Bundesbank Rejects Calls for German Stimulus
World Economy

Bundesbank Rejects Calls for German Stimulus

Germany’s central bank sees no need for a new global stimulus package like the one advocated by the International Monetary Fund, as it expects the world’s economy to continue to recover, Bundesbank board member Andreas Dombret said on Friday.
IMF calls for the world’s largest economies to embark on fresh stimulus have gone unheeded in Germany, where the central bank opposes further monetary easing and the government is reluctant to eat into its record budget surplus, Reuters reported.
“We see no need for a global, coordinated package of monetary, fiscal and structural measures,” Dombret said ahead of the IMF’s annual meeting on Oct. 7-9.
“It is rather about the right policy mix, consistent with stability, in individual countries.”
Dombret added that fears of “secular stagnation”, that is persistently low economic growth, were overblown, even accounting for ageing populations in developed economies.
“The danger of slipping into a secular stagnation is in our view overestimated,” Dombret said.
“A certain weakening of trend growth in developed economies is unavoidable against the background of demographic developments,” he added.
Earlier this month, European Central Bank President Mario Draghi joined the chorus of voices that have criticized Germany for reining in its spending at a time of weak economic growth.
“Countries that have fiscal space should use it,” Draghi said at a news conference. “Germany has fiscal space.”
But Jens Weidmann, president of Bundesbank, argued that Germany’s national debt was already high, and the country’s aging population “calls for lower rather than higher debts.”
Draghi tempered his remarks on Wednesday after a meeting in Berlin with German lawmakers, who grilled him over the ECB’s easy-money policies and their impact on German savers and banks.
“Germany does have fiscal space (but) we need to be nuanced,” Draghi said. “I never argued for irresponsible fiscal expansion.”
The ECB has come under increasing pressure in Germany, the largest eurozone economy, since the central bank boosted its €1.7 trillion ($1.91 trillion) stimulus in March. Top German politicians have warned that ECB policies take money from savers and pensioners and fuel populism.
Weidmann called for a prompt end to easy-money policies, as soon as inflation picks up, and urged policy makers to wait for the impact of recent measures to play out in the economy before announcing new ones.
The example of Japan, he said, shows how central banks can’t solve an economy’s structural problems through ever greater stimulus.
“Japan certainly isn’t a role model for the eurozone,” Weidmann said.


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