Fewer European institutions believe full quantitative easing (QE) is needed to help the European economy compared to their global counterparts, though expectations for
QE starting soon are high.
Twenty-two per cent of a sample of European-based investors believes that a sovereign QE programme will not be required at all, compared to 8% of those in North America and 13% based elsewhere in the world, according to a survey carried out in October but published today in ING Investment Management's Risk Rotation Survey.
The survey of 152 institutions also finds that over a quarter of the respondents believe the European Central Bank (ECB) will implement a programme of full QE in the Eurozone by the end of the first quarter this year and, overall, nearly two thirds of investors believe that the ECB will implement QE before the end of next year.
QE is an extraordinary economic policy measure involving the purchase of government bonds with the aim of increasing growth. Mario Draghi, president of the ECB, has indicated recently that a full programme of QE will be implemented.
Worries about the Eurozone continue to plague investors. One in eight respondents strongly believe that the Eurozone is heading for a deflationary environment similar to that experienced by Japan in recent years. A further 50% of respondents believe that this is "moderately likely", while only 23% of the panel believe that this will not be the case.
The future of Europe is amongst investors' primary concerns as they look ahead to 2015, with 60% of respondents citing a Eurozone crisis as a significant risk to their portfolios.
Valentijn van Nieuwenhuijzen, head of multi-asset strategy at ING Investment Management, says: "It is clear that there are very real concerns of a prolonged period of deflation which could – if investors are correct – twist Draghi's arm when it comes to implementing a sovereign QE programme in early 2015. Whether this will be realised remains to be seen, but without a more US-like flexibility in thinking and commitment to doing 'whatever it takes' to reach the desired objectives, it will be a long time before Europe can be considered healed."
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