Brussels, 19/01/2015 (Agence Europe) - The French President, François Hollande, is confident that on Thursday 22 January, the ECB will announce the launch of a programme for the mass buy-back of assets including government debt bonds (QE, or quantitative easing, European-style).
“On Thursday, the ECB will make the decision to buy back government debt, which will inject considerable amounts of cash into the European economy and create a movement conducive to growth”, he said on Monday 19 January, presenting his wishes to players in business and employment (our translation).
Despite the opposition of the Bundesbank, the Frankfurt-based monetary institute is putting the finishing touches to new unconventional measures aiming to comply with its mandate to keep annual inflation rates at a level close to but below 2%. The outlines of 'European-style QE' depend on a number of parameters: the scale and maturity of the bonds purchased, ultimate responsibility in the event of losses.
Acknowledging the fact that the economic situation in Europe remains “open to question”, Hollande listed several factors giving rise to hopes of growth “in the order of 1% for 2015” in France: the increase observed in volumes of credit granted to economic players, “the credibility of France's signature” (interest rate set at 0.7% when the last wave of 10-year government debt was issued), the fall in oil prices and a low euro exchange rate, which is helping exporters.
Flexibility of the Stability and Growth Pact. Hollande called for the 'Juncker' plan, which is designed to draw down €315 billion in private investment over three years, to be put into place quickly. He believes that the neutrality with regard to the Stability and Growth Pact of direct national contributions to the future European Fund for Strategic Investments (EFSI), to be set up under the aegis of the EIB, will help to create a “leverage effect” to attract private investment.
In particular, the French President argued in favour of the flexibility laid down in the European budgetary rules being “fully put to use to set the right pace for the reduction of public deficits” (see EUROPE 11229). Last week, the updated figures on the French state deficit supported predictions of a deficit of 4.4% of GDP. France is currently negotiating with the European Commission and its external partners for a further postponement (2016?) of its deadline to bring the public deficit back below 3% of GDP. It needs to prove that it is taking budgetary matters seriously and continuing with its structural reforms. “We will have to make cuts in 2015, 2016 and 2017, without touching most public services, which will call for innovations”, Hollande stressed. (MB)