Sound bites: ECB obliged to keep super-easy bias

The ECB’s monetary radar screens should be signalling that rates must stay at record low levels for a long time – if not lower. Parts of the Eurozone are crawling out of recession but the threat of further growth wobbles is never too far away. Germany is an exception and pulling into recovery, but the troubled Eurozone economies are still in dire straights. The massive debt burden, bank balance sheet restructuring and over-tight fiscal policies continue to take their toll on the weak links in the Eurozone economy. Low core inflation, high unemployment and domestic credit contraction are all symptoms of monetary policy needing to give extra zest to monetary stimulation. Interest rates at 0.5% are helping in some part, but the ECB needs to pump prime much more monetary liquidity into recovery efforts. At some stage, the ECB will need to work a more effective means of quantitative easing into equation, or else the Eurozone will be blighted with double digit unemployment for many years to come. This poses the greatest risk to EMU’s survival in the long run, so it is a case of the ECB having to face up to the reality of sink or swim for the euro at some stage soon. Economic pragma and political reality will have to transcend ECB and especially German Bundesbank dogma.