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Tools already there to return Eurozone to growth - Draghi

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Mario Draghi, president of the European Central Bank

Mario Draghi, president of the European Central Bank

Bloomberg

Mario Draghi, president of the European Central Bank

The European Central Bank (ECB) is ready to use additional unconventional tools if needed to spur inflation and growth in the Eurozone, the bank's president Mario Draghi said yesterday.

Mr Draghi also said he expects more demand from banks for its new ultra-long loan programme that funnels cheap cash into banks, known as TLTROs, when the funding is offered again in December.

He was speaking during an appearance in front of the European Parliament's economic and monetary affairs committee.

There was less take-up of the initial tranche of loans than most analysts expected last week, fuelling expectations the ECB may eventually take more radical stimulus measures, such as printing money to buy securities. Such quantitative easing, or QE, would face strong resistance in Germany.

Mr Draghi said the Eurozone central bank's Governing Council "remains fully determined to counter risks to the medium-term outlook for inflation".

"Therefore, we stand ready to use additional unconventional instruments within our mandate, and alter the size and/or the composition of our unconventional interventions should it become necessary to further address risks of a too prolonged period of low inflation," Draghi added.

He said the €82.6bn that was taken by 255 banks last Thursday was "within the range of take-up values we had expected" and noted that banks will have another opportunity to use up their TLTRO initial allowance in December.

"By design, the September and December operations should be assessed in combination," Draghi said, adding that news of the TLTRO programme had already had a "positive impact on financial market sentiment".

A Reuters poll yesterday predicted that the second tranche of the TLTROs in December will attract better demand than last week's sale but is still likely to leave a third of the total €400bn on offer untapped.

QE, involving buying large amounts of private and sovereign debt, has been used by other major central banks - such as the US Federal Reserve, the Bank of England and the Bank of Japan - to get their economies going again.

And while the Fed has now started to withdraw its stimulus, the Eurozone is struggling to recover from its own debt crisis. (Reuters)

Irish Independent