All eyes turn to ECB as eurozone recovery stalls

With data on Thursday showing that the eurozone's tentative economic recovery is already stalling, eyes are once again back on the European Central Bank to come to the region's rescue.
Throughout Europe's seemingly chronic crisis, the ECB has never hesitated to take on the role of firefighter, even though it has never let up in its insistence that governments must do their homework, too, get their finances in order and push through -- potentially unpopular -- economic reforms.
Since November 2011, the ECB has cut its key interest rates six times, lowering its key refi refinancing rate from 1.50 percent to an all-time low of 0.15 percent in June.
It has also pumped unprecedented volumes of liquidity into Europe's banking system and bought up the sovereign bonds of the most vulnerable countries.
But despite such measures -- which took the ECB way out of its comfort zone and some critics say even breached parts of its mandate -- the recent tentative recovery has never appeared very convincing.
ECB chief Mario Draghi warned last Thursday that "general uncertainty" about the unwillingness of certain countries to press ahead with much-needed structural reforms was deterring investment in the region and thereby hampering recovery.
Such warnings appeared to become reality Thursday with the release of data showing that growth may have ground to a complete standstill in the second quarter, dragged down by its two biggest economies, Germany and France.
Eurozone gross domestic product (GDP) stagnated in the period from April to June, falling short of analysts' forecasts for minimal growth of 0.2 percent.
The unexpectedly low figure was mainly the result of a surprise 0.2-percent shrinkage in Germany, usually the reliable eurozone growth engine, and stagnation in an already fragile French economy.
- Calls for ECB action -
French Finance Minister Michel Sapin was quick to call on the ECB to act.
In a column for the daily Le Monde, he urged the central bank to "do its very utmost ... so that the risk of deflation will disappear and the euro find a more favourable level. "
He also called for an easing of countries' deficit-reduction targets to take the current zero-growth situation into account.
ECB watchers, however, believe the central bank has only limited options to jump-start economic activity.
With one of the ECB's key rates already in negative territory, additional rate cuts are unlikely, as even president Draghi himself intimated at the time of the last rate cut in June.
Among its anti-deflation armory, the bank has promised further liquidity operations, this time targeted so that banks lend the money on to companies and businesses.
Draghi has also said that the ECB is working on ways of reviving the market for asset-backed securities, an important source of financing for companies, possibly as part of a wider programme of quantitative easing or QE -- a policy measure practiced by other central banks around the world.
ECB watchers were sceptical whether the lower-than-expected second-quarter GDP figures would actually trigger new moves by the ECB in the near future.
"Judging by what Mario Draghi said last week, a soft second-quarter number was anticipated," said Deutsche Bank economist Mark Wall.
"But soft second-quarter GDP reinforces the ECB's forward guidance that policy will remain loose and could become looser," the expert said, predicting that the ECB could embark on some sort of QE programme in 2015.
And Natixis economist Patrick Artus was sceptical whether quantitative easing would actually prove very effective in the euro area, "given the low level of debt in the private sector, the lack of need on the part of banks for more liquidity and the already very low level of interest rates."