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ECB stimulus risks falling on barren ground without reforms: Praet
February 12, 2015 / 9:07 AM / 3 years ago

ECB stimulus risks falling on barren ground without reforms: Praet

LONDON (Reuters) - European Central Bank measures to inject billions of euros into the euro zone risk falling on barren ground if governments do not shape up their economies, ECB Executive Board member Peter Praet said on Thursday.

European Central Bank Executive Board member Peter Praet speaks during a meeting organised by The Economist in Cascais February 18, 2014. REUTERS/Rafael Marchante

Last month, the ECB launched a sovereign bond-buying plan to pump hundreds of billions in new money into the sagging euro zone economy with a view to bringing inflation, which has turned negative, back towards its target of just under 2 percent.

The move compliments other asset-buying programmes the ECB has deployed to try to buoy the economy.

Praet, the ECB’s chief economist, said the new measures seemed to be working their way through markets and the economy, but that governments must play their part if the ECB stimulus is to generate a faster and more sustained recovery.

“Indeed, perhaps the biggest risk we face with our new measures is that they fall on barren ground because governments are not doing enough to raise confidence in the future,” he said in the text of a speech for delivery in London.

By pursuing structural reforms, governments could raise the growth potential of their economies. If they do this, the outcome could be far more positive.

“If governments are determined in addressing their structural challenges, all the conditions are there for growth to surprise on the upside,” Praet said.

Reporting by Marius Zaharia and Alistair Smout; Writing by Paul Carrel; editing by John O'Donnell

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