As European Central Bank Eases Emergency Measures, Risks May Lurk
- 7 years ago
As European Central Bank Eases Emergency Measures, Risks May Lurk
“It would therefore take a huge leap of faith to say
that crises won’t continue to be a regular feature of the current financial system,” said the report, which listed the withdrawal of central bank support as one factor that could trigger the next meltdown
The central bank’s benchmark interest rate is zero, and investors are so desperate for safe places to put their money
that corporations like Daimler, the German automotive giant, have been able to issue bonds that pay no interest.
Since early 2015, the bank has used newly created money to buy bonds
and other assets worth more than 2 trillion euros, or about $2.35 trillion — a sum roughly equal to the annual economic output of India.
No one knows for sure what unpleasant surprises may lurk when it begins the process of so-called tapering — taking away the easy money
that made it possible for banks to lend and governments to borrow even after investors had largely deserted them during the worst of the downturn.
FRANKFURT — The European Central Bank appeared ready on Thursday to begin dismantling a decade’s worth of emergency measures
that helped keep the eurozone from disintegrating during the financial crisis.
As a first step, the central bank’s Governing Council has signaled it will provide a timetable on Thursday for its rolling back of purchases of government
and corporate debt, a form of virtual money-printing known as quantitative easing.
Such events have occurred regularly since the world’s economic powers abandoned fixed
exchange rates in 1973, a recent report by analysts at Deutsche Bank pointed out.
“It would therefore take a huge leap of faith to say
that crises won’t continue to be a regular feature of the current financial system,” said the report, which listed the withdrawal of central bank support as one factor that could trigger the next meltdown
The central bank’s benchmark interest rate is zero, and investors are so desperate for safe places to put their money
that corporations like Daimler, the German automotive giant, have been able to issue bonds that pay no interest.
Since early 2015, the bank has used newly created money to buy bonds
and other assets worth more than 2 trillion euros, or about $2.35 trillion — a sum roughly equal to the annual economic output of India.
No one knows for sure what unpleasant surprises may lurk when it begins the process of so-called tapering — taking away the easy money
that made it possible for banks to lend and governments to borrow even after investors had largely deserted them during the worst of the downturn.
FRANKFURT — The European Central Bank appeared ready on Thursday to begin dismantling a decade’s worth of emergency measures
that helped keep the eurozone from disintegrating during the financial crisis.
As a first step, the central bank’s Governing Council has signaled it will provide a timetable on Thursday for its rolling back of purchases of government
and corporate debt, a form of virtual money-printing known as quantitative easing.
Such events have occurred regularly since the world’s economic powers abandoned fixed
exchange rates in 1973, a recent report by analysts at Deutsche Bank pointed out.