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Exporters to suffer as eurozone set to begin quantitative easing

By Margaret Canning and PA

An unprecedented €60bn (£45.5bn) monthly quantitative easing (QE) programme in the eurozone could make life uncomfortable for Northern Ireland exporters, it's been claimed.

The action, intended to kick-start the stagnant eurozone economy, will start in March and continue until the end of September next year.

ECB president Mario Draghi told a press conference in Frankfurt that the purchases were an expansion of an existing policy.

He also said the central bank would start a widely-anticipated programme of buying government bonds, along the lines of the quantitative easing (QE) that has already been pursued in the US and UK.

It comes as the eurozone is facing stagnation with inflation at minus 0.2%, threatening a damaging deflationary spiral.

The scale of the asset purchase scheme over 19 months would amount to €1.14trn (£870bn).

Mr Draghi said purchases will start to include the buying of bonds "issued by euro area governments and agencies and European institutions" from March.

Business advisers PwC said the decision has been prompted by worsening growth across the eurozone and by the spectre of deflation hanging over some member countries.

PwC chief economist Esmond Birnie said it may not necessarily be good news for exporters in Northern Ireland.

"To the extent that QE leads to further depreciation of the euro against sterling we should expect additional challenges facing Northern Ireland exporters, especially for the food processing and tourism sectors, which already face strong competition from the Republic of Ireland," he said

"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.

"Also, longer term interest rates in the eurozone are already very low, which reduces the scope for QE to influence financial markets by pushing down bond yields.

"There may be some benefit to European growth from a weaker euro, though this will also result in higher import prices, squeezing consumer spending."

Danske Bank chief economist Angela McGowan said: "The announcement brought the euro down to an 11-year low against the dollar and against sterling the euro fell to under 76p (1.32).

"For European exporters this of course is good news, but closer to home local exporters will feel a loss of competitiveness as sterling exports become more expensive for European buyers.

"Other sectors such as cross-border retail and tourism could be impacted."

Economist Maureen O'Reilly said there were "divergent views" of whether QE can revive flagging economies, but added: "Nearly half of our manufacturing exports go to the eurozone so anything that boosts the eurozone is a plus for Northern Ireland.

"But the jury's out on whether QE works or not and it really will come down to how the markets react to it."

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