The Crisis Management of the ECB

A succession of crises—the global financial and economic crisis (GFC) in 2008, the Great Recession of 2009 and the following Euro crisis—forced the economic policy to action. After the fiscal policy has used up its ammunition in the fight against the effects of the 2009 recession, monetary policy remained the only expansive player in the political arena. The European Central Bank (ECB) responded—like the other major central banks in the world—first with a zero interest rate policy, then by “quantitative easing”. However, the ECB acted in comparison with the Fed with some delay. In the evaluation of the crisis management of the ECB must clearly state that it has missed its own inflation target of 2 %. However, it has been successful in reducing the high government bond yields after the famous “Whatever it takes” speech by ECB President Draghi in July 2012 and the subsequent announcement of the OMT (outright monetary transactions) programme. Whether the quantitative easing program by the ECB in the years 2015/2017 with a view to achieving the primary objective, namely an inflation rate of 2 % will be successful is an open question. Simulations with the Global Economic Model of Oxford Economics indicate that the quantitative easing policy will achieve the inflation target but with a great delay. The impact on the real economy will not be as large as QE experiments in the USA. Other unintended effects—such as the formation of bubbles on the stock markets—are greater than the intended effects.