News / Europe

European Bank Move Could Help Economy

DAX board at the Frankfurt stock exchange, September 7, 2012.
DAX board at the Frankfurt stock exchange, September 7, 2012.
Al Pessin
Europe’s central bank made a key announcement Thursday that immediately eased financial pressure on the continent’s troubled economies, lowering interest rates on some of their debts.  But the move is controversial, and will not, by itself, solve the continent's economic problems or end speculation about some countries leaving the joint euro currency.

The head of the European Central Bank, Mario Draghi, announced that the bank will buy bonds issued by Greece, Italy, Spain and other troubled economies.  The move is designed to ensure that the interest rates those countries must pay remain reasonable.  Private investors were insisting on very high rates in order to buy the bonds, and provide cash for the countries to pay their current bills.

It is a move the bank had refused to make for years, but the chief European economist at London’s Capital Economics, Jennifer McKeown, says it is not enough.

"It’s relatively bold action compared to its previous stance of doing very little," he said.  "But I think the fundamental issues for these economies, most notably their lack of competitiveness and the fact that their debt levels are high, are still there.”

The Greek unknown

McKeown’s firm is still predicting that Greece will have to leave the euro this year, and that other countries will likely follow next year. 

The underlying economic weakness of the troubled countries is compounded now by years of austerity forced on them by their euro partners as a condition for new loans.  McKeown says the strong economies, particularly Germany, are concerned that by easing the pressure, the European Bank’s decision opens the door for the borrowers to violate the austerity agreements.

"There are some real concerns in Germany about the ECB’s actions, over whether the peripheral countries are going to go ahead with their austerity programs," he said.

And there are also concerns about at least two other factors - whether the borrowers can possibly stick to the austerity in the face of long and deep recessions and the resulting public outcry, and whether if they do follow the rules they can turn their economies around in any reasonable timeframe, even ten years.

Hard times ahead

Either way, experts say there is a lot of pain ahead for the troubled countries in the form of recession, falling wages and benefits, and widespread unemployment.  And the chief economist at the Center for European Reform, Simon Tilford, says if the stronger countries don’t agree to share that pain, the troubled countries may force them to, by withdrawing from the euro and defaulting on much of their debt.

"This is an argument about money, basically," said Tilford. "Who pays for misallocated capital, profligate borrowers or irresponsible lenders?  The only way of addressing this kind of problem is by both sides taking a hit.  And so far the full burden of adjustment is being imposed on the debtors.  If they continue with this strategy, then ultimately the only way out will be through countries quitting the currency union."

Tilford says the European Central Bank’s decision could be a significant step toward solving the crisis, but only if Germany doesn’t block it, and only if the bond buying program is big enough and lasts long enough.  And he says European leaders need to find a way to enable the weak economies to grow, so they can repay their debts and ease the burden on their people.

You May Like

UN Report Exposes Widespread Boko Haram Atrocities

Damning report graphically details pattern of vicious, widespread atrocities committed by Islamist militants More

Russia’s Prosecutor General to Review Legality of Baltics Independence

Move, announced Tuesday, has alarmed Baltic States and strained even further their increasingly tense ties with Moscow More

US Urged to Keep Up Pressure on Cuba Rights

Communist government continues to hold dozens of political prisoners, tightly restricts freedom of expression, uses threats, intimidation to discourage critics, according to activist groups More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Hate Groups Spread Influence Via Interneti
X
Mike O'Sullivan
June 30, 2015 8:20 PM
Hate groups of various kinds are using the Internet for propaganda and recruitment, and a Jewish human rights organization that monitors these groups, the Simon Wiesenthal Center, says their influence is growing. The messages are different, but the calls to hatred or violence are similar. VOA's Mike O’Sullivan reports.
Video

Video Hate Groups Spread Influence Via Internet

Hate groups of various kinds are using the Internet for propaganda and recruitment, and a Jewish human rights organization that monitors these groups, the Simon Wiesenthal Center, says their influence is growing. The messages are different, but the calls to hatred or violence are similar. VOA's Mike O’Sullivan reports.
Video

Video US Silica Sand Mining Surge Worries Illinois Residents, Businesses

Increased domestic U.S. oil and gas production, thanks to advances known as “fracking,” has created a boom for other industries supporting that extraction. Demand for silica sand, used in fracking, could triple over the next five years. In the Midwest state of Illinois, people living near the mines are worried about how increased silica sand mining will affect their businesses and their health. VOA’s Kane Farabaugh has more in this first of a series of reports.
Video

Video Blind Somali Journalist Defies Odds in Mogadishu

Despite improving security in the last few years, Somalia remains one of the most dangerous countries to be a journalist – even more so for someone who cannot see. Abdulaziz Billow has the story of journalist Abdifatah Hassan Kalgacal, who has been reporting from the Somali capital for the last decade despite being blind.
Video

Video Texas Defies Same-Sex Marriage Ruling

Texas state officials have criticized the US Supreme Court decision giving same-sex couples the right to marry nationwide. The attorney general of Texas says last week's decision did not overrule constitutional "rights of religious liberty," and therefore officials performing wedding services can refuse to perform them for same-sex couples if it is against their religious beliefs. Zlatica Hoke reports on the controversy.
Video

Video Syrians Flee IS Advance in Hasaka

The Syrian government said Monday it has taken back one of several districts in Hasaka overrun by Islamic State militants. But continued fighting elsewhere in the northern city has forced thousands of civilians from their homes. In this report narrated by Bill Rodgers, VOA Kurdish Service reporter Zana Omer describes the scene in Amouda, where some of the displaced are taking refuge.
Video

Video Rabbi Hits Road to Heal Jewish-Muslim Relations in France

France is on high alert after last week's terrorist attack near the city Lyon, just six months after deadly Paris shootings. The attack have added new tensions to relations between French Jews and Muslims. France’s Jewish and Muslim communities also share a common heritage, though, and as far as one French rabbi is concerned, they are destined to be friends. From the Paris suburb of La Courneuve, Lisa Bryant reports about Rabbi Michel Serfaty and his friendship bus.
Video

Video S. Korea Christians Protest Gay Rights Festival

The U.S. Supreme Court decision mandating marriage equality nationwide has energized gay rights supporters around the world. Gay rights remain a highly contentious issue in a key U.S. ally, South Korea, where police did a deft job Sunday of preventing potential clashes between Christian protesters and gay activists. Kurt Achin reports from Seoul.
Video

Video Saudi Leaks Expose ‘Checkbook Diplomacy’ In Battle With Iran

Saudi Arabia’s willingness to wield its oil money on the global diplomatic stage appears to have been laid bare, after the website WikiLeaks published tens of thousands of leaked cables from Riyadh’s Ministry of Foreign Affairs. VOA's Henry Ridgwell reports.
Video

Video Nubians in Kenya Face Land Challenges

East Africa's ethnic Nubians have a rich cultural history that dates back thousands of years, but in Kenya they are facing hardships, including the loss of lands they have lived on for generations. They say the government has reneged on its pledge to award them title deeds for the plots. VOA's Lenny Ruvaga reports.
Video

Video Military Experts Question New Russian Tank Capabilities

Russia has been showing off its new tank design – the Armata T-14. Designers claim it is 20 years ahead of current Western designs - and driving it feels like playing a computer game. But military analysts question those assertions, and warn the cost could be too heavy a burden for Russia’s struggling economy. Henry Ridgwell reports.
Video

Video In Kenya, Police Said to Shoot First, Ask Questions Later

An organization that documents torture and extrajudicial killings says Kenyan police were responsible for 1,252 shooting deaths in five cities, including Nairobi, between 2009 and 2014, representing 67 percent of all gun deaths in the areas reviewed. Gabe Joselow has more from Nairobi.
Video

Video In Syrian Crisis, Social Media Offer Small Comforts

Za’atari, a makeshift city in Jordan, may be the only Syrian refugee camp to tweet its activities, in an effort to keep donors motivated as the war in Syria intensifies and the humanitarian crisis deepens. Inside the camp, families say mobile phone applications help hold together families that are physically torn apart. VOA’s Heather Murdock reports.

VOA Blogs