Eurozone QE: a bigger gun than thought but not the hoped-for starting pistol /Larry Elliott The Guardian,

Eurozone QE: a bigger gun than thought but not the hoped-for starting pistol

The ECB plan is thankfully bolder than expected but its late launch and compromised nature reveal a hamstrung bank’s lack of independence

 ( …) “There are though, inevitably, some big caveats. The eurozone is supposed to be moving towards banking union, yet only 20% of the asset purchase programme will be subject to risk-sharing. Individual central banks will be responsible for the other 80%. What sort of banking union is that?

Clearly, the risk-sharing was a concession made to Germany, as was the decision to ensure that Greece could not be part of the scheme. The crisis and its aftermath have exposed the limitations of what is supposed to be an independent central bank. The delays, the horse-trading and the limitations of the ECB plan show how deeply politicised it has become. The ECB president is holding the ring between two rival camps: the inflation hawks of northern Europe led by Germany and the French-led group calling for more monetary activism.

Draghi was keen to point out that Thursday’s announcement provides no panacea for the eurozone and he is right about that. Even in the US, where QE was bolder and more rapid, the impact of QE has been relatively modest and has done more to boost the price of assets than it has for the real economy.

In the eurozone, where the banks are still highly risk-averse and are calling in loans to small firms rather than extending new ones, the main impact of bond purchases will be through a weaker currency. Parity against the dollar looks a real possibility and that will help exports, but there is unlikely to be the investment-led boom Draghi is looking for.

For Americans and Brits, though, this is a good time to be planning that trip to Berlin, Paris or Rome.”

Larry Elliott

The Guardian, Thursday 22 January 2015 / http://www.theguardian.com/business/2015/jan/22/eurozone-qe-bigger-gun-than-expected-not-hoped-for-starting-pistol-investment-boom