Michael Noonan (Limerick City, Fine Gael)
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Inflation in the euro area has been below levels consistent with price stability for some time and, in fact, moved into negative territory in December and has subsequently remained there in January and February. The fall in inflation combined with the fact that inflationary expectations have begun to drift downwards poses a risk to price stability.

As a result, and with policy rates effectively at zero per cent, the ECB announced an expanded asset purchase programme due to commence this month to include bonds issued by euro area central governments, agencies and European institutions. Under this expanded programme, the combined monthly purchases of public and private sector debt securities will amount to €60 billion. 

These monthly purchases are intended to be carried out from March 2015 until end-September 2016 and will, in any case, be conducted until inflation moves onto a path consistent with price stability. Price stability in the euro area, in turn, has been defined as annual inflation of close to but below 2 per cent (inflation being measured by the Harmonised Index of Consumer Prices). 

Monetary policy operations in the Eurosystem are normally carried out on a decentralised basis by the National Central Banks (NCB) and are recorded on the published balance sheets of the NCBs. For example, this applies to the regular main refinancing operations carried out each week. For the extended asset purchase program, decentralised implementation also applies for at least 80 per cent of purchases. This does not mean that quantitative easing is ineffective - the Eurosystem (consisting of the ECB plus the National Central Banks) is expanding its balance sheet with positive implications for inflation and economic activity.

Decisions on and the implementation of monetary policy in the euro area are entirely a matter for the Governing Council of the ECB, which is independent in these matters. I note, however, that there is  some mutualisation - the Governing Council decided that 20 per cent of the additional asset purchases under the programme will be subject to risk sharing. Moreover, the scale of the asset purchase programme is rightly seen as being the more important issue, as well as the  fact that it is potentially open-ended

In this regard, the Irish economy should benefit through a number of channels. For example, the economy should benefit directly through improved financing conditions for households and firms. In addition, the euro area is Ireland's single largest export destination; therefore, by supporting real economic activity and raising inflation in the euro area this will underpin export growth in Ireland. Monetary policy also works through the exchange rate channel the depreciation of the euro will provide a boost to Irish exports. Raising the rate of inflation in the euro area will also help Ireland achieve our twin goals of improving competitiveness and increasing tax revenue. So, over time, the success of quantitative easing will be seen in terms of stronger growth rates in Ireland and across the euro area, and inflation rates consistent with price stability.

So, in summary, my view is that quantitative easing is an effective policy response and will positively impact on inflation and economic activity in the euro area and Ireland. It is important that the monetary policy is supported by appropriate fiscal policies and that the necessary structural reforms continue to be implemented by Member States across the euro area.