We are fairly relaxed about the impact of a slowdown in China on the euro-zone. Most importantly, this is because the concerns about the Chinese economy look overblown. And in any case, the direct trade links between the euro-zone and China are fairly small.
Even if we were wrong and the impact on the euro-zone were large, perhaps because of renewed and longer-lasting financial turmoil, the ECB has scope to expand its monetary stimulus. Domestically- generated problems already present a strong case for doing so. Weak inflation, declining inflation expectations and sluggish growth all suggest that QE will need to be extended before too long.
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