Mario Draghi indulged the photographers and their rapid-fire shutters for a few moments, making his first appearance for the news media in the European Central Bank's ostentatious new high-rise headquarters in Frankfurt.
Then he shooed the cameras away. He had an important message to deliver.
Draghi, the central bank's president, told reporters on that early December afternoon that it was ready to deploy new weapons against the euro zone's dangerously low inflation rate. Though this 19-nation bloc is one of the world's richest economies, it has never really recovered from the 2008 global financial crisis. And low inflation is one of the impediments to growth.
Emphasising every word, Draghi said that the bank's governing council had just agreed to prepare "for further measures, which could, if needed, be implemented in a timely manner."
In the past, such assurances had bought time for Draghi. His famous vow in 2012 to "do whatever it takes" to save the euro currency union had seemed to work without the bank having to actually take much action.
But on this day, after months of Draghi's saying the equivalent of "stay tuned," his statement of resolve failed to work the old magic.
European stock markets sagged even as he spoke. The reaction by investors, whose money and faith will be crucial to any true economic recovery, raised an ominous question: Is the man who is arguably the most powerful official in Europe really powerful enough to pull the Euro zone out of its doldrums?
Draghi's quandary is that the actions that might save the Euro zone also threaten to divide it.
As he begins the fourth year of an eight-year term, the central bank has still not pursued the path that many economists say offers the greatest hope to millions of Europeans to escape from a "lost decade" of stagnation: buying government bonds and other financial assets in huge numbers. Such an approach, known as quantitative easing, was used successfully by the Federal Reserve in the US. The idea is to pump money into the financial system, encouraging more lending and spending and kick-starting the economy.
Draghi continues to send signals that a bond-buying programme is in the works. In an interview published on Friday, he warned of the danger that low inflation could cause people to delay purchases, in the expectation that prices will fall further. If so, that could be the beginning of a pernicious decline of expectations that would undermine consumer spending and business investment.
Yet even as Draghi tiptoes toward a bond-buying programme, which could be unveiled as early as the central bank's policy meeting on January 22, he faces challenges from inside and outside.
Many economists say Draghi is running out of time to deliver the decisive action needed to prevent low inflation from becoming a chronic condition. While low prices benefit consumers in the short term, extended low inflation, which could worsen into the widespread decline in prices known as deflation, imposes a heavy burden on borrowers and makes it hard for companies to be profitable, encouraging them to cut wages or lay off workers.
In its core task - to keep inflation below, but close to, 2 per cent - the central bank has fallen short. The last time the euro zone's annual rate of inflation was 2 per cent was in January 2013. As of November 2014, the rate was only 0.3 per cent, already low enough to have a pernicious effect on growth. Yet the central bank has seen a steep decline in the size of its balance sheet, the key measure of how much money it has been able to pump into the economy. That number has shrunk to about euro 2 trillion from almost euro 3 trillion early in 2012.
Jens Weidmann, the president of Germany's central bank, the Bundesbank, and a member of the European Central Bank's governing council, has argued against more aggressive monetary stimulus and been a thorn in Draghi's side. All central banks face internal dissension, but Europe's is unique in that its members are separate countries. The Euro zone is a currency union with a centralised monetary policy, but the member countries remain largely in control of their own budgets and regulatory policies.
The leaders of France and Italy, the second- and third-largest Euro zone economies after Germany, seem unable to overcome resistance from trade unions and other interest groups over changes that promise to help improve long-term growth. Even Germany, the region's economic anchor, has lost momentum and barely escaped falling into recession in the third quarter of 2014, the most recent to be reported.
Without a more aggressive monetary policy, a growing chorus of economists say, Europe has little chance of economic revival anytime soon.
But in Germany, conservative opposition to large-scale asset purchases similar to those conducted by the Fed and the Bank of England borders on the hysterical.
If Draghi is fortunate, the Euro zone economy will start to recover without a big central-bank intervention, and inflation will rise toward the 2-per cent target. The plunge in world oil prices will provide some stimulus, but because fuel is usually priced in dollars, it is being partly offset by a weaker euro.
But the costs of delay are mounting. And now, even if the central bank finally does begin full-bore quantitative easing, there is no certainty that it will be enough to rescue the euro zone's creaky, highly regulated economy.
© 2015 The New York Times
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