peter praet : interview in jornal de negocios interview with mr peter praet, member of the executive board of the european central bank, in jornal de negocios, conducted by mr rui jorge on 9 february and published on 16 february 2015. * * * the ecb has presented its quantitative easing ( qe ) program almost six years after the federal reserve system and the bank of england. what took you so long to go in that direction? the federal reserve system intervenes traditionally by buying securities directly on the market, while we typically provide liquidity to the banks via temporary lending operations. as a result of the financial crisis, we have adapted our monetary policy tools : for example, recently we lent for longer maturities of up to four years provided that banks provide loans to the economy and we guaranteed very low rates for an extended period of time, through forward guidance. why now? monetary policy accommodation via the banking system has reached its limit. with its asset purchase program, the ecb wants to regain control over its balance sheet : we will decide how much base money we will inject in the system. have previous measures failed? monetary policy has had a big impact on the economy. without all the measures we have taken since the beginning of the crisis, we would probably be in the midst of a depression today. our measures have led to a significant degree of accommodation. additionally, we managed to decouple our monetary policy from the united states in line with economic fundamentals. recently we have also seen some positive effects from the credit easing measures we took over the summer, but given the persistence of too low inflation for a prolonged period of time, the governing council decided to take additional measures. several economists question the effectiveness of qe in europe : banks are still not in good shape ; the euro area now has lower interest rates than the united kingdom and united states at the time ; and europeans have fewer financial assets. how do you answer that? qe comes in addition to all the other measures of monetary policy accommodation. qe is intended and expected, in particular to strengthen one transmission channel through which non - standard monetary policy measures work, the so - called portfolio rebalancing channel. this channel depends on the amount of liquidity that is created by the central bank. qe will reinforce this channel, which was judged to be too weak otherwise. do you have an estimate of the possible impact on inflation? the question

has said that time is of the essence for approaches at the european level to address aggregate demand, such as the juncker plan. we are still waiting for the results of a €315 billion plan that is leveraged 15 times. are you worried? it is not just about having a common european plan. it is also about asking countries to reprioritise their budgets in terms of public investment and taxes, which is admittedly not easy to do. should countries with fiscal space use it? you need to have fiscal space. when i look at aggregate values for the euro area, it is even better than those for the united states or united kingdom. it is not as if the euro area is in a danger zone. you cannot reason only on aggregate, because one also needs to assure fiscal sustainability in each country. moreover, the spillovers across the countries are relatively limited. so countries could use their fiscal space without compromising sustainability. there should be no illusion that a big demand shock will come from fiscal expansion. without that demand shock, either with public or private money, qe will not work, or will it? financial conditions are much easier and will support aggregate demand. also, structural reforms in a number of countries have started to produce positive effects. in addition, you have to consider the oil supply shock, which is positive for growth, provided that inflation expectations remain anchored. this is important. why? when inflation expectations are threatened by a shock, you may get negative impacts owing to possible delaying of consumption or investment. this is why qe comes at the right time. bis central bankers ’ speeches why doesn ’ t the central bank just print money and send a check to every household until september 2016. that would probably have an effect, wouldn ’ t it? this point is made in some academic circles, but how should this money then be distributed? it would be up to parliaments to decide how to distribute it, but then the ecb would be directly involved in the monetary financing of governments, which it is not allowed to do. wouldn ’ t it be possible to find a solution whereby the exact money that is printed finds its way to the private sector without affecting the budget directly? but what would you do? would you, for instance, give each person, rich or poor, a cheque for the same amount? this option, at least from what we have learned from others ’ experiences, also has a redistributive effect through a wealth effect :