EBRD Joins Calls for More ECB Action to Boost Economy; Development Bank Joins OECD in Pushing for Further Stimulus
The European Bank for Reconstruction and Development Thursday urged the European Central Bank to launch a large-scale program of asset purchases known as quantitative easing, becoming the latest international organization to signal that the package of stimulus measures announced earlier this month won't solve the eurozone's twin problems of low growth and inflation.</br></br>On Sept. 4, ECB President Mario Draghi announced new cuts to its key interest rates along with programs to buy asset-backed securities and covered bonds, having cut rates in June and announced a program of cheap loans for eurozone banks. Mr. Draghi and a majority of his colleagues on the ECB's governing council had pressed ahead with the new package despite opposition from Germany's Bundesbank.</br></br>However, the Organization for Economic Cooperation and Development Monday cut its growth forecasts for the currency area, now seeing growth of 0.8% in 2014, having projected an expansion of 1.2% in May. The Paris-based research body called on the ECB to launch a program of large-scale asset purchases, including government bonds.</br></br>The OECD was joined Thursday by the EBRD, which was established in 1991 to help countries in Eastern Europe and the former Soviet Union make the transition from centrally planned to market economies. The development bank has in recent months cut its growth forecasts for many of the 34 countries in which it invests, partly because of the conflict in Ukraine, but also because of a slower recovery in the 18 countries that share the euro.</br></br>"The case for quantitative easing has become compelling to support the still fragile recovery in the eurozone, to which much of the CEB [Central Europe and the Baltics] and SEE [Southeastern Europe] are strongly linked," the EBRD said. "An effective eurozone QE may help lessen the risk of setbacks in the recovery of those regions."