Pity Mario Draghi, president of the European Central Bank. He is seeking to lead the eurozone to monetary water. Unfortunately, the beast has many heads: some long for a drink; others insist a drink would be bad for all. Yet the ECB has to try. Letting deflation take hold would be far more dangerous.
So the ECB has decided to purchase €60bn of assets a month until at least September 2016. Above all, the purchases will continue until the bank sees a “sustained adjustment” in the path of inflation consistent with its aim of achieving inflation rates “below, but close to, 2 per cent” over the medium term. The allocation of purchases is to be in line with countries’ shares in the ECB’s equity (roughly the same as shares in gross domestic product). In a concession to Germany, the ECB has also agreed that 80 per cent of purchases will fall on the balance sheets of national central banks. Nevertheless, it stresses, “the Governing Council retains control over all the design features of the programme and the ECB will co-ordinate the purchases, thereby safeguarding the singleness of . . . monetary policy”.
This is akin to Mr Draghi’s 2012 pledge to do “whatever it takes” to save the euro. This time the ECB says it will buy some €1tn of assets, which is 10 per cent of eurozone GDP and a similar proportion of gross public debt. Above all, it will keep going until it hits its target.