Frankfurt / AFP
European Central Bank (ECB) chief Mario Draghi said that while chronically weak loan growth in the euro area “has been recovering for quite some time, it is still too low.”
In the wake of the eurozone’s financial and debt crisis, banks became wary of lending money to households and businesses for fear of a possible default, preferring instead to hoard their excess cash at the ECB, because there,
at least, they could receive
interest on it.
However, the complete collapse in lending in the single currency area emerged as a major obstacle — and even threat — to the region’s economic recovery, because credit is a vital lubricant that keeps the economy running smoothly.
Majority for policy measures
Draghi said that the “overwhelming majority” of the ECB’s decision-making governing
council members voted in favour of a large raft of new policy
measures to kickstart inflation in the euro area.
“Regarding the adoption of today’s decision, the majority in favour has been overwhelming,” Draghi told a news conference when asked about possible dissent on the council to a new cut in interest rates and an extension of the ECB’s asset purchase programme.
ECB ‘not short of ammunition’
Draghi slapped down fears that the bank may have exhausted its stock of weapons in battling chronically low inflation, saying a latest bout of measures announced Thursday shows it is “not short of ammunition”.
“It’s a fairly long list of measures, each of them is very significant and devised to have the maximum impact to boosting the economy and the return to price stability,” he told journalists.
“So we’ve shown we’re not short of ammunition,” he added, minutes after the bank announced it was slashing already record-low interest rates, pumping massive new sums into the banking system and, for the first time, buying corporate bonds.
Draghi has hinted that
eurozone interest rates, already at new all-time lows, would fall even lower in the future if area-wide inflation does not pick up soon.