World Economy

ECB Urged to Change Current Monetary Policy

ECB Urged to Change Current Monetary PolicyECB Urged to Change Current Monetary Policy

German Finance Minister Wolfgang Schaeuble said the European Central Bank needed to change its current monetary policy “in a timely manner,” warning that very low interest rates had caused problems in some parts of the world.

With Germany heading toward federal elections and savers complaining about low interest rates, officials from Europe’s largest economy have stepped up pressure on the ECB to scale back its monetary stimulus of bond purchases and sub-zero rates, Reuters reported.

The ECB last week closed the door on more interest rate cuts, judging the eurozone economy to be rebounding, but said inflation looks to remain weak for years so it still needs to pump out the cash.

Speaking at a finance conference in Berlin, Schaeuble said: “Ultra-loose monetary policy in many regions has been encouraging undue risk taking, policy complacency, capital misallocation and asset price bubbles and will continue to do so if it is not reversed in time.”

“We need to exit current monetary policy in a timely manner and return to a more normal course,” said Schaeuble, a senior member of Chancellor Angela Merkel’s conservatives.

He said that the Federal Reserve in the US had already begun this process and the ECB had recently tweaked its communication in a way that could be seen as pointing in a similar direction in the medium term.

Schaeuble also dismissed media reports that the German government was quietly lobbying for Bundesbank chief Jens Weidmann to succeed Mario Draghi as ECB president.

Germany’s Der Spiegel magazine said in an unsourced report last month that Berlin wanted Weidmann to take over from Draghi in 2019.

“This debate is not only damaging but also superfluous,” said Schaeuble. He added that the ECB has a difficult job in implementing monetary policy that suits the needs of all eurozone members and that he has never criticized the ECB directly.

Turning to Britain’s decision to leave the EU, Schaeuble said the “unfortunate decision by British voters”—together with some pronouncements by the new US administration—had increased political uncertainties.

The German government is aiming for a Brexit deal that would limit negative consequences for the bloc, Schaeuble said. But he also added that Berlin did not want to weaken Britain.

“We want a solution that causes as little damage as possible for both sides,” Schaeuble said. He expected London to remain an important financial center for Europe after Britain had left the bloc.

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