Mario Draghi is showing no mercy. Rate cuts and bond-buying haven't gotten the eurozone out of troubled waters, but he's staying the course. DW's Henrik Böhme says such Titanic-esque monetary policy could sink the euro.
He's done it again. Believe it or not, ECB chief Mario Draghi has lowered interest rates yet again. The benchmark refinancing rate now stands at zero-point-zero percent, meaning the expropriation of savers isn't only continuing - it's getting worse.
The central bank's controversial asset-purchasing program will be expanded. Instead of buying bonds worth 60 billion euros ($66.8 billion) per month, the ECB is now going to purchase 80 million euros' worth. The program will now also entail buying corporate bonds. The bogus monetary policy of Mario Draghi continues.
The problem for Europe's top guardian of the euro is that none of his previous measures has had a tangible, positive impact. On the contrary, inflation, which Draghi has wanted to push up by printing more and more money, still hovers around zero. And the eurozone economy isn't really picking up much either. One issue is that companies continue holding back investments, and that's why they don't ask for fresh loans on a large scale.
The lenders themselves, which are awash with fresh money, can't pass it on as they would like to. And if they want to use the ECB overnight parking facility, they have to pay for it through a negative deposit interest rate. The owners of the huge amount of cheap money available have been looking for other ways to invest as you can't just let it rest under your pillow. The result is that big bubbles are in the process of forming, whether in the real estate market, the art market or elsewhere.
Why not buy oil, Mario?
So, what exactly is pushing Draghi to pump even more money into markets, if his plan has failed miserably thus far? According to its own rules, the ECB may not purchase more than a third of the total bond debt of a given country anyway.
And why does he stubbornly stick to an inflation target of little under 2 percent? It pretty much looks like an artificial target now, stemming from a time when a barrel of crude cost around $100. Instead of buying bonds, Baader Bank's Klaus Stopp suggested the other day that Draghi should rather buy up oil in Rotterdam as a better long-term investment.
What about stepping down?
What Draghi is doing comes close to running amok. Cheap money destroys trust in the long term and makes people addicted. It also prompts eurozone governments to delay required reforms. The patient isn't healed automatically by administering a greater dose of the same medication. The redistribution of money from the north to the south is continuing.
For highly indebted eurozone nations such as Spain, Portugal or Greece, Draghi's policy is a blessing. For the eurozone as a whole the iceberg is approaching the eurozone's Titanic fast.
Threatening letters sent by the European Commission to Madrid and Rome won't change anything. Brussels has called for more public savings and faster reforms. Draghi's announcement will have pleased investors, though. European stock markets didn't take long to jump as the junkies got an even bigger fix, although the Frankfurt Stock Exchange closed 2.3 percent down. But if this is the only purpose of Draghi's exercise, the Italian would be well-advised to take his leave soon.
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