ECB Stimulus Hikes Global Economy Hopes01/24 09:42
The global economic outlook just got brighter after this week's big stimulus
from the European Central Bank, leading policymakers from around the world said
DAVOS, Switzerland (AP) -- The global economic outlook just got brighter
after this week's big stimulus from the European Central Bank, leading
policymakers from around the world said Saturday.
In a panel at the World Economic Forum in Davos, they said a perkier Europe,
coupled with a prolonged period of low oil prices, could help shore up the
global economy following a period of underperformance that has prompted many
forecasters to reduce their growth forecasts.
"Lower oil prices and the big decision by ECB could further improve world
economic outlook," said Haruhiko Kuroda, governor of the Bank of Japan.
The ECB's planned 1.1 trillion-euro ($1.2 trillion) stimulus has been one of
the main talking points at Davos and has helped counter some of the pessimism
that has enveloped the global economy in the past few weeks. Stock markets
around the world have surged amid hopes the ECB move could help boost the
ailing economy of the 19-country eurozone.
However, Benoit Coeure, an executive board member at the ECB, insisted that
on its own, it won't be enough. He said governments across the region have to
enact a raft of structural reforms to their economies, such as making their
labor markets more flexible and encouraging businesses to invest.
"We have done our part, others have to do their part," he said.
Coeure hoped the stimulus will give governments the space and encouragement
to proceed with those measures.
"In the case of Europe, being patient is just a risk that we don't want to
take," he said.
Some in Europe, particularly in Germany, are worried that the ECB's
bond-buying program may ease the pressure on governments to do more to reform
In Germany, there's also concern the stimulus is debasing the euro currency
--- the prospect of more euros in circulation can weigh on the currency. The
euro has fallen sharply since Thursday's announcement, and is trading at
11-year lows around the $1.12 mark.
That's potentially good news for eurozone exporters as it makes their wares
cheaper in international markets. A lower euro can also boost inflation as
imports get pricier. The primary motivation behind the stimulus is to get
inflation in the eurozone back toward the target of just below 2 percent.
Currently prices are falling modestly.
Coeure insisted the lower euro wasn't a primary motivation of the ECB,
stressing that the ECB doesn't have an exchange rate target.
The euro's fall, he said, "was part of the channel" by which the stimulus
works but "not the main consideration."
Mark Carney, governor of the Bank of England, also welcomed the ECB's
stimulus and said low oil prices may prevail for longer than many people think.
"That creates an opportunity that is considerable and possibly undervalued
for the global economy," he said.
Carney did issue one note of caution, warning that the current low interest
rates around the world and the stimulus programs in Europe and Japan could
prompt "excessive risk-taking." However, he said a better international
supervisory framework means the world economy is more able to deal with that
than it was before the global financial crisis in 2008.