European Central Bank unveils massive stimulus to goose up eurozone growth and inflation

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European Central Bank unveils massive stimulus to goose up eurozone growth and inflation

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The European Central Bank is to print hundreds of billions of euros to try to boost the flagging eurozone economy.

The so-called quantitative easing programme will see the bank buying government bonds and other investments.

Added to existing ECB schemes it will pump out a total of 60 billion euros each month.

The stimulus move, which is also intended to push up ultra-low inflation, comes despite opposition from Germany.

Berlin is worried that buying government debt could encourage countries to continue spending beyond their means and not move forward with economic reforms.

ECB President Mario Draghi said: “In March 2015 the Eurosystem will start to purchase euro-denominated investment-grade securities issued by euro area governments and agencies and European institutions in the secondary market.

Draghi said the bond purchases will go on until September of next year and until inflation start to sustainably rise.

At the moment consumer prices are falling in the eurozone which the ECB fears will reduce economic growth.

In reaction to the stimulus moves the euro fell in value against other currencies, European share indexes jumped and the cost of borrowing fell for countries with weaker economic growth like Italy, Spain and Portugal.

But many in the financial world doubt that printing fresh money will work.

They point out quantitative easing is the ECB’s last throw of the dice after cutting interest rates to record lows and funnelling hundreds of billions of euros in cheap loans to the region’s banks failed to work.

“It is a mistake to suppose that QE is a panacea in Europe or that it will be sufficient,” former US Treasury Secretary Larry Summers said at the World Economic Forum in Davos on Thursday.

“There is every reason to expect that QE will be less impactful in a context like the present one in Europe than it was in the context of the United States.”

Quantitative easing has been successful in the US, but less so in Japan.