The European Central Bank yesterday launched an unprecedented bond-buying exercise aimed at reversing deflation and boosting the eurozone economy.

Although Malta was not in need of such an intervention as its economy is growing and inflation is in check, the move, technically known as quantitative easing, was welcomed by economists as it could boost growth.

The ECB’s long-anticipated decision was announced by its president, Mario Draghi, following a meeting of the governing council that includes Malta Central Bank Governor Josef Bonnici.

Mr Draghi said the ECB would buy government bonds between this March and the end of September 2016 pumping about €60 billion a month into the eurozone’s economy for a total of more than €1 trillion. It was also announced that eurozone interest rates would remain at a record 0.05 per cent, as they have been since last September.

The ECB’s unprecedented intervention mirrors what has already been done successfully both in the US and in the UK.

Indicators show the eurozone is experiencing deflation, seriously creating the danger that growth would stall as businesses and consumers keep their wallets closed waiting for prices to continue to fall.

Through its latest exercise, the central bank is aiming to boost spending by further lowering the costs of borrowing, encouraging banks to lend and eurozone businesses and consumers to spend.

Contacted by Times of Malta, economist Alfred Mifsud welcomed the move though he deemed it a bit late in the day. “This should have been implemented a long time ago. However, the ECB had a lot of resistance from certain member states, particularly Germany.”

Asked how the move would affect Malta, Mr Mifsud said although the island was not facing the same economic problems as other members of the eurozone, a boost in the EU economy would have a positive impact.

“If the EU economy is given a boost and more demand is created, this will surely have a positive effect on us. We are part of the eurozone and most of our trade is with EU member states,” he said.

Also welcoming the ECB decision, economist Lawrence Zammit said the move could boost Malta’s competitiveness.

“Through this move, the value of the euro is expected to fall and this will boost our competitiveness, particularly in the manufacturing and services industries, especially where we trade with non-euro currency,” Mr Zammit said. “Tourism may also be boosted further as most of our tourists still come from the UK where the value of the sterling vis-a-vis the euro also plays an important part,” he added.

The ECB move prompted the Swiss Central Bank to abandon its cap on the frank, and Denmark, whose currency is pegged to the euro, was forced to cut interest rates in anticipation of the flood of money.

Following Mr Draghi’s announcement, the euro fell, European shares jumped and bond yields in Italy, Spain and Portugal fell, with the single currency dropping a full cent against the dollar.