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EU Central Bank Moves to Help Economy

Public Debt, Protests Made Economic News in 2011

Public Debt, Protests Made Economic News in 2011

The European Central Bank released a new round of measures to stimulate the economy, including lowering interest rates more.

The financial moves announced Thursday are the latest efforts to lift the economy of the 19-country bloc that uses the euro.

The European Central Bank, or ECB, cut all three of its main interest rates. The bank also increased its monthly financial asset-buying program.

Officials at the ECB hope banks will lend more money to businesses and consumers to help the region's economy.

The eurozone economy has had low economic growth for many years. Growth was 0.3 percent in the last three months of 2015.

The ECB’s cuts to three main interest rates it controls take effect on March 16. The rate for deposits with the central bank was cut further to negative 0.4 percent.

The negative interest rate means that depositors pay the bank instead of receiving interest payments. The unusual measure is meant to encourage banks to lend money rather than keep it with the central bank.

The ECB also said it would increase the purchase of bonds from 60 billion euros each month to 80 billion euros. The move puts more money into financial institutions that hold the bonds, putting more money into the Eurozone economy.

The measures are similar to tactics that the U.S. central bank used to boost the American economy during the 2008-2009 world financial crisis.

Since then, the U.S. economy has recovered. The unemployment rate now stands at 4.9 percent. However, central bank policymakers are dissatisfied with economic growth. Many workers are still looking for better-paying, full-time jobs rather than the part-time work they accepted.

However, slowing growth in China, the second-biggest global economy, is blamed for erratic stock market prices around the world. Chinese Premier Li Keqiang recently said China’s expected economic growth will be between 6.5 and 7 percent.

In the Eurozone, the jobless rate is down from its 2013 peak of 12.1 percent, but was still at 10.3 percent in January.

European Central Bank president Mario Draghi said the bank's new measures show "that we are not out of ammunition."

He said, "Rates will stay low, very low, for a long period of time and well past the horizon of our purchases" of assets.

But he added, "Taking into account the support of our measures to growth and inflation, we don't anticipate that it will be necessary to reduce rates further."

I’m Mario Ritter.

Ken Bredemeier reported on this story for VOA. Mario Ritter adapted it for VOA Leaning English. Kathleen Struck was the editor.

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Words in This Story

stimulus n. an economic measure meant to cause growth; something that causes something else to happen

bloc n. a group of people or countries linked by a treaty, agreement or common goals

asset n. a valuable person or thing; something owned by a person or company that has value

erratic adj. not regular, changing in ways that are not expected or usual

encourage v. to make a person or group more determined, hopeful or confident

anticipate v. to expect and look ahead to something

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