[Eco] Eurozone nations face stronger pressures to lift economies

As the European Central Bank deploys its most powerful economic weapon, the onus for growth now lies with the 19 individual countries in the euro currency union, a fractious and highly political group.

The central banks’ plan calls for buying €60 billion ($69 billion) of government bonds and other debt each month. It is the kind of aggressive action that leaders in weaker eurozone countries have long wanted and that Germany has tried to block.

Syriza, the leftist party expected to win the Greek elections this weekend, on Thursday called the bond purchase programme an important decision which the next Greek government will use for the benefit of the country.

The central bank, though, is stretching the limits of its power. And if it is not enough to address what ails Europe, any further stimulus efforts would fall to national leaders.

Such steps would involve the sort of extensive government spending that many countries, including Germany, have been reluctant to pursue, hewing, instead, to a philosophy of budget discipline that has acquired the shorthand label of austerity.

The German chancellor, Angela Merkel, on Thursday warned her peers not to waste the breathing space given them by the central bank. We should not become diverted from the fact that we as politicians need to put a framework for recovery in place, Ms Merkel said at the World Economic Forum in Davos, minutes before the ECB announced its decision in Frankfurt.

The central banks’ plan is aimed at easing the burden on national governments by pumping at least at least 1.1 trillion euros into the system. The increased demand from the ECB should raise bond prices and push down yields. If the tactic works, it would ripple through financial markets, pulling down the interest rates on other types of debt, like business loans.
— New York Times News Service

Source - The Hindu