A Report of European Central Bank Bond-Buying Program - Essay Example

A Report of European Central Bank Bond-Buying Program Background The ECB bond-buying program is a man the European central bank, but there seems to be a disparity about how it’s handling the scheme. There are allegations from the Bundesbank in Germany that the program has gone outside the boundaries of its mandate. But at the same time criticism towards the German reaction from a member of ECB points out that the Germans’ central bank definition of the policy is restrictive. This issue has landed at the door steps of Europe’s highest court and it is clear that it conquer with German central bank accusations (De, P. 850).IntroductionThis report brings out a clear picture of the issues pointed out as relevant to the European central bank bond-buying program.

These aspects are appointment, inflation, growth, financial stability, fiscal policy and politics. Each of them plays a significant role in this context and influences the program from different angles. The program is strongly advocating for the protection of the euro, this is according to ECBs president Mario Draghi well this has received a lot of backing from euro-zone governments (De, P. 849). The ECB bond-buying program is entirely an economic program, but it has faced political interruptions influencing its performance.

The program is toiling to ensure that Europe remains relevant economically a midst the looming economic crisis in the world. There is a balance between inflation, growth, financial stability, creation of fiscal policy and politics. If we look at politics first of all the euro-zone governments back the ECB bond buying program to the extent of out voting the Bundesbank by the other 22 members. The case after being heard by a German court on allegations that the program went beyond its mandate clearly brought out the skeptism.

On the other hand after the case was forwarded to the European court the judgment was in favor of the program. The levels of inflation raise concern across the European economy as it is questionably low. According to comments from Janet Yellen (Fed chair) that the central bank could raise its rates has sparked worries across the region. The members prefer that another method is used to improve on the economy other than the former the speculation is that ECB is moving to quantitative easing. Economies are recovering and growing at the same time, but the process is as slow to the extent of insignificance.

At the moment the euro zone has concentrated on deflation other than allowing the ECB to establish a stimulus for the recovery of the European economy (De, P. 845). In conclusion, the euro zone is losing grip of its financial stand at an alarming rate. Furthermore, the efforts in play face a lot of opposition from different factions in the region. For instance, the ECB is facing opposition from the German Bundesbank and the shift towards deflation other than allowing the program to establish a stimulus for the purposes of redeeming the economy.

From a different view the slow rate of economic growth and recovery is as a result of different economic policies between the member counties. Recommendations One of the recommendations reflects on the mandate of ECB bond-buying program where it should be protected from external influence completely. Those parties interested in offering advice or commenting should do it through a negotiating platform. Again the Eurozone should focus on a particular path and avoid interfering with the progress of ECB bond-buying program.

The program focuses on stimulation of economic growth, but the euro zone is shifting to deflation which is a short term solution.Work CitedDe, Grauwe P, and Y Ji. "Fiscal, Implications of Ecbs Bond, Buying Program." Open Economies Review. 24.5 (2013): 843-852. Print.