Business

CAIRO — Egypt's central bank said on Monday it had devalued the Egyptian pound by 14.3 per cent to 8.95 to the US dollar to face "challenges" emerging from declining foreign currency inflows.

The bank has been battling an acute US dollar shortage over the past few months, with the local currency often trading at a rate of almost 10 pounds to a dollar on the black market.

The devaluation boosted sentiment on the stock market, with Egypt's benchmark EGX30 index rising 6.7 per cent to 7,003.91 in midday trading.

The Central Bank of Egypt said the move to devalue the pound was aimed at adopting a "more flexible foreign exchange policy" that would be driven by demand and supply.

"This will resolve the exchange rate irregularities, resulting in a more regular and continuous flow of foreign currency," it added in a statement.

The move would also help face "challenges from a noticeable decline in foreign currency inflows from tourism, direct investment and remittances from Egyptians living overseas".

Tourism, a cornerstone of the Egyptian economy and a key foreign exchange earner, has been severely hit by years of political turmoil triggered since the fall of longtime leader Hosni Mubarak in 2011.

It was dealt a body blow with the bombing of a Russian passenger airliner over the Sinai Peninsula on October 31 that killed all 224 people on board, mostly Russian tourists.

Revenues from tourism slumped 15 per cent year-on-year to $6.1 billion in 2015.

Egypt's foreign exchange reserves have fallen from more than $36 billion in 2010 to about $16 billion, despite some $20 billion given in aid to Cairo by its powerful Gulf allies.

But the bank said, the reserves would reach $25 billion by the end of 2016 on the back of "foreign investments and an increase in the competitiveness of the Egyptian economy".

Separately, Egypt's tourism minister said in an interview last week that Cairo plans to announce incentives for low-cost airlines such as easyJet and Germany's Air Berlin and Condor to help combat a slide in tourist arrivals.

"We already have a programme for tour operators that have flights, but we never had a programme for airlines alone," Hisham Zaazou told Reuters on the sidelines of the ITB travel fair.

Visitors to Egypt's beaches and ancient sites bring in business which accounts for 11.5 per cent of the country's economy.

The government has been offering tour operators an incentive of $30 per seat on aircraft on which between 60 and 90 per cent of seats have been filled.

Zaazou said it was not yet clear whether the new programme for commercial airlines would pay a certain amount per seat on planes or whether it could offer alternate incentives such as lower handling fees at airports.

"I will announce that [programme] very soon when I meet with everybody and listen to everybody," he said in the interview.

The number of tourists coming to Egypt fell around 6 per cent to 9.3 million in 2015 from a year earlier due to a drop following the plane crash in October, while receipts slid to $6.1 billion from $7.2 billion, he indicated.

That is a far cry from around $12.5 billion in annual receipts Egypt earned before the 2011 uprising which scared away tourists and foreign investors.

Zaazou said arrivals in the first couple of months of 2016 were down 30 to 40 per cent compared with a year earlier and said he did not expect to see a significant improvement before the second half of the year.

"If we can stabilise the [2016] number around where we were last year, around 9 million, I will be happy. We can then enter 2017 on better grounds and make up for lost time," he added.

LONDON — The Organisation of the Petroleum Exporting Countries (OPEC) on Monday predicted global demand for its crude oil will be less than previously thought in 2016 as supply from rivals proves more resilient to low prices, increasing the excess supply on the market this year.

OPEC's monthly report contrasts with that of the International Energy Agency (IEA), which on Friday said producers outside OPEC were cutting production by more than it had expected.

Saudi Arabia in 2014 led a change in OPEC strategy to defend market share instead of cutting output to support prices, hoping to slow growth in rival supplies such as US shale oil. The move accelerated a collapse in prices, which hit a 12-year low of $27.10 in January.

The price drop has started to slow the development of relatively expensive supply sources such as shale and forced companies to delay or cancel billions of dollars worth of projects, putting some future supplies at risk.

In the report, OPEC said it still expected supply from outside the group to fall by 700,000 barrels per day (bpd) this year. But it revised up the absolute level of non-OPEC supply in 2015 and 2016, and said producer efforts to maintain output made its 2016 forecast more uncertain.

"There has been a reduction in production costs, mainly in the US, as well as increased hedging, with producers choosing to produce with losses rather than stopping production," OPEC indicated. "This has caused the non-OPEC supply forecast in 2016 to become more uncertain."

As a result, OPEC now expects the global demand for its crude to average 31.52 million bpd in 2016, down 90,000bpd from last month's forecast.

The group pumped 32.28 million bpd in February, the report said citing secondary sources, down about 175,000bpd from January, mainly due to outages in Iraq and Nigeria.

Saudi Arabia told OPEC it kept output in February steady at 10.22 million bpd, after the top oil exporter struck a preliminary deal with fellow OPEC members Venezuela and Qatar, plus non-OPEC Russia, to freeze output.

Iran, which wants to regain market share after the lifting of Western sanctions on Tehran rather than freeze output, told OPEC it raised supply to 3.39 million bpd, about 250,000bpd more than the secondary sources' estimate.

The report indicates supply will exceed demand by about 760,000bpd in 2016 if OPEC keeps pumping at February's rate, up from 720,000bpd implied in the previous report.

The IEA said the oil price may have finally bottomed out after an unprecedented drop over the past 18 months, noting oil's "remarkable recovery" over recent weeks.

Recent sharp gains in the oil price, taking it to around $40 per barrel now from $28.50 in mid-January, do not necessarily mean that the worst is over, the IEA added in its monthly oil market report.

"Even so, there are signs that prices might have bottomed out," it continued.

Oil had seen a dramatic fall since trading above $110 in mid-2014 to lows seen in January of this year, before staging a modest recovery to current levels.

CMC Markets analyst Jasper Lawler credited the IEA's outlook with sparking the oil price rise by calling for "a possible bottom".

The report was "bullish", added DNB Bank.

"Undoubtedly, one of the reasons for the price strength is the monthly report on global supply/demand published by the IEA this morning," commented oil brokers PVM.

But there is a long way to go before supply and demand find a real balance, probably in 2017, the IEA said in its report.

"For prices there may be light at the end of what has been a long, dark tunnel, but we cannot be precisely sure when in 2017 the oil market will achieve the much-desired balance," it added.

Among factors supporting higher prices are talks among producers launched by Saudi Arabia, Venezuela, Qatar and Russia to freeze production which the IEA said amount to "a first stab at coordinated action that is intended to stabilise prices" with the presumed aim of pushing oil up to $50 a barrel.

The outcome of negotiations is, however, uncertain and a big supply overhang in the oil market means it would have little impact in the months ahead.

"Later this month some oil producers are expected to meet to discuss a possible output freeze. We cannot know what this might be and in any event it is rather unlikely that an agreement will affect the supply/demand balance substantially in the first half of 2016," the report said.

'Market forces working their magic' 

Among other factors keeping a lid on oil supply, Iran's return to the market following the lifting of Western sanctions in January has been "less dramatic than the Iranians said it would be", the IEA added.

"Provisionally, it appears that Iran's return will be gradual," continued the 29-nation agency that provides analysis on global energy markets.

Iran's Oil Minister Bijan Zangeneh said earlier this month that Iran was pumping 400,000bpd more than a year earlier, which is short of the 500,000-barrel increase Iran announced in January.

The IEA mentioned supply disruptions in Iraq, Nigeria and the United Arab Emirates, steady demand for oil and recent weakness of the dollar as other reasons favouring expectations of a price upturn.

Also, there are signs that high-cost producers, including of US shale oil, are lowering output as they can't cover their costs because of oil price weakness.

Consequently, the IEA has lowered its output target for the US, Brazil and Colombia.

"There are clear signs that market forces, ahead of any production restraint initiative, are working their magic and higher cost producers are cutting output," it said.

Global demand for oil is expected to grow by 1.2 million bpd this year, unchanged from the IEA's previous estimate.

But the agency said that risks are on the downside, with demand in the US expected to be flat and in China below that seen in recent years.

Most oil demand growth this year will come from India, smaller Asian countries and the Middle East, the IEA indicated.

While many market analysts agreed with the IEA's oil price assessment, Goldman Sachs this week gave a dissenting view.

"We maintain our near-term view of a trendless oil market with substantial volatility" between $40 and $20 per barrel, Goldman said.

AMMAN — There are several fields of cooperation between Jordan and the United Arab Emirates (UAE), especially at the economic sector which witnessed the signing of bilateral agreements and memoranda of understanding, Industry, Trade and Supply Minister Maha Ali said on Monday.

At a meeting with Maj. Gen. Abdul Razaq Obeidli, chairman of the Emirati association for intellectual property, and an accompanying delegation, Ali highlighted the solid relations between Jordan and the UAE which became a model for Arab-Arab cooperation at all levels.

She also stressed the importance of cooperation in the intellectual property sector, especially in the fields the ministry is tasked with, such as trademarks and patents, in addition to training and exchanging expertise.

Obeidli, who is also assistant general commander of Dubai police for quality and excellence, expressed keenness to develop cooperation with the Kingdom in the intellectual property sector through benefiting from both countries' expertise.

AMMAN — Apartment sales increased since the beginning of 2016 in terms of number of transactions and areas, the Department of Land and Survey (DLS) said on Sunday. Sale transactions in the Kingdom in the first two months of this year increased by 9.3 per cent to 5,279 compared to 4,831 in the same period of 2014, according to the DLS.

Data also showed that sales of apartments less than 120 square metres increased by 9 per cent to 1,885 transactions by the end of February compared to 1,729 ones in the same period of 2014.

Also by the end of February, sales of 120 — 150 square metre apartments increased by 10 per cent, reaching 2,036 transactions compared to 1,856 ones in the same period of 2014. Sale transactions for apartments of more than 150 square metres totalled to 1,358 in February, compared to 1,246 at the end of the same month in 2014.

A total of 728,000 square metres of apartments were sold in January and February, registering an 18 per cent increase compared to 618,000 square metres sold in the same period in 2014.  

AMMAN — Italian President Sergio Mattarella has bestowed on Amman Chamber of Commerce (ACC) President Issa Murad the Order of the Star of Italy, an ACC statement said on Sunday.

Italian Ambassador to Jordan Giovanni Brauzzi presented Murad with the Order last Wednesday during a ceremony in recognition of Murad's role in enhancing Jordanian-Italian relations.

During the ceremony, attended by Industry, Trade and Supply Minister Maha Ali, Amman Mayor Aqel Biltaji and senior dignitaries and diplomats, Murad expressed gratitude and stressed the depth of bilateral relations, especially those bonding the ACC and the Italian embassy. 

The ACC president said Italian products enjoy the trust of Jordanian consumers, and called for holding regular commercial exhibitions between the two countries, in order to exchange expertise and get to know the national products of each country. 

Murad also talked about the results of the London donor conference and highlighted His Majesty King Abdullah's efforts to improve Jordan's chances to benefit from it despite challenges and hardships facing the Kingdom's national economy from the repercussions of the Syrian crisis.

Brauzzi voiced his country's appreciation for the economic role Murad played in improving bilateral economic relations.

SINGAPORE — Yo-yoing currencies, spiralling inflation and plunging commodity costs are shaking up the rankings of the world's most expensive cities, with Tokyo sliding and Shanghai shooting up.

Political uncertainty and global economic volatility have up-ended the list of pricey places, according to a cost of living index compiled by the Economist Intelligence Unit (EIU).

"Only eight cities of the 133 surveyed have seen their ranking position remain unchanged in the last 12 months," the EIU said.

Perennially expensive Japan, whose capital was the planet's costliest city for much of the last two decades, has dropped against global peers, thanks to a much weaker yen.

Tokyo, in 11th place globally, is now only as expensive as Shanghai, where rising prices are hitting consumers in the pocket.

The collapse of the Brazillian real has sent the relative cost of living in Rio De Janeiro down 52 places to 113th, making it half as costly as New York.

"In nearly 17 years of working on this survey I can't recall a year as volatile as 2015," said Jon Copestake, an EIU survey editor.

"Falling commodity prices have created deflationary pressures in some countries, but in others, currency weakness caused by these falls has led to spiralling inflation," he added.

Singapore retains the top spot in the list, thanks chiefly to the eye-watering cost of owning a car in the city state, with Zurich and Hong Kong tied in second place.

Hong Kong's currency peg to the US dollar was propelling the former British colony up the rankings, the EIU said, with the value of the greenback pushing New York into the top 10 and to its highest place since 2002.

Asian cities tended to be the priciest locations for general grocery shopping, with Seoul the most expensive for everyday food, while recreation and entertainment was a big drain for European locations.

Resource-backed currencies like the Australian dollar also weakened because of lower commodities demand from China, edging cities like Sydney and Melbourne out of this year's top 10 list.

List of the 10 most expensive cities in the EIU survey:

 1- Singapore
 2- Zurich
 3- Hong Kong
 4- Geneva
 5- Paris
 6- London
 7- New York
 8- Copenhagen
 9- Seoul
10- Los Angeles

AMMAN — Achieving sustainable economic growth and empowering small- and medium-sized enterprises (SMEs) are among top national priorities, Central Bank of Jordan (CBJ) Governor Ziad Fariz said on Saturday.

At a workshop organised by the Italian embassy in Amman in cooperation with the European Bank for Reconstruction and Development (EBRD), CBJ and the Association of Banks in Jordan, Fariz underlined the role of SMEs as they constitute some 95 per cent of the national economy, supporting growth and development, besides helping to curb unemployment and poverty.

SMEs contribute to employing around 70 per cent of the private sector's workforce and account for some 40 per cent of the gross domestic product, he indicated.

Fariz spoke about financing SMEs in Jordan and government and CBJ endeavours in enabling them reach funding resources. 

The governor said, “the biggest challenges facing SMEs include providing guarantees, lack of credit information and  insufficient knowledge of bank administrations in such kind of financing.”

He added that the government and CBJ launched financing programmes in cooperation with international donors, and established a credit bureau, a national fund for financing start-ups and another fund for guaranteeing  loans. 

Italian Ambassador to Jordan Giovanni Brauzzi said enhancing the SMEs sector in Jordan through expanding the scope of  financing is considered a main pillar in the Jordanian development strategy.

Like Jordan, the Italian economy relies on SMEs which form 90 per cent of the economy and play a vital role in the economic growth and the country's development process, Brauzzi added.

Economic similarity between Italy and Jordan, along with "distinguished" political relations, encourages Italy to support the Kingdom, he added, mentioning the $400 million Italy announced at the London donor conference  to help Jordan and Lebanon respond to the Syrian refugee crisis.

EBRD Head of Office in Jordan Heike Harmgart said helping SMEs reach financing sources is a strategic concern for the bank which considers the sector as the backbone of any economy.

AMMAN — Two insurance companies completed last week  the sector's first merger in about 25 years.

Ali Wazani, chief executive officer of First Insurance, said merging procedures with Yarmouk Insurance started in April 2015, and needed 11 months to complete, describing the period as "fast", especially the two companies worked in different categories.

He remarked that Yarmouk did not practise life insurance and that First Insurance followed Islamic principles.

"At the beginning of the merging process, we had to reclassify Yarmouk into Islamic insurance so the merger can be completed," Wazani added, noting that the capital of the new merged company stands now at around JD28 million.

He promoted First Insurance, indicating that since it was established in 2008, the company's market share increase from 0.91 per cent to 6.48 per cent in 2015.

"With this percentage, the company last year ranked fourth among insurance companies in the Kingdom," said Wazani, who is also chairman of the Jordan Insurance Federation.

The investment council in late 2015 decided to offer incentives to insurance firms willing to merge, hoping to salvage financially troubled companies and boost the sector’s performance. 

As per the incentives, the government provided exemptions from income tax for three years and exempted the company from fees for ownership transfer and capital raise, said Ashraf Bsiso, chairman of the new First Insurance.

"These exemptions will have a positive impact in stimulating the economy on the medium and long terms," added Bsiso, who is also the representative of the Bahraini Solidarity Holding which acquired some 71 per cent of the new merged company.

RIYADH — Saudi Arabia's plans for economic reform foresee winding down “jobs for life” in an inefficient state bureaucracy and replacing them with new careers in a dynamic private sector.

That's the theory, at least. But in the short term, there is a problem: 2016 is set to be an abysmal year for job creation. 

Public spending is being slashed and growth forecasts for oil and non-oil portions of the private sector are gloomy.

A tough market awaits first-time job seekers in the world's largest oil exporter, where "employment week" fairs are currently helping to pitch some 400,000 graduates to prospective employers.

For Nezzar, 26, who will finish a master's programme in computer systems at a US university in May, the scale of the problem became apparent when he received a phone call from home in Jeddah. 

There were no jobs this year, his father told him, offering the advice: "'Don't come home'."

Saudi net employment rose by only 49,000 in 2015, its slowest annual increase since records began in 1999. 

That is far short of the 226,000 jobs that the economy must create each year to accommodate new entrants to the labour market, according to a February report by Riyadh-based Jadwa Investments.

The number of working-age Saudis outside the labour force also rose by 85,000, most of them young people, said the Jadwa report. 

That was nearly double the number entering the labour force, representing the first drop in the participation rate since 2009.

"Government hiring has slowed down due to austerity measures, while at the same time the private sector has started to stagnate," indicated Steffen Hertog, an academic at the London School of Economics. 

"There's just a shortage of jobs," he said.

Signs of strain

In a country where nationals generally count on steady government paychecks to support them, Saudi citizens have so far been largely sheltered from the effects of prolonged low oil prices.

Even as the oil slump pushed the kingdom into a 367 billion-riyal ($97.89 billion) deficit last year, hefty public spending kept government salaries flowing and propped up the non-oil private sector, which depends heavily on state subsidies and contracts. 

But as the economy has slowed and the government has begun tightening its purse strings, signs of strain in the labour market have started to show.

The government hired 10,000 fewer Saudis in 2015 than it did the year before, adding only 93,000 new employees to the public payroll compared to 103,000 in 2014.

Meanwhile, the number of Saudis employed in the private sector in 2015 fell for the first time since the Nitaqat labour market reforms began in 2011, introducing targeted hiring quotas for private companies to make their staffs more Saudi.

Even as the non-oil economy continued to grow overall, prompting companies to add some 369,000 non-Saudis to their payrolls in 2015, expansion slowed to its lowest rate since 2009.

They hired 43,000 fewer Saudis than they did the year prior.

A challenging year

Hiring prospects are likely to shrink even further in 2016, as proposed government spending cuts totalling some 135 billion riyals ($36.01 billion) take their toll.

The government's 2016 budget included explicit pledges to rein in state spending on "recurring expenditures" like salaries and benefits, which means curtailed public sector hiring.

Economic growth is widely expected to slow, with the International Monetary Fund projecting gross domestic product (GDP) growth of 1.2 per cent, only slightly lower than the central bank's own expectations of around 2 per cent.

Professionals surveyed by online job portal Bayt.com expressed diminished expectations: 65 per cent expected their companies to hire new employees in a year's time, down from 78 per cent last August.

"This is going to be a challenging year for employment. Employment generation in an economy slowing down is very difficult," indicated  Said Al Sheikh, the chief economist of NCB Bank.

Some economists, including Al Sheikh, expect to see increased pressure from the ministry of labour for "job substitution", in which companies are compelled to swap out cheaper foreign workers for Saudis.

But upheaval in the workforce would place additional pressure on an already wobbly private sector, risking an even sharper slowdown.

Even then, no feasible amount of substitution would accommodate the hundreds of thousands of young Saudis about to start the job hunt. 

Separately, the point man for a wide-ranging revamp of Saudi Arabia's economy to cope with an era of low oil prices is  a former food executive and mayor of Jeddah with a reputation for pushing through politically sensitive reforms.

Economy and Planning Minister Adel Fakieh faced down strong opposition from the business community as labour minister in 2010-15 when he established quotas on the number of foreign workers companies could hire to boost local employment, the kingdom's biggest economic reforms in years.

With his troubleshooting reputation established, Fakieh was made acting health minister in 2014 to handle a major public health crisis when Middle East Respiratory Syndrome broke out.

Now he is being asked by Deputy Crown Prince Mohammed Bin Salman to develop reforms aimed at ending the kingdom's vulnerability to an unpredictable oil market.

Saudi Arabia's future stability, and the continued rule of the Al Saud family, rest upon its ability to transition away from the economy's almost total reliance upon income from crude exports, something that has eluded previous reform efforts.

A super committee on the economy led by Prince Mohammed is working with Fakieh's economy and planning ministry to develop a national transformation plan that may face opposition from business and bureaucracy when it is released, probably in May.

Fakieh's track record of effecting change in seemingly moribund situations and his skill as a communicator are widely admired by people who have worked with him, both in government and from his private sector days.

"He is very very good socially and at getting people to agree. He's witty. He's also quite sharp. He gets things done to an extent," said a person who worked with him and asked not to be named because he had signed a non-disclosure agreement. 

"He's curious. He reads about behavioural economics, about international policy research," he added.

He also makes extensive use of Western consulting firms, including McKinsey & Co., Boston Consulting Group, Oliver Wyman and Bain & Co., several people who have been involved in economic planning under the new administration said.

Structural change

Unlike in past administrations, when reforms were decided by a clutch of Al Saud members and enacted by the finance ministry and central bank, Prince Mohammed now sets policy in his super-committee, the Council for Economic and Development Affairs.

The economy and planning ministry, once regarded as the junior partner in government policymaking, works under Fakieh like a secretariat to the council, taking its ideas and fleshing them out into complex proposals.

So central has Fakieh become since King Salman, Prince Mohammed's father, took power in January 2015 that his department drew up significant parts of this year's budget, a responsibility that has always belonged to the finance ministry.

When the 2016 budget was unveiled to media on a glitzy television stage decorated with pictures of Riyadh's modern skyline in December, it was Fakieh, rather than Finance Minister Ibrahim Alassaf, who presented the macro-economic figures.

The budget included a general policy statement pledging large-scale reforms including privatisation, the reduction of dependence on oil and subsidy reform. That night, petrol prices were raised for the first time in years.

A performance management body to ensure government departments are implementing policy goals was announced in October and key performance indicators to monitor government departments are being developed, both orchestrated by Fakieh at the prince's request.

The economy and planning ministry did not immediately respond to requests for an interview with the minister or members of his team.

Business elite

The Fakiehs owned a Mecca trading house and married into the Al Sulaiman family, whose patriarch Abdullah, Riyadh's first finance minister, built its bureaucracy in an age when national reserves were kept in a locked chest under the king's bed.

Fakieh was born in 1959, Asharq Al Awsat newspaper, owned by the Al Saud, reported when he was made a labour minister in 2010.

His wife, Maha Fitaihi, is a prominent businesswoman in her own right and founder of the kingdom's Girl Guides, a mark of Fakieh's membership of a business elite that has often pushed socially progressive policies while backing the Al Saud.

The Fakieh Group owns subsidiaries including a major poultry business, a nationwide restaurant chain, Jeddah hotels and tourist attractions, private schools and a land development in Mecca.

It was as an executive for other companies that the economy and planning minister made his name during the 1990s, first at Bank Al Jazirah and then at Savola, the kingdom's biggest food company.

As labour minister he introduced the Nitaqat programme, taking an ineffective and toothless quota system and refining it to take account of different sectors and company sizes. He was also given more scope to punish delinquent firms with fines.

Companies hated it, complaining of increased costs and lower productivity. An accompanying crackdown on the black market in foreign labour in 2013 led to over a million people leaving the country. 

Central bank data showed the number of Saudis with private sector jobs more than doubled to 1.54 million from 2010-14.

Critics say he failed to institute deep-set change in either the labour ministry or health ministry, however, preferring the quick fix of setting up alternative departments.

"He starts too many things at once and promises too many things to people. He's delivered a lot of things at the labour ministry, but hasn't fixed it. It's still a bit of a mess," said the person who worked with him.

While the long-term success of reforms will probably ultimately hinge on Saudi Arabia's ability to improve the quality of its bureaucracy, the leadership may be betting that getting change started is the more urgent priority.

"He is seen by the top leadership as a doer," said John Sfakianakis, a Riyadh-based economist.

"Whether you think he was right or wrong on the labour reforms, he delivered. Of the group of senior ministers at that time, he was the only one who was delivering."

FRANKFURT — European Central Bank (ECB) chief Mario Draghi unleashed a bold easing package on Thursday, cutting rates and expanding asset buys, but undid the very stimulus he hoped to achieve by suggesting there would be no further cuts.

That comment drove the euro to unwanted gains against the dollar and prompted criticism from some that Draghi, who already in December disappointed markets by under-delivering, had once again botched his communication.

Seeking to resurrect corporate activity and investments, the ECB said it would start buying corporate debt and even offered to pay banks for lending to companies in the ailing euro area in a bid to kickstart growth and stave off the threat of deflation.

The bank has sought for three years to push inflation up to its target level, spending 700 billion euros on asset buys in the past year alone. But it has been to no avail amid weak investment, high unemployment, high debt and productive slack in the economy.

Draghi announced that ECB staff had slashed its inflation and growth expectations, predicting that even with fresh stimulus, price growth will not reach its target for years to come and growth will slow.

Markets initially cheered the package but reversed course after Draghi hinted the ECB was done cutting rates and ruled out a tiered deposit rate structure — a system of multiple rates already used in Switzerland and Japan to encourage lending to companies, while also punishing banks that hold too much cash.

"Rates will stay low, very low, for a long period of time and well past the horizon of our purchases," Draghi told his regular post-Council news conference.

"From today's perspective and taking into account the support of our measures to growth and inflation, we don't anticipate that it will be necessary to reduce rates further," he said.

The euro reversed course on Draghi's comments and firmed close to 1.5 per cent. Eurozone stock fell by 1.5 per cent and euro area bond yields soared — all effectively tightening monetary conditions and so going counter to Draghi's aims.

Delivering above expectations, the ECB raised monthly asset buys to 80 billion euros from 60 billion euros and cut its main refinancing rate to zero from 0.05 per cent. It also cut its deposit rate by 10 basis points to -0.4 per cent and shaved the marginal lending rate, used by banks to borrow from the ECB overnight, to 0.25 per cent from 0.3 per cent.

"Where the ECB disappointed was on the forward-looking signal on rates and on its inflation target," JPMorgan analyst Greg Fuzesi said, arguing that the ECB should have argued for tiered deposit rates as a way to protect bank earnings while giving the ECB room to cut further.

"This is disappointing as the ECB could have added a different spin, emphasising that a tiered deposit rate system limits the direct cost to banks and that the targeted long-term refinancing operations (TLTRO) help banks even further by providing very cheap funding," Fuzesi added.

Misfire?

Nicholas Spiro of Lauressa Advisory consultancy headlined his commentary "Draghi misfires his bazooka".

"For a central banker who prides himself on his verbal intervention skills, it beggars belief that Mr Draghi would commit the faux pas of ruling out further cuts in interest rates any time soon," he said.

The ultra cheap four-year TLTRO loans would be offered at an interest rate of zero, but banks lending out more than a prescribed amount will get a reduction worth up to the deposit rate, currently at minus 0.4 per cent.

"A bank that is very active in granting loans to the real economy can borrow more than a bank that concentrates on other activities," Draghi noted.

Sceptical Germans, the biggest opponents of ECB policy easing, quickly jumped on Draghi, arguing that the side effects of the stimulus could spoil the gains.

"The ECB's decisions are a heavy burden for savers and insurers," said Markus Soeder, the minister for finance in Bavaria, one of Germany's biggest states.

"They are a guide for financial speculation. The average wage earners and savers will have to pay for the European monetary policy. Under Mario Draghi, the ECB is more Wall Street than Bundesbank," he added.

Draghi answered such criticisms partly in German, arguing: "Suppose we had embraced the 'nein zu allem' ['no to everything'] policy strategy? We deem that the counterfactual would have been a disastrous deflation."

But he acknowledged the limitations of negative rates and said any future moves would likely have to focus on other, non-conventional measures.

"Does it mean that we can go as negative as we want without having any consequences on the banking system? The answer is no," he said.

The ECB's move came after the Group of 20 of the world's major economies last month agreed they need to look beyond ultra-low interest rates and printing money to shake the global economy out of its torpor. 

The US Federal Reserve, the Bank of Japan, Bank of England and Swiss National Bank are all set to meet next week.