Is the ECB's zero interest policy effective?

Mario Draghi has countered criticism of his zero interest rate policy from Germany saying he must preserve price stability for the whole of the Eurozone and not only for Germany. At the same time he announced that the benchmark interest rate would be left at its current historic low. Are Berlin's complaints justified or is it overstepping the mark?

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The Economist (GB) /

Schäuble should stop whining and start spending

It is not the ECB's monetary policy but the misguided fiscal policies of national governments that are hindering economic growth in Europe, business weekly The Economist complains:

“The fundamental reason for Europe’s low interest rates and bond yields is the fragility of its economy. ... For years, Mr Draghi has been saying that monetary policy alone cannot speed up the economy, and that creditworthy governments must use fiscal policy as well, ideally by raising public investment. If Mr Schäuble wants higher yields for German savers, he should be spending more money. Instead, his government is running a budget surplus. ... If politicians want a scapegoat for the low rates that bedevil their savers, they would do better to look in the mirror than target the ECB.”

Verslo žinios (LT) /

ECB making savers fork out

In the end bank customers will pay for the ECB's mistaken monetary policy, the business paper Verslo žinios complains:

“If the ECB lowers the deposit rate for banks to minus 0.5 percent, the banks will incur losses if they don't pass this on directly to their customers, explains Gitanas Nausėda, a consultant at SEB Bank. … For the banks it will be very difficult to stick to zero or positive interest rates. That means that their customers will then have to pay for depositing their savings with them. It is important to change the systems and control mechanisms of the sailing ships so that they can navigate through troubled waters as smoothly as possible, experts say.”

Financial Times (GB) /

Enough of Berlin's interventionism

The European monetary union can only be successful if Germany's politicians also start to respect the independence of the ECB, Financial Times admonishes:

“The ECB’s legal obligation is to bring inflation back to target, not to shield Germany’s savings system; and with Berlin blocking several of the alternatives, it may have little option but to keep interest rates near their current low level for some years to come. ... Trying to depict ECB policy as a battle between national interests undermines the foundations of European monetary union. This is not in Germany’s own interests. If Berlin wants European monetary union to succeed it must stop trying to create a clone of the Bundesbank, and back down.”

Spiegel Online (DE) /

No one needs the German savers' money

The website Spiegel Online sees the German government at the root of the problems with monetary policy:

“The fact that the helicopter proposal is actually being seriously discussed just goes to show how desperate the ECB has become. Despite zero interest rates inflation has been hanging around zero percent for months. If a German were ECB chief the two-percent inflation target would still be a top priority - and increases in the interest rate that lower the money supply would leave him even further away from that goal. A dilemma he would have his countrymen to thank for: rather than investing the citizens' savings in roads and universities via government bonds the German government wants budget surpluses. … German savers must face the fact that no one needs their money. At least not for the conditions they are used to getting. Four percent for bombproof investments? That was back in the times of guaranteed economic growth and rising public debt.”

Corriere della Sera (IT) /

Draghi right to stick to his guns

Draghi has not just dismissed Berlin's proposals he has also ruled out the possibility of "helicopter money" being paid, the Corriere della Sera comments approvingly:

“The first No was directed at those who want the Frankfurt-based financial institution and its president Mario Draghi to change the strategy that was launched in 2012 and has prevented the collapse of the euro. The second No is directed at those who are demanding that the ECB do even more than it has done so far. The idea of giving money away entails great risks. … The ECB can claim to be the only European institution that has taken concrete steps to fight the crisis. And it has made it clear that in the meantime national governments have postponed unpopular decisions on reducing national debt and introducing structural reforms. Yet such measures are the only guarantee for sustained growth.”

Neue Zürcher Zeitung (CH) /

ECB taking too many risks

In sticking to its zero-interest policy the ECB is putting its credibility with markets and consumers at risk, the centre-left daily Neue Zürcher Zeitung warns:

“The ECB itself says that its measures have raised inflation in the Eurozone by roughly 0.5 percent and that similar results are expected in the future. But does this comparatively small rise in inflation justify the numerous risks and side effects of an expansive monetary policy? Or would it not be smarter to keep several irons in the fire? The financial markets are already discussing whether the ECB is losing control. This is a worrying development because credibility is the biggest asset a central bank has when it comes to implementing monetary policy, maintaining stable prices and ensuring public confidence.”