The ECB Sends an Important Message to Italy

As expected, the European Central Bank (ECB) has once again decided not to adjust its interest rates. The ECB has, however, changed its message slightly when it comes to its ongoing asset purchase programme, dropping the previously included suggestion that the programme might be expanded. Professor Friedrich Heinemann, head of the Research Department “Corporate Taxation and Public Finance” at the Centre for European Economic Research (ZEW), Mannheim, comments on the ECB’s actions.

“The ECB changing its tune on bond purchases is a welcome development. This announcement suggests that we may finally be about to see the long-awaited phase-out of the purchase programme. This message from the ECB is particularly helpful coming just days after the Italian election.

The strong performance of populist parties in Italy’s parliamentary elections has created increased uncertainty over the country’s economic recovery. The ECB is now making it clear that its monetary policy is not designed to suit the particular circumstances of Italy but for the Eurozone as a whole. This is an important message to send to the next Italian government; namely that the ECB will not help to finance irresponsible financial policy.”

For further information please contact:

Prof. Dr. Friedrich Heinemann, Phone +49 (0)621/1235-149, E-mail friedrich.heinemann@zew.de