As the European Central Bank (ECB) deploys its most powerful economic weapon, the onus for growth now lies with the 19 individual countries in the eurozone, a fractious and highly political group.
The central bank’s plan calls for buying 60 billion euros (US$69 billion) of government bonds and other debt each month. It is the kind of aggressive action that leaders in weaker eurozone countries have long wanted and that Germany has tried to block.
SYRIZA, the leftist party expected to win the Greek elections this weekend, on Thursday called the bond purchase program “an important decision which the next Greek government will use for the benefit of the country.”
Photo: Bloomberg
The ECB, though, is stretching the limits of its power with the bond-buying program. And if it is not enough to address what ails Europe, any further stimulus efforts would fall to national leaders. Such steps would involve the sort of extensive government spending that many countries, including Germany, have been reluctant to pursue, hewing, instead, to a philosophy of budget discipline that has acquired the shorthand label of austerity.
German Chancellor Angela Merkel warned her peers not to waste the breathing space given them by the central bank.
“We should not become diverted from the fact that we as politicians need to put a framework for recovery in place,” Merkel said at the World Economic Forum in Davos, minutes before the ECB announced its decision in Frankfurt, Germany.
The ECB’s plan, in part, is aimed at easing the burden on national governments by pumping at least at least 1.1 trillion euros into the system. The increased demand from the ECB should raise bond prices and push down yields. If the tactic, known as quantitative easing (QE), works, it would ripple through financial markets, pulling down the interest rates on other types of debt, like business loans.
Even if the ECB action does not reach Italian or Portuguese borrowers, it could still help.
Italian shoemaker Geox president Mario Moretti Polegato said quantitative easing could help restore a sense of optimism. Many smaller Italian companies could get credit if they wanted it, he said, but they are too pessimistic about their business prospects to invest.
“The ECB move is not something that will replace what Italy needs to do,” Polegato said in an interview at Davos, but added: “It’s a first step.”
Any relief that national leaders feel might be clouded by the realization that there is probably not much more the ECB and its president, Mario Draghi, can do to stimulate the region’s economy.
On Thursday, Draghi again emphasized that national governments need to step up their efforts to rekindle growth.
“It is crucial that structural reforms be implemented swiftly, credibly and effectively, as this will not only increase the future sustainable growth of the euro area, but will also raise expectation of higher incomes and encourage firms to increase investment today and bring forward economic recovery,” Draghi said in a statement. “Fiscal policies should support the economic recovery.”
Quantitative-easing programs have helped revive the economies of the US and Britain, but the eurozone is not a single country. It is largely a matter of conjecture whether pushing down the interest rates on government debt and some other kinds of bonds in Spain, for example, would make it easier for a hard-pressed small business owner in Italy to get a loan.
“The way it’s transmitted is the key,” Stanford University professor of economics Anat Admati said in an interview in Davos.
Central banks “don’t control what happens after they give the money,” she said. “They make money cheaper and hope it finds its way to the real economy.”
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
RECORD-BREAKING: TSMC’s net profit last quarter beat market expectations by expanding 8.9% and it was the best first-quarter profit in the chipmaker’s history Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which counts Nvidia Corp as a key customer, yesterday said that artificial intelligence (AI) server chip revenue is set to more than double this year from last year amid rising demand. The chipmaker expects the growth momentum to continue in the next five years with an annual compound growth rate of 50 percent, TSMC chief executive officer C.C. Wei (魏哲家) told investors yesterday. By 2028, AI chips’ contribution to revenue would climb to about 20 percent from a percentage in the low teens, Wei said. “Almost all the AI innovators are working with TSMC to address the
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”