-Mario Draghi, ECB President
By the end of 2013 the 18-nation's bloc's real GDP was 3% lower than in the first quarter of 2008, meaning there is an excess capacity in the economy. At the same time, the M3 indicator– a measure of money supply, climbed only 7% between September 2008 and March 2014, while the nominal GDP advanced a mere 4% over the same period. Surprisingly, the balance sheet of the European Central Bank is shrinking, meaning the central bank is failing to do the job.
A couple of months earlier Mario Draghi claimed the central bank cannot fix the region's problems on its own. It is true, but they should do far more in order to generate growth in demand in line with the existing potential. The ECB can also act to strengthen credit in peripheral countries. In other words, Draghi has to demonstrate his imagination he showed with OMT once again. A poll conducted by Bloomberg showed that 47 out of the 52 respondents believe the ECB will ease its monetary policy on June 5, when they will gather in Frankfurt. Furthermore, a record 88% claimed for a rate cut. In fact, a move towards negative interest rates is a part of the answer, while the asset-buying programme will expand the balance sheet and will reduce the persistent fragmentation of credit markets across the region. A creation of the market for securitised assets will help to deal with ‘bad' banks in case tests show big holes in the capital. Nevertheless, the ECB has to act, and it is clear that Draghi has not done enough, yet .
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