The European Central Bank (ECB) announced a fresh stimulus package on Thursday 12th September, in an attempt to prevent the fragile Eurozone economy from grinding to a halt. The stimulus includes an interest rate cut and plans to pump €20bn a month into the financial markets.
In one of his final acts as ECB President, before Christine Lagarde takes over in November, Mario Draghi said governments across the Eurozone needed to take greater steps to reboot growth by ramping up public spending or cutting taxes.
In a thinly veiled rebuke to Germany, which has among the strongest government finances in the world, Draghi said that Eurozone nations with solid finances had to take swift steps to support growth by loosening their purse strings.
After years of support from the central bank to sustain growth in the decade since the financial crisis, he said: “Now it’s high time I think for the fiscal policy to take charge. In view of the weakening economic outlook and the continued prominence of downside risks, governments with fiscal space should act in an effective and timely manner.”
The ECB said it would cut its deposit rate to a new all-time low of -0.5%, a reduction of 0.1%, meaning banks would incur charges on any balances they kept there. Negative interest rates are meant to encourage banks to lend to consumers and businesses, rather than park their money with the ECB.