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 ...

Economists say the rise in rates would be much steeper if markets believed that Italy was actually prepared to go through with the plans. So far (the market reaction) has been clear, but not extreme.
The European Union's budget commissioner says he hopes Italy's...
New export orders in European manufacturing PMIs have been slipping for months and are likely to fall further in May.
While the on-again, off-again threat of an all-in trade war...
WB Predicts Myanmar Growth at 6.7 Percent
Given the government’s efforts to accelerate reforms and to...
Talent Deficit May Hit Major APEC Economies
Asia Pacific faces an imminent labor shortage of 12.3 million...
Poland to Become Less Dependent  on EU Funds
The Polish economy will become less and less dependent on the...
N. Korea Not Seeking US Aid
North Korea on Sunday fumed at US reports that the country is...
Eurozone Private Sector Slowest in 18 Months
Business data firm IHS Markit said last week that its...
China Industrial Firms’ Profits Grow 21.9%
Profits earned by Chinese industrial firms in April rose at...

Trending

Googleplus