Using a steady hand, despite the economic woes in Europe which include low inflation and poor growth, the European Central Bank is ready to ensure recovery. A solid recovery is necessary as several of the 18 countries in the European Union using the euro currency are struggling with crippling debt. Also on the list of potentially troublesome items is the concern that the low inflation rates might lead to deflation.
Early in January 2014, in an effort to shore up the economically unsteady southern European countries, the European Central Bank agreed to buy their government bonds; a move that necessitates facilitation as each of the individual countries requesting help has their own government bond systems. The current plan to save the jeopardized euro currency is set upon the prediction that the inflation rate will stay near the healthy estimate of 2 percent and growth expectancy will remain at 1.1 percent in 2014. The growth expectancy in 2015 is 1.3 percent. It was anticipated that no further actions would be taken unless the situation radically changes.
Despite these measures Europe’s economic recovery is not immediately certain prompting the Mario Draghi to make a statement at the World Economic Forum. He said that he considers there to have been dramatic improvement over the past three or four months. Conforming to this statement, the European Central Bank announced that they are reducing their supply of emergency American dollars. In some cases, banking establishments experiencing troubles may turn to borrowing dollars from their central bank when their own funds are not able to be replenished. The European Central Bank is ready to ensure a recovery and declared that a reassessment of the dollar funds will take place in the summer of 2014.
Making it clear that it was imperative that European banks not default on their loans, Mr. Draghi firmly said that European countries must remain committed to reducing the costs of structural forms. One of the main problems still facing Europe is the high unemployment levels, specifically in the countries where the debt is highest. Greece and Spain are particularly troubled. The unemployment rate in Greece was rated at 27.6 percent in July of 2013, while the unemployment rate of Spain was set at 26.6 in September of the same year. Equally, unemployment rates in France and Italy rose during 2013. Some believe that the slowing of the inflation rate assists the workers whose jobs or pay have been reduced because of the radical reduction of structural forms in certain countries, such as Greece. The lowering of employee costs then is felt to bring a competitive edge to the market.
In November 2014, the European Central Bank is aiming to take over 130 of the largest banks in the European region. Citing the need for transparency, Mr. Draghi stated that in October he would fail banks who, after testing for asset quality and investigating lenders, displayed weakness. The European Central Bank has demonstrated that it’s ready to ensure recovery after a long economic slump.
By Persephone Abbott