Don't expect German criticism of the ECB to die down

Fri Apr 22, 2016 1:51pm EDT
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By Noah Barkin

BERLIN (Reuters) - If you look at the facts, for Germany to lay into the European Central Bank makes little sense.

Yes, low interest rates are not great for Germans who have squirreled away their savings in traditional bank accounts instead of investing them in real estate or stocks. But this has been offset by inflation that is close to zero.

Yes, the ECB's loose monetary policies are not ideal for the German economy at the moment. But the bank's mandate, as Mario Draghi reminded everyone at his news conference on Thursday, is to look at the euro zone, not at individual member states.

And yes, German savings banks and life insurers are suffering. But this has more to do with their flawed business models than with the ECB, which is doing what central banks around the world have been doing for years in an effort to kick-start inflation and push up growth.

So why are politicians in Berlin, led by Finance Minister Wolfgang Schaeuble, crying foul? It's because their criticism has a lot more to do with politics.

That is why no one should expect the criticism to die down now that Draghi has shot back with a not-so-subtle warning to Berlin that its attacks could end up undermining confidence in current policies, forcing the bank into even bolder steps.

If this wasn't obvious before, it should be after Chancellor Angela Merkel herself came out on Thursday, hours after Draghi spoke, and declared the German debate over the ECB's low interest rate policies "legitimate".

In truth, leading members of her conservative party agreed over a month ago, following three regional elections, to go on the offensive against the ECB and its low rates, numerous officials have told Reuters.   Continued...

European Central Bank (ECB) President Mario Draghi speaks during a news conference at the ECB headquarters in Frankfurt, Germany, April 21, 2016.   REUTERS/Ralph Orlowski