The European Central Bank has left interest rates unchanged at 1 per cent yet again, even as calls are growing across the region for a cut in rates to boost investment in the austerity-hit European periphery.
The decision by the bank was generally expected, as the results of the lending of €1trn to Eurozone banks through the long-term refinancing operation are still being waited upon. The ECB will be hoping that the loans, which were made at low interest rates and are set to last for three years, will spur investment across the region. However, is becoming apparent that many of them were simply deposited back with the ECB at rates a quarter of what they were taken out for.
The ECB is also pursuing an almost accelerationist agenda, in that it is concerned about making life too easy for the periphery and thus removing the motivation to enact what it sees as crucial structural reforms to the labour market and financial systems.
The bank is caught between two competing pressures. On the one hand, Germany is expressing concerns that inflation may be too high, at 2.6 per cent across the Eurozone, on the other, Spain is experiencing unemployment at around 25 per cent, and sorely needs some sort of stimulus. If fiscal isn't available, monetary may be the next best thing.
On closer inspection, however, the two may not be that conflicting. No-one would argue that Spain's unemployment is a good thing, but some do think that Germany should suck it up and take their inflation.