Encryption will probably be your best choice.

     

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