Belfast Telegraph

Business View: Europe leaves it late in reviving ailing patient

By Margaret Canning

Northern Ireland's exporters will be anxiously awaiting the effects of eurozone quantitative easing.

Until recently, they had said it would never happen. But yesterday brought European Central Bank chief Mario Draghi's much-trailed announcement that a QE programme of €60bn would start in March.

As economist Maureen O'Reilly points out, the effectiveness of QE is much debated.

And there are fears that the eurozone's difficulties are too deep-rooted for mere QE to address.

With the patient arguably terminally ill, the treatment may be too late, and the procrastination of European policymakers may have caused irreparable damage.

PwC chief economist Esmond Birnie says: "The ECB has left it much longer than the UK and USA to launch QE, and the experience of Japan in the 1990s and 2000s suggests that delaying policy responses allows economic and financial problems to become more deeply embedded."

To put it bluntly, throwing money at the problem may not help - like the desperate patient who resorts to quackery and snake oil.

Mr Birnie said: "Growth is very weak in France and Italy, the second and third largest economies using the euro and collectively accounting for nearly 40% of eurozone GDP.

"Businesses are reluctant to invest, labour markets remain inflexible and governments have been slow to undertake much-needed economic reforms.

"Until these issues are addressed, we are likely to continue to see disappointing growth in the euro area economies."

As Danske Bank chief economist Angela McGowan points out, the immediate impact of yesterday's announcement was to bring the euro to an 11-year low against the dollar, and to prompt the beleaguered currency to fall to £0.76 against the pound.

She points out that it may have an impact on tourism - most likely visitors from the Republic feeling less inclined to cross the border for shopping, entertainment or breaks. In short, QE may usher in complications for Northern Ireland.

Belfast Telegraph

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