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 ...

Close to 40% of digital transformation initiatives will be supported by AI capabilities.
The digital economy in Asia-Pacific, or APAC, is expected to...
An electronic stock indicator of a securities firm in Tokyo.
As investors come to terms with the impending end of easy...
Maersk is expanding its competitive universe to include different types of companies.
The world’s largest container company will start looking for...
Lloyds Profits Miss Forecasts
Lloyds Banking Group PLC raised its 2017 dividend by 20% and...
Most economists would agree that Italy needs faster economic growth if it is to resolve its public debt  and banking-sector problems in an orderly manner.
Italy’s economy is growing again, but it’s still the worst...
CBs May Top Inflation Targets
Not only will central banks meet their inflation targets, they...
Pak Current Account Gap Widens
Pakistan’s current account deficit widened 28.74% on a month-...
NZ Says Pacific Trade Deal Will Boost GDP
New Zealand estimates a Pacific trade deal would boost its...