The much maligned quanteuropeitative easing program set forth by the European Central Bank (ECB) on March 9, 2015 has been declared to be “undoubtedly effective”. This vote of approval was delivered no less than the current ECB chief Mario Draghi. Contrary to the skepticism than prevailed when it was announced earlier this year, Mr. Draghi extolled the program’s success whose positive effects continue to be felt today.

When it was launched, it was intended to facilitate the ECB to create electronic money which would be used to buy Eurozone government securities in a bid to boost business and consumer spending in the same economies.

While some people questioned if it was the best thing that the ECB could do to rescue flagging Eurozone economies, its success has vindicated Mario Draghi and the bank. The success was not without its precedence as the idea of quantitative easing has been quite successful with the Federal Reserve and the Bank of England from whom this idea was replicated. These central banks had this same program successfully initiated and conducted about 7 years ago today.

The bid to start the repurchasing of bonds worth €1 trillion from member states has been quite successful and the ECB chief heaped praise on the program and its attendant benefits one of which is to restore confidence in the Euro and the single currency zone idea.

Why quantitative easing was introduced.

In the months leading to the end of 2014, many economies experienced reduced growth with the likelihood of deflation threatening to cause havoc in Eurozone markets. What had had been projected to happen was that reduced prices of goods and services would not spur a growth in purchases as it would be normally expected. Rather, the public in Eurozone economies would have withheld their money as they betted on prices to fall further. This would have brought production to serious lows and unemployment to dangerous highs. This would have resulted in the rising of interest rates all over the Eurozone whose effects would have precipitated the troubles the economies were experiencing at that time. All this would have cast these economies and their populations in dire straits. The fact that most of these economies were still in the recovery period following the global financial crisis of the last decade.

The quantitative easing was introduced to save the situation. This became more urgent as conventional methods to mitigate this problem did not yield expected results.

Most of the program’s naysayers were skeptical because quantitative easing had never before been tried and tested on European soil. The plan which has generally been followed was to make the purchases of bonds from the secondary markets. The intention here was to put money back to the economies because this is where the investment funds and private banks had invested substantial amounts of their funds.

All member states involved

ECB had hoped to rope in all 19 member states to join in the program, an endeavor that contributed to its success despite Greece having to reach a new financing deal with the bank.

ECB had projected the QE to close in September 2016 after about 18 months with about €60 billion worth of bonds in public and private ownership being bought. Its phenomenal success and an unprecedented uptake have forced the ECB to schedule a program evaluation for December 2015. It is unlikely that the QE will reach its 18 month preset life as most of its projected achievements have been met already.

We are in front of a situation where the price trend is very weak, the macroeconomic environment is still uncertain,” said Mr. Draghi. “We must consider whether, with the weakening of the world economy, it is also effective in countering adverse pressures that could hinder a return to price stability over the medium term,” he added.