Euro QE is here
The European economy is in an epic depression. With industrial production stagnant, mass unemployment showing no signs of abating, and inflation on a severely downward trend, economists such as The New York Times' Paul Krugman are concerned that Europe is becoming like Japan, the former second-largest economy in the world, which has spent more than 20 years in a deflationary depression.
But now the European Central Bank — which has a mandate of 2 percent inflation per year, something that even with interest rates close to zero it has not been achieving — is finally going to do something about it.
ECB chief Mario Draghi announced today that starting in October, the ECB would be purchasing asset-backed securities in order to try and reinvigorate the European economy. The ECB may not be calling it quantitative easing (QE), because it is not quite the same as what the Fed has been doing — the Fed's QE plan involves buying both asset-backed securities as well as U.S. government debt in order to buoy the economy— but it is a start.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
The real question is: why now? After all, earlier in the summer Draghi was quoted as saying that he believed that the European recovery remained "on track."
The answer may be that Germany, the economic superpower at the heart of Europe — which is now on the brink of a recession — has finally been shaken. Germany has been strongly opposed to quantitative easing while other eurozone economies such as Spain, Greece, Italy, and Portugal struggled, with Chancellor Merkel remaining adamant that structural reforms, such as government spending cuts, are the right answer for those countries' woes. But now that the contagion has spread to Germany, things are different.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
John Aziz is the economics and business correspondent at TheWeek.com. He is also an associate editor at Pieria.co.uk. Previously his work has appeared on Business Insider, Zero Hedge, and Noahpinion.
-
Earth's magnetic North Pole is shifting toward Russia
Under the radar The pole is on the move
By Devika Rao, The Week US Published
-
Four invigorating paths for solo travelers to take in 2025
The Week Recommends New year, new opportunities to see the world on your own terms
By Catherine Garcia, The Week US Published
-
Pam Bondi, Trump's new pick for attorney general
In The Spotlight Bondi was selected after Trump's first pick, Matt Gaetz, removed himself from contention
By Justin Klawans, The Week US Published
-
US charges Indian tycoon with bribery, fraud
Speed Read Indian billionaire Gautam Adani has been indicted by US prosecutors for his role in a $265 million scheme to secure solar energy deals
By Peter Weber, The Week US Published
-
Boeing machinists approve contract, end strike
Speed Read The company's largest union approved the new contract offer, ending a seven-week strike
By Peter Weber, The Week US Published
-
US economy still strong in final preelection report
Speed Read It grew at a solid 2.8% annual rate from July through September
By Peter Weber, The Week US Published
-
Boeing machinists reject deal, continue strike
Speed Read The rejection came the same day Boeing reported a $6.2 billion quarterly loss
By Peter Weber, The Week US Published
-
Ports reopen after dockworkers halt strike
Speed Read The 36 ports that closed this week, from Maine to Texas, will start reopening today
By Peter Weber, The Week US Published
-
Empty-nest boomers aren't selling their big homes
Speed Read Most Americans 60 and older do not intend to move, according to a recent survey
By Peter Weber, The Week US Published
-
Brazil accuses Musk of 'disinformation campaign'
Speed Read A Brazilian Supreme Court judge has opened an inquiry into Elon Musk and X
By Rafi Schwartz, The Week US Published
-
Disney board fends off Peltz infiltration bid
Speed Read Disney CEO Bob Iger has defeated activist investor Nelson Peltz in a contentious proxy battle
By Rafi Schwartz, The Week US Published