Constancio Hails Highly Successful ECB Stimulus Amid Recovery

  • ECB vice president says euro-area recovery is resilient
  • Stimulus steps were not an experiment and are now vindicated

Vitor Constancio lauded the European Central Bank’s stimulus, saying policy makers have been “highly successful” in driving the euro area’s recovery while warning that the job isn’t finished yet.

“The euro-area economy is experiencing a broad-based, robust and resilient recovery,” the ECB vice president said in a speech in Frankfurt on Monday. “But we know that this process still relies significantly on our monetary policy support. It is not yet self-sustained and therefore we must be patient and persistent.”

From Lost Decade to Golden Years: Euro-Area Economy Picks Up

The 19-nation currency bloc is set for the fastest economic expansion in a decade and differences in growth rates between member nations are the smallest in the region’s history. At the same time, inflation is well short of the ECB’s target, one reason why policy makers last month decided to extend their bond-buying program at least until September.

Constancio said the ECB estimates that its monetary policy measures will boost euro-area output by around 1.7 percentage points from 2016 through 2019. That’s more than the central bank achieved in previous recoveries, he said.

Even with interest rates below zero and bond purchases on the way to 2.5 trillion euros ($2.9 trillion), the vice president said there were so far no signs of widespread negative side effects on the economy. He did note narrower concerns, such as house prices in some of Germany’s biggest cities, but argued that the ECB has been vindicated in the steps it took.

“Our monetary policy measures were not an ‘experiment’ on the economy, but were in line with the policies previously adopted by other major central banks,” Constancio said. Despite concerns “about possible collateral consequences of our policy, such concerns have however not materialized in real facts and we can now underline the appropriateness of our monetary policy stance.”

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