February 20, 2017
by Marcel Fratzscher
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Germany’s savings madness

This text was also published in German in  ZEIT ONLINE on February 17,  as part of the op-ed column “Fratzschers Verteilungsfragen“.

Germany is generating substantial export surpluses – but the profits are being squandered abroad. The solution? Investing in Germany.

Since the year 2000, every German has lost an average of €7,500 euros in savings abroad.

How could that be? Didn’t our country just post a record surplus, exporting significantly more to its foreign partners than it is importing? Yes, German companies and thus German citizens have produced and exported €2,200 billion more in goods and services than consumed: a positive trade balance. Continue Reading →

February 13, 2017
by Marcel Fratzscher
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Curse of the Trade Surplus

This text was published in Handelsblatt Global Edition on February 13, 2017.

The criticism of Germany’s trade surpluses by the U.S. government has caused collective indignation here at home. Much of the criticism is not fair. Accusations that Germany manipulates the euro and misuses the European Union for its own interests are unwarranted. But there is also a kernel of truth that our European neighbors have been voicing for a long time: Germany’s trade surplus is tantamount to protectionism. That’s a harsh reproach – is it true?  Continue Reading →

February 3, 2017
by Marcel Fratzscher
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No envy, please!

This text was also published in German in  ZEIT ONLINE on February 3,  as part of the op-ed column “Fratzschers Verteilungsfragen“.

“Time for fairness“ is the motto of the new candidate for Chancellor of the German Social Democrats, Martin Schulz, in his campaign against Angela Merkel. The slogan is bound to strike a chord in a country where 70 percent of the people feel that inequality is too high. But the issue of fairness should not be the one at stake. Unlike inequality that that can be measured, fairness – at least concerning distributional issues – is purely subjective. A public debate about fairness is bound to aggravate rather than alleviate the polarization within German society. Continue Reading →

January 19, 2017
by Marcel Fratzscher
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Statement on the meeting of the Council of the European Central Bank (ECB), January 19, 2017

ECB President Draghi has clearly signaled a continuation of its current course of monetary policy. The rising inflation trend is a positive, welcome development for everyone. Especially Germany should welcome the positive trend in inflation. The sooner the ECB can achieve its price stability objective of 2%, the sooner the ECB can end its expansionary monetary policy stance. Continue Reading →

December 8, 2016
by Marcel Fratzscher
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Statement on the ECB decision (December 8, 2016)

The ECB decision is wise and balanced. It may disappoint many in Germany. The extension of the PSPP programme was inevitable as the risks to the euro area economy are still huge and the ECB is likely to miss its price stability mandate through 2019.

The ECB decision is wise as it leaves all options open. The ECB is introducing more flexibility through the changes to the PSPP programme. The ECB decision implies a longer period of low interest rates than expected by many. The reduction of the size of monthly purchases sends a clear signal to financial markets about the possibility of a gradual exit, with the objective of avoiding an abrupt increase in interest rates in the future. The risks to price stability have to be weighed carefully against the risks to financial stability through the ECB’s expansionary policy path.

November 9, 2016
by Marcel Fratzscher
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Statement on the Election of Donald Trump as US President

I expect the German economy to withstand the challenges arising from a Trump presidency. German companies are competitive, flexible and well diversified globally. I don’t expect that Germany’s trade with the USA will suffer significantly. My main concern is the European economy, which is still mired in a deep economic and financial crisis. The US election makes it more urgent than ever to speed up reforms and give the European economy a growth stimulus. I expect the euro to appreciate moderately, similar to what happened during the financial crisis in 2008, as the euro is a strong and credible global currency.

The root cause of the election outcome is the growing economic and social inequality in the USA and the failure of the American Dream. A majority of Americans have realized that politicians had broken their promise of equal opportunities for all. 
However the USA have a strong democracy, that will be able to cope with Trump as its president. Despite his outrageous campaign promises, the soon most powerful man in the world will end up almost powerless. I don’t expect major negative economic consequences from the election. Trump will not be able to fulfill any of his threats, such as for the US to leave the World Trade Organization, to denounce the NAFTA agreement with Mexico and Canada or to dramatically increase public debt.  

October 20, 2016
by Marcel Fratzscher
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Statement on today’s meeting of the Council of the European Central Bank (ECB), October 20, 2016

The ECB decision bears no major surprises. Draghi did not contradict market expectations of an extension of the QE program to be announced in December. Such an extension has thus become even more likely. I do not expect a reduction in the monthly purchases by the ECB. Such a step would disappoint market expectations and could trigger undesired market reactions. The latest economic news are not encouraging and give little cause for a fundamental change in monetary policy.

July 21, 2016
by Marcel Fratzscher
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Statement on today’s meeting of the Council of the European Central Bank (ECB), July 21, 2016

The European Central Bank is facing a difficult dilemma. The slower the euro area economy is growing, the lower interest rates and the harder it becomes for the ECB to implement its public sector purchase program. The ECB has assumed a wait-and-see strategy in the hope that its new measures will be effective and the economy will not deteriorate further. Italy’s banking crisis, more than the Brexit, is an enormous risk for the entire euro area, also for Germany, and will have a significant impact on the ECB’s monetary policy in the years to come.

June 29, 2016
by Marcel Fratzscher
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Europe Needs to Show What It’s Made Of

This article was originally published in Handelsblatt Global Edition on June 28, 2016.

The Frenchman Jean Monnet, one of the founding fathers of today’s Europe, wrote that the process of European unity will “be accomplished in crises.”? The Brexit decision is a catastrophe for all Europeans. It is coming at a high price in political, social and economic terms.

But it is also a crisis that can make Europe significantly stronger – if politicians, especially in Germany, recognize and use it as such. What is positive is that this crisis is an “announced crisis.”? It provides politics with the chance to act proactively and preventively. This requires Europe to have a post-Brexit plan. Four elements are particularly important. Continue Reading →

June 27, 2016
by Marcel Fratzscher
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Making the Eurozone more resilient: What is needed now and what can wait?

This article was first published on VOXEU.org on June 25, 2016. 

Britain voted to leave the EU. This is terrible news for the UK, but it is also bad news for the Eurozone. Brexit opens the door to all sorts of shocks, and dangerous political snowball effects. Now is the time to shore up the Eurozone’s resiliency. The situation is not yet dire, but prompt action is needed. This VoxEU column – which is signed by a wide range of leading economists – identifies what needs to be done soon, and what should also be done but can probably wait if markets are patient. 

The UK’s choice to leave the EU was, we believe, a historic mistake. But the choice was made; we must now turn to damage control – especially when it comes to the euro.

The Eurozone is growing, albeit slowly. If all goes as forecast, economic health will eventually be restored, unemployment will decrease, and the periphery countries will regain competitiveness. Continue Reading →