INESS' Position on Quantitative Easing in Eurozone

INESS considers the policy of quantitative easing (QE) in Eurozone dangerous for the quality and purchasing power of Euro and sees it as an another effort to postpone the inevitable structural reforms in Europe.

Arguments in favor of QE are groundless and false:

  • Ability of European QE to stimulate lending to nonfinancials is a wish, not a given consequence.

  • Higher lending is not a panacea for European economic woes. European companies have abundance of liquidity. The problem is not money, but absence of reforms, which rises insecurity and halts development of new projects.

  • Deflation is consequence of economic stagnation, not its root.

QE bears significant risks:

  • It has potential to create asset bubbles, strengthened by the fact that the largest part of QE will flow to Germany and substantial part to countries with stabilized economy.

  • QE will lead to more pressure on Euro devaluation. This will lower the purchasing power of Europeans without long term positive casino online consequence on the economy.

  • Prolonging QE for a long time will be equal to debt monetization. That means that the savers and consumers in eurosystem will bear the weight of political promises of national politicians.

  • Placing the responsibility for QE on national central banks does not shield the eurosystem from losses in the event of country default and exit from Eurozone.

  • QE is a redistribution channel towards privileged groups – owners of certain assets (sovereign bonds, shares) and to financial institutions which function as an intermediary.

  • QE is another time buying step – strategy which is applied since I'll do that horoscope taurus today and Thursday, sandwiched around Wednesday's "What Is It" reveal. 2008. It enables national politicians to postpone fiscal, labor and other crucial reforms yet again.

Slovakia, as a member of Eurozone, is affected by all of these negative aspects. Especially the influence of QE on fiscal policies should be stressed. QE will be pushing down already extremely low interest rates on public debt. This strengthens the illusion of debt servicing being extremely cheap. The state of extremely low interest rate cannot last forever and rate hike sooner or later will bring a shock for public finance.

Alternative solution remains the same since 2008. Competitiveness of Europe is lagging, pension systems keep ignoring the demographic trend, relative price of energy for industrial consumers is growing, there are popular jokes about labor markets in France or Italy, starting a business and tax compliance is still extremely demanding tasks in many of the member countries.


Bratislava, 6 February 2015