The ECB’S Bond Buying Programme – Is It a Game Changer? asks Ted Scott
Ted Scott, F&C director Global Strategy says that the success of the ECB’s bond buying programme will ultimately rest on recovery in growth and stable or reducing debt levels in affected eurozone countries.
The success of the programme, like other policies implemented by the ECB or other members of the Troika, will ultimately depend on whether growth recovers and debt levels can be contained or reduced.
In this respect, the new strategy buys time and will enable the member states to fund themselves more effectively but, with a slowing global economy and uncompetitive exchange rate, it will not contribute to higher GDP or lower debt ratios. For that to occur a more fundamental change in strategy is needed which is something the politicians have to decide upon.
As we have said throughout this crisis, the outcome is likely to be in the form of a full fiscal and political union as well as a common currency, or there will be a partial break-up. Either of these scenarios is consistent with Draghi’s view that the euro is irreversible but the way of achieving a stable and sustainable solution will require more fundamental policy decisions than what the ECB delivered yesterday.