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Stories Stories Business Draghi needs to realize ECB's gas pedal is already on the floor

Draghi needs to realize ECB's gas pedal is already on the floor

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Written by Aldine      June 08, 2014    
 
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There's no way to push money into the economy unless businesses and consumers are ready to borrow it to invest and spend.

Today's measures are designed to encourage banks to look harder for borrowers. They aim to do this by lowering banks' costs of borrowing, by imposing some small costs on banks that sit on money rather than lending it out, and by making it cheaper for banks to borrow from the ECB to fund lending to small businesses.

" Cutting interest rates to record lows "

But the banks wouldn't be sitting on money in the first place if they had credit-worthy business clients eager to take out loans. Indeed, rather than clamoring for new loans from the ECB, the banks have been paying down existing ones.

What is needed are policies addressed not to lenders, but to potential borrowers and spenders, who are holding back because of the dismal prospects for growth.

[Read Full Article:Draghi needs to realize ECB's gas pedal is already on the floor]

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Location

Epicentre
Frankfurt, Germany

Details

Author
David Woodruff
Contributor's Comment
Mario Draghi is stepping on the gas, cutting interest rates to record lows, trying to funnel money into the real economy, and introducing a charge on banks that hold excess reserves with the European Central Bank.
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