Europe’s Central Bank is often cast as one of the pantomime villains of Ireland’s banking crisis. After all, it is the institutional personification of ‘Frankfurt’s Way’. While it is always easiest to blame the outsider, accusations levelled at the ECB are not in this case entirely without foundation. The recent decision by Jean-Claude Trichet – ECB President until late 2011 – to cooperate with Ireland’s banking inquiry is therefore a welcome development.
The ECB has been hitting the headlines for very different reasons of late, and you might be wondering, for once, not what have they done to me lately, but what have they done for me. The big economic news of early 2015 is that the ECB is finally following the lead of the world’s other big central banks with it’s own PPM (programme for printing money), commonly referred to by finance types as QE (quantitative easing). Basically, this means increasing the quantity of euros in the economy, but with the click of a mouse rather than the cranking of printing presses. For the foreseeable future, Frankfurt will create an extra EUR 60bn – roughly EUR 180 per person in the Eurozone – every month. Not to be sniffed at.
Unfortunately, this new money won’t be dropped from a helicopter into your bank account every month. The theory is that more euros in the system will lead to higher prices, higher wages, even lower interest rates, more lending, more exports and stronger growth.
Ok, you might say, but what does that mean for my back pocket?