Best Italia Economy Portal: Germany is not resigned to Qe

Saturday, January 24, 2015

Germany is not resigned to Qe – Il Sole 24 Ore

History Article

This article was published on 24 January 2015 to 08:12 hours.

The German idea

The president of the Bundesbank believes that

inflation below zero is

due primarily

at the drop of oil

The idea of dragons

According to the President ECB

a long time

inflation at these levels

can bring down the expectations

medium to long term

FRANKFURT

There are past twenty-four hours by the announcement of the plan of purchases of government bonds by the European Central Bank that the president of the Bundesbank, Jens Weidmann, expressed publicly his disagreement on the solution concocted by ECB President Mario Draghi.

The purchase of government bonds, which is part of a wider program of quantitative easing (Qe) to more than 1,100 billion euro which will start in March, “is not like other monetary policy instruments. Brings with it risks, “Weidmann said, according to the advances of an interview which will be published this morning by the popular daily” Bild “. Weidmann was one of five members of the board, on 25, to express his opposition to the launch of Qe, the decision that, according to Draghi, has not even needed a vote, when it became clear that it had a “large majority” . Despite an expected defeat in the board, the president of the Bundesbank does not abdicate its role as guardian of stability in front of the German public, which is largely opposed to the initiatives of the ECB. The choice of a daily newspaper with wide circulation as the “Bild” is not accidental.

“The program – said Weidmann – makes the central banks of the largest creditors of the governments of the eurozone countries. This leads to the risk that the rules on public finances should be neglected. There may be political pressure to keep rates permanently low, when we will need to raise them. ” The German central banker complains fact that monetary policy can be dominated by the tax, the opposite of what Draghi said Thursday.

The dissent of Weidmann, the Bundesbank said, comes from a different reading of the situation economic, is also urged to Draghi’s press conference. While the German banker believes that the current inflation below zero stems mainly from the collapse of oil prices, which on the other hand, however, gives a boost to growth and then in a matter of time will favor the increase in inflation, the ECB President believes instead that a prolonged period of inflation too low (and the ECB expected to remain below zero or just above at least through 2015) to bring down inflation expectations over the medium term and thus trigger a deflationary spiral. Inflation expectations 5y5y (ie on from here to 5 years for the next 5 years), recently fell to record lows around 1.50%, rebounded to 1.80 with the announcement of the ECB.

Weidmann also stressed the main concern of Germany, namely that the easing of monetary policy may ease pressure because the countries that need it most, such as Italy and France, make reforms. The same concept has been recalled by the Finance Minister, Wolfgang Schaeuble yesterday in Davos (the minister asserted that “the ECB is doing a good job in maintaining price stability”). Even Draghi moreover believes that monetary policy can not replace action by governments in the budgetary and structural reforms, which also reiterated Thursday.

In another message addressed implicitly to the Italian situation and French, Weidmann said that “the Stability Pact should not be further softened.” The budgets of France and Italy will again be submitted to the judgment of the European Commission in March next and the postponement of the assessment on their public accounts was received unfavorably by the countries of the line of the penalty area.

Another critical voice on timing of the launch of the Qe by the ECB was raised yesterday by the governor of the Austrian Central Bank, Ewald Nowotny, who in the days immediately preceding the meeting was rather pronounced in favor. “I do not know if it was wise to have spent the last ammunition. Personally I would have preferred to think of this program but to wait a bit ‘to see if we really need them, “giving time to the measures announced earlier to their effects. The most immediate effect of Qe, Nowotny said, will be the depreciation of the euro. The other dissenting council member would be another German, Sabine Lautenschlaeger, and the governors of the Netherlands and Estonia.

Quote of the capital of the member countries, consistency of the bond market and risk levels