By Jonathan Davies
The European Central Bank (ECB) has announced a €60bn quantitative easing (QE) programme.
President of the ECB, Mario Draghi, said the bank will purchase €60bn worth of bonds until September 2016, or until there is a "sustained adjustment in the path of inflation".
It means the ECB will inject more than €1 trillion into the eurozone economy.
Some analysts had predicted that the ECB would buy bonds worth €50bn (£38bn) a month.
The QE programme is aimed at reducing borrowing and tackling deflation in the eurozone. It should encourage banks to lend more, as well.
The US, UK and Japan have all undertaken QE programmes with some success. It has worked particularly well for the US which ran its QE programme from 2008 to 2014.
The ECB has resisted calls to launch QE over the years, but Mr Draghi said in 2012 that he would not rule anything out.
Speaking at the World Economic Forum in Davos, Switzerland on Wednesday, the Organisation for Economic Co-operation and Development (OECD) called for Mr Draghi to press ahead with uncapped QE.
Angel Gurria, secretary-general of the OECD, said: "Let Mario go as far as he can. I don't think he should cap it. Don't say 500bn (euros). Just say, 'As far as we can, as far as we need it.'"
The Institute of Directors (IoD) warned against QE as a replacement for structural reform.
James Sproule, the IoD’s chief economist said: “The IoD is sceptical about the European Central Bank’s proposed quantitative easing programme. If QE is used simply to support government deficit spending through the purchase of sovereign bonds, it may provide a short term Keynesian boost but it also allows politicians, once again, to avoid tough decisions. Ultimately, QE on its own risks setting the Eurozone on the road to Japanese-style stagnation and deflation. QE is not, should not and cannot be seen as a substitute for the kind of structural reforms to labour and product markets that the EU so desperately needs.
“The problem across much of the Eurozone is a lack of entrepreneurialism, as rigid and anti-competitive systems hold back enterprise and growth. Much greater liberalisation of product markets is necessary and we must appreciate and accept that the disruption this causes will lead to a degree of creative destruction. High European unemployment remains a structural issue, and businesses are unwilling to hire because of a desire to avoid the significant liabilities of employment that still characterises Eurozone labour markets. No program of QE is going to address these issues, although the healthier the general economy the more rapidly these necessary changes can be enacted.
“When it comes to QE, it is important to understand the difference between the Eurozone and the United States and, to a lesser extent the United Kingdom. Simply put, QE in the Eurozone will be a different beast because the underlying structures of Eurozone businesses and finance arrangements are distinct from the British and American models."
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