Dodging questions as to the consequences of Portugal’s state of political confusion, ECB boss Mário Draghi has warned that “uncertainty is bad for the economy”.
Quizzed by journalists at this week’s meeting of the Governing Council in Malta, Draghi said “I cannot answer questions of a political nature”, but the banker stressed two “certainties”: “uncertainty is bad for consumption and bad for investment”.
While Portugal’s left-wing parties continue to define what centre-right critics denounce as a “coup”, Draghi added that the ECB is “doing its part” in trying to revive Europe’s weak economy – and may soon do even more – but that governments too have an important role to play, in embarking on structural reforms that will make recovery stronger and long-lasting.
It was the kind of speech that would have had many in the audience struggling to stay awake, but as Bloomberg pointed out: “Nine months to the day since the ECB president won the battle to start QE (quantitative easing – the buying-up of government debt using newly-created money), the impact on euro-area inflation is barely noticeable”.
Unwilling to accept criticism that QE could never be the answer, Draghi has intimated that the ECB’s stimulus programme will need to be “re-examined” and that “options include a further reduction in the deposit rate”.
As Diário de Notícias explains today, the ECB is already injecting €70 billion per month into Europe’s commercial banks via ultra-cheap loans.
The programme was meant to end in September 2016, but now it looks like being extended.
Meantime, the euro continues to slide – down yesterday to another three-week low – and uncertainty, certainly in Portugal, continues to hover over the immediate political horizon.