Legal challenge shows rocky path to ECB money-printing

Sun Jan 11, 2015 3:04am EST
 
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By John O'Donnell

FRANKFURT (Reuters) - A landmark legal opinion this week will remind the European Central Bank of the limits it faces as it advances towards money printing, while a tumbling oil price saps inflation in debt-strained Europe.

With expectations high that the ECB is on the verge of buying government bonds with new money to shore up the economy, an influential adviser to Europe's top court will give his view on Jan. 14 about an earlier unused bond-buying scheme.

It is the latest chapter in a long-running and increasingly bitter dispute about quantitative easing (QE) between the ECB and Germany, the largest member of the 19-country bloc, that is likely to limit the size or scope of such a program.

As the debate continues, the euro zone economy is all but grinding to a halt. Germany is expected to announce modest growth on Jan. 15 for last year.

In the United States, fresh data on rising employment as well as retail sales is set to show just how much its recovery has overtaken Europe.

"The global economy is at a precarious point," said Jacob Kirkegaard of Washington think tank, the Peterson Institute.

"The falling oil price is a huge shot in the arm. Nonetheless, it is clear that the ECB will have to do something. There is no growth and the debt burden is too high. The world will be flying on one engine, the U.S., for quite some time."

Oil's second-biggest collapse on record has taken the price of a barrel of benchmark Brent crude to around $50 from $115 in the middle of last year. [ID:LCOc1]   Continued...

 
The famous euro sign landmark is photographed outside the former headquarters of the European Central Bank (ECB) in Frankfurt, late evening January 8, 2015.   REUTERS/Kai Pfaffenbach