EU to throw 1.26 trillion euros at the banks

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EUROPEAN Central Bank chief Mario Draghi yesterday launched the bank’s ‘expanded asset purchase programme’, to buy bonds from banks to try to get them to finance EU production.

The bank is to use 1.26 trillion euros to buy 60bn euros per month of banks’ bonds until the end of September 2016 or until there’s a ‘sustained adjustment in the path of inflation’ to get it to, or below, 2%.

Draghi said: ‘They are intended to be carried out until the end of September 2016 and will in any case be conducted until we see a sustained adjustment in the path of inflation which is consistent with our aim of achieving inflation rates below, but close to, 2% over the medium term.’

Draghi continued that ‘in line with our forward guidance, we decided to keep the key ECB interest rates unchanged’.

He added: ‘As regards the additional asset purchases, the Governing Council retains control over all the design features of the programme and the ECB will coordinate the purchases, thereby safeguarding the singleness of the Eurosystem’s monetary policy.’

On the issue of risk, he said: ‘The risks surrounding the economic outlook for the euro area remain on the downside, but should have diminished after today’s monetary policy decisions and the continued fall in oil prices over recent weeks.’

He added: ‘The Governing Council will continue to closely monitor the risks to the outlook for price developments over the medium term. In this context, we will focus in particular on geopolitical developments, exchange rate and energy price developments, and the pass-through of our monetary policy measures.’

One of the first results of the decision is expected to see a major rise in the price of gold, which will now be regarded as the only real money.

• UK government borrowing rose to £13.1bn in December, official figures show, largely as a result of a £2.9bn payment to the European Commission budget.

Figures from the Office for National Statistics show public sector net borrowing rose from £10.3bn a year earlier.

David Kern, Chief Economist at the British Chambers of Commerce said: ‘It is disappointing that public sector borrowing in December was again higher than a year ago.

‘The current trends suggest that it will be difficult for the government to meet its target for this financial year, although there could be a significant improvement when the January figures, which will include significant income tax payments from businesses to the exchequer, are published next month.’