Mar.8 (Dow Jones) -- In January, Giorgio Caprino, co-owner of a toy importer based in northeast Italy, asked his bank to increase a credit line he needs to pay suppliers. A year ago, his bank would have waved the request through in less than a month, he says.

Today, with Italy in recession, Mr. Caprino is still waiting for an answerand getting more nervous by the day. Suppliers wont send me anything if I dont pay them, he says.

The European Central Bank hopes a new stimulus program will keep credit flowing to eurozone businesses like Mr. Caprinos and prevent the regions flagging economy from tipping into recession this year.

On Thursday, ECB President Mario Draghi launched a program to provide cheap funding to European banks until 2023.

The ECBs surprise move to launch new stimulus just three months after ending its 2.5 trillion ($2.8 trillion) bond-buying program highlights the speed of the falloff in the eurozones economyand the regions continued dependence on ultraloose monetary policy.

The eurozones five-year expansion has been flagging ever since the business cycle peaked in late 2017.

A slowdown in China has hurt a region heavily reliant on exports for growth7% of Germanys exports go to the Asian giant.

Violent protests in France, a rise in Italian borrowing following Romes plans to increase already high debt, and weakening demand in the U.K. ahead of its planned split from the EU pushed the ECB to cut its eurozone growth forecast. It now expects the regions economy to expand 1.1% this year, down from the 1.7% it expected in December. Even a eurozone jobless rate that is lowest in a decade has failed to stimulate growth or consumer spending.

The outlook for the eurozone is so weak that investors dont expect the ECB to raise interest rates until at least 2020. Interest rates on some German sovereign debt is now negative.

Bank lending to households and businesses slowed at the end of last year, ending a steady rise since the ECB first launched stimulus measures, including cheap loans, in 2014.

Now, the ECB wants to cushion the economy as it heads into a delicate phase. The U.S. and China are locked in high-stakes trade talks, the U.K. is engaged in fraught talks on Brexit and anti-immigrant and nationalist parties expect big wins in European elections in May.

If Brexit goes smoothly and the U.S. and China settle their trade battle, the economy could pick up, say economists.

We are currently in a gray area between a pronounced slowdown in growth and a recession, said Joerg Kraemer, chief economist at Commerzbank , Germanys second largest lender. Commerzbank expects the German economy, which represents 30% of eurozone gross domestic product, to grow just 0.6% this year.

In January, the German light engineering industry saw orders fall 9% from a year earlier, with overseas orders down 11%.

After creating jobs in 2018, some German manufacturers are now planning to trim payrolls. Schaeffler AG , an automotive and industrial components maker, announced job cuts on Wednesday as part of a plan to boost profitability.

We are anticipating that the environment, especially in the global automotive business, will remain extremely demanding and challenging, said Schaeffler CEO Klaus Rosenfeld. We expect the global economy to slow down further.

In France, which has largely escaped weakening demand from China, violent protests against President Emmanuel Macrons pro-market reforms blocked highways, delaying some deliveries.

Some plants took a hit, said Bruno Grandjean, chief executive of French Redex, a French industrial group that specializes in high-precision mechanical systems.

The effectiveness of the ECBs new cheap funding may be limited, some economists say, because of the extent to which an uncertain economic outlook, rather than banks inability to secure funding, has crimped lending.

One immediate benefit from the ECBs announcement was a weaker euro, which may help exporters cope with a weakening of demand for their goods in China and elsewhere.

But the weak currency isnt likely to entirely offset that. Figures released Friday by Chinas General Administration of Customs showed imports to the country were 5.2% lower than a year earlier in February, following a 1.5% drop in January.

Many European economists say that in the face of a new and more severe slowdown, there is little the ECB can do. Its key interest rate is in negative territory and it has already bought a large share of eurozone government bonds.

The responsibility for halting a slide toward recession would fall to eurozone governments, they say.

There isnt much [the ECB] can do thats powerful, said Dirk Schumacher, chief economist at Natexis in Frankfurt. Whats powerful is fiscal policy.

Germany, the Netherlands, Austria and a number of smaller countries could increase their investment spending by half a percentage point of economic output over a three-year period without spooking bond investors and causing a counterproductive rise in their borrowing costs, according to the OECD.

Even that level of coordinated stimulus, coupled with some long-sought overhauls to increase competition in the heavily regulated services sector, would only add a quarter of a percentage point to eurozone economic growth this year and next.

The reluctance of national governments to act helps explain why the ECB has done so much of the heavy lifting since the financial crisis struck in 2008, as Mr. Draghi noted Thursday.

Its relatively easy to advise about the right policy, much more difficult is to implement it in a democratic society, he said.

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Fecha de publicación: 08/03/2019