RIGA The European Central Bank's money printing scheme is not enough on its own to lift growth because banks in the euro zone are not transmitting cheap credit to the economy due to heightened uncertainty, Governing Council member Ilmars Rimsevics said on Friday.
"It is crucial to understand why commercial banks are not providing sufficient credit to the real economy and why business does not stand in line at banks to borrow money," said Rimsevics, considered a moderate conservative on the ECB's rate setting council.
Rimsevics' comments echo the concerns of hawkish policymakers who argue that after nearly two years of asset buying, the ECB's money printing program is losing its effectiveness, providing waning benefits at increased risk. They say the bank should step back and ask governments to carry more of the burden.
The ECB trimmed its asset buys in a surprise move on Thursday but promised a protracted stimulus, promising to keep borrowing costs depressed for a long time, a dovish message that foreshadows ECB stimulus for years to come.
Still, even after 1.5 trillion euros of asset buys, credit growth is lackluster, raising questions about the effectiveness of the scheme, known as quantitative easing.
"The biggest problem in my opinion is uncertainty about the future, uncertainty about whether taxes will be raised, uncertainty about the situation in Europe and its neighbors," said Rimsevics, Latvia's central banks governor.
"In these circumstances, companies are concerned about their future and do not invest, so export and credit are stagnating."
(Reporting by Gederts Gelzis; Writing by Balazs Koranyi; Editing by Richard Lough)