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ECB’s QE may have a positive effect on Cyprus, economists say

By Stelios Orphanides

The European Central Bank’s expanded asset purchasing programme announced today by its chairman Mario Draghi may help fight deflation and invigorate growth, at least to some extent, economists said.

Alexander Michaelides, who heads the finance department at the Imperial College in London, said the ECB’s 1.1 trillion euros asset purchase programme, also known as quantitative easing, will help the euro area avoid deflation while it may at least indirectly help the Cypriot economy via a weak euro.

The euro “should not have been so strong” given the euro area’s growth prospects, Michalides said adding that a weaker euro could help the economies of countries like Cyprus exposed to third-country services income, such as tourism from the United Kingdom.

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