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Momentum grows for QE for People – Will the ECB take notice?

As the European Central Bank is set to decide on boosting its quantitative easing (QE) programme or deciding on new measures, the QE for People campaign coalition calls on the ECB to carry out a comprehensive assessment of the potential impact of more direct monetary policies for the eurozone economy.

Press release - March 10th 2016

The ECB will share its latest thinking on QE and monetary developments at a press conference today in Frankfurt (14h30).

The QE programme has been operating in the Eurozone for almost a year. Evidence shows it is failing: Headline inflation dropped to -0.2% in February.

“Quantitative easing is not working for people and businesses across Europe - it is failing on its own terms,” said Frank van Lerven, a researcher at Positive Money.

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With deflation looming and bleak prospects for recovery in the eurozone, more and more economists and think tanks are calling on the ECB to adopt a new monetary policy called Quantitative Easing for People. The concept includes proposals for so-called “helicopter money” whereby the central bank would distribute money directly to citizens or to conduct monetary financing for public investments in the eurozone.

“If the QE money went directly into additional spending by government or into lower taxes or to people’s bank accounts, it would surely have an effect.” recently wrote the Financial Times’s Chief Economics commentator, Martin Wolf.

Similarly, the idea was also mentioned in The Economist, French newspaper Le Monde and Alternatives Economiques and the Dutch TV channel RTL.

“Time for a Regime change”

Think tanks are joining the call. In particular, the Centre for European Reform has called for a ‘regime change’ in Frankfurt, suggesting that “the ECB could go beyond what any central bank has so far contemplated doing, and hand out cash directly to citizens”.

The proposal is also making its way inside the European Parliament. Polish MEP Dariusz Rosati (EPP) has raised the question directly to Mario Draghi at a plenary session of the Parliament on February 1st. “The ECB should make a thorough analysis of all possible consequences of the helicopter money measure, in case it would have to be implemented,” Mr Rosati said.  

The former member of the Polish Central Bank's monetary Committee emphasized that  “The ECB is not running out of options, but it must innovate and take bolder steps to stimulate the real economy. Helicopter money, after a throughout analysis of the ECB, might indeed be one of the possible solutions.”

Last month, MEPs Paul Tang (S&D), Molly Scott-Cato (Greens) and Fabio de Masi (GUE/NL) hosted a conference on this topic at the European Parliament, at which they also expressed their support for the general idea.

“The ECB has a moral obligation to consider QE for People”

At the same event, macro fund manager Eric Lonergan said: “The treaty gives the ECB a clear mandate to maintain inflation at 2%, and it is manifestly failing at doing this. From this perspective, the ECB has a moral obligation to consider new options.”

The campaign for Quantitative Easing for People was launched in November 2015 by a coalition of 20 organisations from Europe. So far more than 100 economists have endorsed it.

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