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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 
Saturday.

   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 
their economies.

   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.   


(KA)


 
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