Draghi urges European governments to increase public spending


Draghi urges European governments to increase public spending

This week while the UK might be paralysed over Europe, the same can’t be said for the European Central Bank, which announced a major change in policy in its attempt to stave off a recession within the Eurozone. The actual policy, a 0.1% cut in deposit rates and a resumption of QE is not so drastic but the language used points to a more fundamental shift in the banks approach. ECB President Mario Draghi made it clear that boosting inflation was now the banks main focus and the ultra-loose monetary policy could be here to stay. Draghi urged member states to capitalize on cheaper rates and spend more, a statement sure to irritate Germany who have so far resisted loosening the purse strings.

The German resistance to fiscal policy is now the key issue facing the Eurozone. The ECB has run out of ammunition and has resorted to begging governments to spend the free money it’s willing to print. With the German economy slowing and its governments popularity waning, it can’t be too long before they cave and go on a spending spree.

Read what the team at FE consider to be significant over the current week.