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Markets put QE plan under miscroscope

Friday, January 23, 2015 - 02:32

As markets digest Thursday's dramatic QE announcement from the ECB, investors question the scheme's effectiveness in hauling the euro zone out of trouble - and German opposition to it shows no signs of going away. Katie Gregory reports.

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It took Mario Draghi over two years to unleash QE, some already saying it's too little too late. A Reuters poll of economists - found almost half believe the ECBs scheme won't be enough to push up inflation to its target at just under 2%. Alastair McCaig from IG says there are already rumours about further phases to come. (SOUNDBITE) (English) IG, MARKETS ANALYST, ALASTAIR MCCAIG, SAYING: "Speculation on trading floors is already rife about what phase 2 of this might well mean. And could we see the monthly 60 billion being spent maybe increase to say 80 billion? I think that will be a topic of conversation that will escalate as we see the picture around Europe develop over the course of this year." European share markets are at record highs after Draghi's commitment to QE. Including the German DAX. But many in the euro zone's largest economy are far from happy. German newspapers calling Draghi's move dangerous. Adding fuel to the fire - questions over its legality. Hans-Werner Sinn is the President of the German Institute of Economic Research. (SOUNDBITE) (German) PRESIDENT OF IFO (INSTITUTE FOR ECONOMIC RESEARCH) INSTITUTE HANS-WERNER SINN, SAYING: 'We do have article 123 of the EU treaty which says: 'A monetisation of government debt is not permitted'. And that's it.'' The fractured euro zone economy has very much become a battleground between Germany - and the rest. Southern debt-ridden countries have been craving a monetary injection. Baader Bank's Robert Halver. (SOUNDBITE) (German) CAPITAL MARKET ANALYST FROM BAADER BANK, ROBERT HALVER, SAYING: "Italy, Spain, Greece, Portugal and France can easily raise new debt, which means we're going to see a new surge in debt. This will hurt massively, but it also helps the economic situation, but we can say that the old stability of Germany's Bundesbank is unfortunately dead." But the EU's Economic Commissioner says Draghi is right. (SOUNDBITE) (English) EU ECONOMIC COMMISSIONER, PIERRE MOSCOVICI, SAYING: "I think that this decision has to be appreciated as decision in the interests of the euro zone, a decision taking into account the true economic situation." Just a month in and the euro zone economy began 2015 in better shape than expected - latest PMI data showing a five month high. That's despite companies slashing their prices at the fastest rate in five years - news which many say will back up the ECB decision to take on both QE - and a German backlash.

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Markets put QE plan under miscroscope

Friday, January 23, 2015 - 02:32