Enda Kenny: ECB should be independent of political pressure in stimulus move

The Taoiseach, Enda Kenny, has said he would "like to think" the European Central Bank could be independent of pressure from euro zone member states when it is reaching policy decisions.

Addressing an event at the World Economic Forum in Davos, Mr Kenny said it remained unclear how the ECB would act today, but added that anything it does to help with price stability “can only be good for Europe”.

Most observers expect ECB president, Mario Draghi, to announce a landmark stimulus programme for the euro zone economy early this afternoon.

"We don't actually know the outcome of the decision to be made by the ECB yet, but it is an independent entity within the European institutional framework. And its mandate is to deliver on price stability, and in delivering that mandate that can only be good for Europe, " Mr Kenny said.

Asked about German pressure on the ECB in relation to its plans for quantitative easing, Mr Kenny emphasised the bank’s independence.

“I’d like to think that the ECB could be independent of political pressure in delivering on the mandate which it has been given in its independence by the treaties,” he said.

Earlier, former US Treasury Secretary Larry Summers warned that quantitative easing will not be a "panacea", and that it will be "less impactful" than the bond-buying programme launched by the US.

Also speaking at the World Economic Forum in Davos, the Harvard economist said that it would be a mistake to suppose that the bond-buying programme expected to be announced by the European Central Bank today “will be sufficient.”

“I am all for European QE, but the risks of doing too little far exceed the risks of doing too much. Deflation and secular stagnation are the macro-economic threat of our time. That said, I think it is a mistake to suppose that we is a panacea or that it will be sufficient.

Outlining the differences between the quantitative easing programme under consideration by the ECB and the US' bond buying-programme, Mr Summers said: "there is every reason to expect that QE will be less impactful in a context like the present than it was in the context of the United States. "

He pointed out that the US began its quantitative easing programme when long-term interest rates in the 3 per cent range, not the 40 basis point range currently in place. The US programme functioned well because it was unexpected rather than widely predicted, while the US programme worked through a capital markets channel, whereas a large part of lending in Europe takes place though banks.

“We’re all for Quantitative Easing. It’s necessary but it’s not sufficient,” he said.

Speaking in this morning's panel discussion, IMF director Christine Lagarde said that recent developments in the markets showed that "to a point you can say that it [quantitative easing] has already worked."

Ms Lagarde said she expects the U S Federal Reserve to raise rates this year. "The Fed is probably going to raise rates this year. Our expectation is more likely mid year than end of 2015".

On the euro zone economy, Ms Lagarde said that politically, the euro area is “not yet at the political stage” of supporting a common fiscal policy. “More progress has to be made towards fiscal union. There is huge potential... but to think of it as one single economic unit, unfortunately it is not yet the case. “

Referencing Ireland as a country that has successfully improved its economy, Ray Dalio, chairman of Bridgewater Associates noted that there was twice the rate of entrepreneurship in the United States than in Europe. He said that political extremism could be the "biggest threat to the euro" this year.

"If the moderates of Europe do not get together and change things in a meaningful way, I believe there is a risk that the political extremists will be the biggest threat to the euro. Youth unemployment in Italy and Spain is 50 % - a lost generation - there needs to be forceful action, or else there will be political extremism." He said that a victory for Spanish radical left party Podemos in this year's Spanish elections "would undermine productivity" in Spain.

“Forceful quantitative easing and forceful structural reforms are what is required” in Europe, he said.