40153
Germany, ECB on Collision Course
World Economy

Germany, ECB on Collision Course

The European Central Bank left key interest rates at zero or below on Thursday. But ECB President Mario Draghi said afterwards that the eurozone's top monetary authority can deploy more stimulus if global troubles threaten to derail a modest economic recovery.
Thursday's ECB action comes just a month after Draghi extended a massive quantitative easing program and dropped interest rates to a record low. Draghi’s continued willingness to do “whatever it takes” is raising alarm particularly among German politicians, CCTV reported.
Critics accuse him of undermining the independence of the Eurozone’s central bank. But German Finance Minister Wolfgang Schaeuble believes it’s his turf that risks being infringed upon–by the ECB.
“The more we are able to reform our structures, the more growth we create, the more we can defend the ECB from being over-strained," he said.
"In general, a permanent zero interest rate–or negative interest rate–is not a reasonable situation. There’s no question about it: that is not the function of interest rates."
Here to Stay
Last month, ECB boss Mario Draghi, saw things rather differently. Amongst other measures, he dropped interest rates to a record low–and said they’d have to stay there for an extended period.
The aim was to get money flowing into the still-struggling real economy–by encouraging banks to lend. What that doesn’t guarantee–is that consumers, or companies, will actually borrow.

“They would buy more shares, they would invest in the real estate sector–given that no firms are available who would demand additional credit," said Christian Dreger, German Institute of Economic Research.
"Banks have to move to more risky assets. So there is of course increasing risk that the development in the asset markets is more driven by speculative motives."
At this sensitive moment for the bloc’s shaky economic recovery–German politicians, and Europe’s bankers, are again on a collision course.
The ECB is by no means the only central bank engaged in what is essentially a massive economic experiment–and no one quite knows what the end result will be. So while Draghi still believes he’s offering vital life support to the global economy, others are increasingly unsure.

 

Short URL : http://goo.gl/ZXKEk8
  1. http://goo.gl/ggwqTK
  • http://goo.gl/k9CB5q
  • http://goo.gl/elJDb4
  • http://goo.gl/VbpsuA
  • http://goo.gl/iihbho

You can also read ...

China Challenges US Solar Panel Duties
China says it is challenging a US tariff hike on solar panels...
In a retaliatory move, President Recep Tayyip Erdogan’s government on Wednesday announced higher tariffs on some US imports, namely on passenger cars (120%) and leaf tobacco (60%).
Turkey has raised tariffs on some US imports, including...
World trade volume growth peaked in January at almost 5.7% year-on-year but nearly halved to less than 3% by May.
Cyclical indicators point to slower and more uneven growth in...
File picture of Kim Jong-un (L) and Moon Jae-in at the truce village  of Panmunjom, South Korea.
South Korea President Moon Jae-in on Wednesday offered a bold...
Moody’s Predicts Slower Fiscal Progress in S. Africa
South Africa’s fiscal consolidation will be slower than the...
Nigeria CPI Drops to 11.14 Percent
Nigeria’s National Bureau of Statistics says the consumer...
Surging Inflation Mars Philippines Growth
The Philippine economy in 2018 is a story that can be summed...
Transport tickets and fuel have driven up costs for consumers.
Inflation in the UK climbed in the month of the July, as had...

Trending

Googleplus