Quantitative easing: To deal with the root of the problem, the ECB should tackle non-performing loans

Quantitative Easing (QE) – the unconventional form of monetary policy by which a central bank creates new money electronically to buy financial assets, thus helping to increase private sector spending and lower inflation – has been used by the European Central Bank (ECB) in the past.

It was widely expected that an extension of the current QE programme would be announced during the ECB Governing Council meeting on the 10 March 2016.

What are the implications, and what are the risks? Eddie Gerba and Corrado Macchiarelli argue that the most effective way to deal with the root of the problem would be to accelerate the resolution of Non-Performing Loans (NPLs).

ESO: Background information: Europe Should Tighten Monetary Policy And Ease Fiscally http://www.europeansources.info/record/europe-should-tighten-monetary-policy-and-ease-fiscally/

ESO: Background information: Quantitative Easing: Evolution of economic thinking as it happened on Vox http://www.europeansources.info/record/quantitative-easing-evolution-of-economic-thinking-as-it-happened-on-vox/

ECB: Speech, 02.03.16: From challenges to opportunities: rebooting the European financial sector https://www.ecb.europa.eu/press/key/date/2016/html/sp160302.en.html

ECB: Press Release, 10.03.16: ECB adds corporate sector purchase programme (CSPP) to the asset purchase programme (APP) and announces changes to APP https://www.ecb.europa.eu/press/pr/date/2016/html/pr160310_2.en.html

ECB: Press Release, 10.03.16: ECB announces new series of targeted longer-term refinancing operations (TLTRO II) https://www.ecb.europa.eu/press/pr/date/2016/html/pr160310_1.en.html

---