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| ECB in FFM (Photo credit: orkomedix) |
The question arises because the European Central Bank might have to lower interest rates further to revive growth. Business surveys this week are likely to show the euro zone economy remaining flat on its back in August after contracting by 0.2 percent in the second quarter.
But the ECB has already cut to zero the interest it pays banks on excess reserves. So driving the deposit rate into negative territory -- charging banks for the privilege of parking surplus funds -- would force lenders to weigh up the alternative of withdrawing cash and stashing it somewhere safe.
The idea sounds outlandish. Not so. ECB Executive Board member Benoit Coeure addressed it back in February. ... Continue to read.
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