Any effort by the European Central Bank to launch a massive quantitative easing programme this year would fail to revive the euro zone economy, according to economists polled in a Financial Times survey.
The survey of 32 euro zone economists mainly working in the financial sector, conducted in mid-December, found that most expected the ECB to launch QE in 2015 – catching up with the world’s other main central banks that have all bought large quantities of sovereign debt since the last financial crisis.
Twenty-six economists thought that the central bank would start purchasing government bonds this year, while five did not and one did not respond.
A stuttering recovery and a worrying drop in inflation have raised fears of another crisis in the currency bloc and put pressure on policy makers to cast aside powerful German opposition and begin purchasing sovereign debt.
ECB president Mario Draghi last week gave his strongest signal yet that the central bank would extend its asset purchases to include sovereign debt in the coming months. A decision could be made as early as the next governing council meeting on January 22nd.
But most poll respondents expected growth and inflation to stay weak even with QE.
Dario Perkins, economist at Lombard Street Research, said it would help lift inflation expectations and reduce the euro but would not be a “total game changer”.
Jörg Krämer of Commerzbank said QE would lower the yield on government bonds and “help the finance ministries of highly indebted countries such as Italy, and its banks”. But he added that QE would not change low growth and inflation levels and would “only fuel asset prices”.
While several respondents said government bond-buying was likely to help fight the threat of deflation and lower yields on debt issued by weaker sovereigns, most economists agreed that growth would remain lacklustre unless governments backed the ECB’s efforts.
“QE is not a panacea for the euro area,” said Carsten Brzeski of ING DiBa, a bank. He suggested that the biggest impact from any QE would come “if governments were at the same time allowed to start a deficit-financed investment programme. [IT’S]doubtful [THAT]will ever happen in the euro area”.
Some said a larger package stood more chance of success. “If it is big enough, it will have some effect on the economy, if only to bring the euro down,” said Jonathan Loynes of research group Capital Economics.
Most economists forecast the size of purchases at €500 billion, although some put the figure as high as €1 trillion. Some also expected the ECB to start buying corporate debt alongside sovereign bonds.
The ECB said in December that Mr Draghi and most of the governing council backed expanding the central bank’s balance sheet from €2 trillion towards €3 trillion. Copyright The Financial Times Limited 2015
