Skip to main content

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated Cookie policy, Privacy policy and Terms & Conditions

mody25_FREDERICK FLORINAFPGetty Images_mario draghi Frederick Florin/AFP/Getty Images

Draghi’s Dangerous Farewell

The risks of further monetary stimulus measures by the European Central Bank outweigh the benefits. Additional stimulus will either amount to less than anticipated or will not be sustained – yet it could still undermine the eurozone's financial system and public finances in far-reaching ways.

PRINCETON – Mario Draghi risks deepening the eurozone’s problems in the final weeks of his eight-year term as president of the European Central Bank. He has promised that the ECB will reduce interest rates further to spur the eurozone economy. But policymakers have room for only modest rate cuts, which will do little to boost growth – and will put potentially intolerable pressure on the eurozone’s fragile banks.

Back in June, Draghi said that the ECB was preparing a new dose of stimulus, including further reductions of its policy interest rate and a renewal of quantitative easing (QE) through purchases of government bonds. And he continued to call for “a significant degree of monetary stimulus” following the ECB Governing Council’s most recent meeting on July 25.

More recently, Christine Lagarde, who is due to succeed Draghi as ECB president on November 1, said the central bank “has a broad tool kit at its disposal and must stand ready to act.” Likewise, Olli Rehn, governor of Finland’s central bank and a member of the ECB’s Governing Council, called for “substantial and sufficient” action. Financial markets thus expect aggressive “big-bang” measures from the ECB at the council’s next meeting on September 12.

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.


Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.;
  1. solana114_FADEL SENNAAFP via Getty Images_libyaprotestflag Fadel Senna/AFP via Getty Images

    Relieving Libya’s Agony

    Javier Solana

    The credibility of all external actors in the Libyan conflict is now at stake. The main domestic players will lower their maximalist pretensions only when their foreign supporters do the same, ending hypocrisy once and for all and making a sincere effort to find room for consensus.


Edit Newsletter Preferences