The Euro Zone is still in crisis. Some people feel that it is on its way to recovery, while others are rather pessimistic on this. The main force trying to resolve the issue is the ECB. They have previously cut their interest rates as a way of assisting the economy to recover. This was mainly so that the banks of the Euro Zone were able to help their customers deal with the financial crisis. Furthermore, it was supposed to support the revival of the economy.
Benefits
The cutting back of interest rates should have substantial effect on your mortgage payments. When the European Central Bank cut back its interest rates, the banks have to remit fewer funds to it. This follows a situation where the banks need less cash from the consumers. Therefore, interest rates will generally decrease. If your bank adhered to the ripple effect of the cutback of the interest rates, your mortgage payments should have been low
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Reduced rates associated with overdrafts is another benefit that you should have been afforded. The cutting back of interest rates enables the banks to allow their clients lower overdraft rates. This in turn will act as a cheaper option for lending for the public. The greatest blow to the public in the crisis is the lack of financial assistance; this aims to ease this strain.
Finally, the cutbacks on interest rates are supposed to enable you to take charge of financial systems so that you can be able to strategize and get back on track. The lowering of interest rates should enable you to fight the economic crisis and be able to revive your economic operations. They act as forms of financial assistance from the financial institutions.
Limitations
The steps taken by the ECB have, however, been faced with some resistance. For instance, not all banks actually took the cut. Hence, you might not have noticed any lower rates on your mortgage payments or on your overdrafts.
Another limitation of the cutbacks on interest rates is the lack of evidence in the real economy. The effect of this practice is not visible on the real economy. It is more of a theory than an actual solution to the debt crisis facing the Euro Zone.