Main focus of Friday, April 8, 2011

Benchmark interest rate divides Europe

The European Central Bank (ECB) has become the first major central bank in the West to reverse the trend in interest rates. For the first time since the outbreak of the financial crisis it decided on Thursday to raise its benchmark interest rate from 1.0 to 1.25 percent. While some commentators see the move as supporting recovery among the EU's strong economic states, others complain it will put ailing euro countries at a grave disadvantage.

De Telegraaf - Netherlands

Increasing the benchmark interest rate is a clever move by the European Central Bank (ECB), writes the tabloid De Telegraaf: "The slowly recovering Dutch economy will have no trouble coping with this modest increase. Moreover, the measure boosts the euro and is a sign of strength vis-à-vis the crisis-hit financial markets. But above all it is good that the French ECB boss has not bowed to the pressure of the ailing southern European countries that were demanding that the pension increase be postponed. Instead the higher interest rate ruthlessly confronts crash pilots like Portugal and Greece with the reality. These countries cannot be allowed to slow down the Eurozone, but must deal with their own problems." (08/04/2011)

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More from the press review on the subject » Financial Markets, » Banks, » Europe

Financial Times Deutschland - Germany

The ECB's interest rate hike is no good to anyone, writes the liberal business paper Financial Times Deutschland: "Germany could do with a higher benchmark interest rate, the crisis countries could do with a lower one, and somewhere in between is a half-hearted compromise that doesn't help the one and damages the others. To escape this dilemma ECB head Jean-Claude Trichet is handing responsibility for the crisis-ridden euro states back to the political class. The ECB plans to buy up fewer government bonds in future. In fact only the unlimited money supply for commercial banks serves as a reminder that it is still operating in crisis mode. In regulative terms there is nothing to say against the EFSF bailout fund intervening in place of the ECB to supply crisis countries with fresh money. But the disadvantage is that this depends on the protracted political processes of the EU. ... Should Spain also fall into a tailspin regardless of all the signs that its situation is improving, quick help would be difficult without the ECB." (08/04/2011)

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More from the press review on the subject » EU Policy, » Fiscal Policy, » Europe

Público - Spain

Raising the benchmark interest rate by a quarter percentage point works to the advantage of the German economy and the detriment of the Spanish, no matter how much ECB boss Jean Claude Trichet defends the move, writes the leftist daily Público: "In an attack of alleged social sensitiveness he claimed that controlling inflation was 'particularly beneficial for the poor' and 'the most efficient way to boost the creation of jobs'. In reality what Trichet has done serves the interests of Germany, a country that is experiencing a sustained growth phase and whose exporting power could be threatened by rising inflation. However for countries like Spain which are battling to get out of the crisis and whose economies are mainly sustained by the dynamism of domestic consumption, this raise in interest rates is a major setback which according to experts will have a negative impact on unemployment and will increase the pressure of mortgage interest rates on its already burdened citizens. Financial policy should not be dictated by certain powers and wrapped up in scientific dogmas." (08/04/2011)

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More from the press review on the subject » Fiscal Policy, » Economic Policy, » Banks, » Germany, » Spain, » Europe
All available articles from » Marco Schwartz

Hospodářské noviny - Czech Republic

The European Central Bank's raising of the benchmark interest rate is sending out the wrong signal at the wrong time, the business paper Hospodářské noviny writes: "Paradoxically the Central Bank raised the interest rate just a few hours after Portugal requested financial help due to its increasing loan burden. In general a growing number of Eurozone countries are running into difficulties. For debtors, the change in the interest rate means that their loans will become more expensive, exacerbating an already difficult situation. ... The ECB's decision arouses the suspicion that it takes its decisions on the basis of what's good for Germany, rather than for the Eurozone as a whole. More important than the current rise of the interest rate by a quarter of a percentage point is the signal it sends on the direction monetary policy is moving in. The combination of expensive money and restrictive budget cuts by the debtor countries deepens the division of the Union into two halves. And how long will the 'more responsible' countries be willing to pay for the rest?" (08/04/2011)

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More from the press review on the subject » EU Policy, » Fiscal Policy, » Germany, » Spain, » Europe
All available articles from » Julie Hrstková

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