RENEE MONTAGNE, HOST:
OK, over in Europe there's been a lot debate on what to do about the troubled currency. And today the European Central Bank announced a new plan to bolster the euro at a meeting in Frankfurt. Bank president Mario Draghi is under immense pressure to prevent the collapse of Europe's monetary union. The bank did not lower interest rates, as some investors hoped, but did unveil steps to ease the eurozone's debt crisis. NPR's Jim Zarroli is in Germany, following the events, and he joins us now. Good morning.
JIM ZARROLI, BYLINE: Good morning, Renee.
MONTAGNE: So, European Central Bank President Mario Draghi has said that he will not let the 16 nation eurozone fall apart, he'll do anything it takes to keep it together. So what is the bank going to do?
ZARROLI: Well, what he announced this morning is basically what he has, sort of, been hinting about. He's - he's - the ECB is going to buy government bonds of up to three years duration from some of the weaker, indebted countries like Italy and Spain. As you know, these countries have what Draghi says are disproportionately high interest rates. It's made it a lot harder for them to pay off their debts. The ECB has a lot of money and the idea is that the ECB will go out into the markets, buy up these bonds, and that will help bring up interest rates. And the important thing is, Draghi isn't putting a limit on how much bond buying the ECB is willing to do. So he's, sort of, sending a message to the markets, you know, we're ready to stand behind these governments, we're going to step in as needed, we'll keep coming back. The idea is this will stabilize the markets. You know, once investors know that a central bank is determined to keep interest rates low, then interest rates tend to stay low. The question is whether this goes far enough. But, of course, we'll have to see.
MONTAGNE: Well - but Jim, why not just lower interest rates if that's what they want?
ZARROLI: Well - I - they do have the ability to lower interest rates a little bit more. They could've done that today. I think the feeling was - you know, it wouldn't really help the economy that much. Just as in the United States, you know, there's - there's a limit to how much affect that will have on economic growth. I mean, this is something different. This is aimed at helping the individual governments that have particular problems with indebtedness, to be able to, sort of, dig out of the debt hole a little bit more easily.
MONTAGNE: Now, part of the reason we're even talking about this, is that it's considered a make or break moment for the Central Bank and the eurozone. How far will this plan go to address the underlying problems of eurozone countries, especially those weaker ones you mentioned?
ZARROLI: Well, Draghi was pretty clear about that this morning. He says, you know, Europe has huge problems, it's basically in a recession - economy is shrinking, unemployment is very high, especially in some countries. And he says it's going to take a long, long time to fix that. It's not going to change overnight. But what he is doing will, at least, help address the debt problem. You know, one thing that happens when you're in a recession is that tax revenues fall and it becomes harder for governments to pay off their debt. That's, to some extent, what's happened in the United States. Investors see that, they lose confidence in some governments, it can drive up interest rates. You have a vicious cycle. Now, the plan that Draghi announced today, is, sort of, intended to try to stop that. At least to the extent that it can.
MONTAGNE: And leading up to this announcement, the Central Bank was taking a lot of heat, interestingly, from both sides. Some thought he - it shouldn't be stepping in at all. Others criticizing the bank for waiting too long to address the crisis. What about that?
ZARROLI: Yeah, um, Germany, in particular, has been very opposed to this, worried about inflation. The head of the Bundesbank even threatened to resign over it. Germany thinks that the ECB shouldn't be doing this, that it should be focused on price stability - or, at least, some Germans think that. And Draghi says the ECB has - has a backstop in place to control inflation if that's necessary. Jim, thanks very much.
MONTAGNE: Jim, thanks very much.
ZARROLI: You're welcome
MONTAGNE: That's NPR's Jim Zarroli speaking to us from Berlin. Transcript provided by NPR, Copyright NPR.
