Currency and Financial Markets ECB Europe

Statement on today’s meeting of the Council of the European Central Bank (ECB)

The ECB is right to orientate its policy towards price stability at the mid-term and not to react to short-term price movements. Calls for an early exit of the ECB’s expansive policy are misplaced and premature. The price dynamics of the past two months mainly reflect a normalization of energy prices. The euro area economy remains weak and unemployment rates are too high to allow for a quick return to price stability and for an end to the expansive monetary … [continue reading]

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Business Cycles, Growth, Economic Structure Currency and Financial Markets ECB Economic Policy Europe Foreign Trade and International Economic Relations

Germany’s Misunderstood Trade Surplus

Now that Germany’s current-account surplus has reached a record €270 billion ($285 billion), or close to 8.7% of GDP, the ongoing debate about its economic model has intensified. Eurozone politicians and Donald Trump’s administration in the United States are each blaming the other for the economic imbalance; and all are blaming the euro.

Trump’s administration, for its part, has attacked Germany for exporting too much, and accused it of manipulating the euro. In fact, Germany’s trade surplus has little to … [continue reading]

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Currency and Financial Markets Economic Policy Monetary Policy ZEIT ONLINE op-ed column

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, … [continue reading]

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Currency and Financial Markets ECB Monetary Policy

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]

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Currency and Financial Markets ECB Europe Macroeconomics Monetary Policy uncategorized

Supplement: Statement on the result of the Brexit referendum

An important aspect, that has been widely ignored in the debate about the consequences of a Brexit, is the impact on ECB monetary policy. Lower oil prices and a weaker economy in the euro zone and in Germany are likely to increase deflationary pressures further. As a consequence, the ECB is likely to extend its expansionary monetary policy path further into the future. The Brexit will most likely imply a longer period of zero interest rates for the euro area.… [continue reading]

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Currency and Financial Markets ECB Europe Macroeconomics Monetary Policy

Statement on the Federal Constitutional Court’s decision regarding the European Central Bank’s OMT program

The German constitutional court took a wise decision, but which is effectively a reversal of its earlier decision of January 2014. The court now accepts the authority and the decision by the European Court of Justice on the ECB’s OMT program of 2015. The backing down of the German constitutional court is a smart move, as it would inevitably have lost the battle against the European Court of Justice on issues of European law. … [continue reading]

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Currency and Financial Markets ECB Economic Policy Europe Macroeconomics Monetary Policy

Statement on the Decision of ECB’s Governing Council 06/02/2016

The ECB has signaled that low inflation is likely to persist even longer than previously feared. The new projections by the ECB have increased the probability of an extension of QE beyond March 2017. The ECB is putting great hopes into its new liquidity program for banks in order to improve credit to the private sector, strengthen the economy and thereby raise the inflation rate.… [continue reading]

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Currency and Financial Markets ECB Economic Policy Europe Macroeconomics Monetary Policy

Statement on the Decision of ECB’s Governing Council 04/21/2016

“With its decision, the ECB has signalled the continuation of its expansionary monetary policy. The ECB policy of low interest rates will not end soon. I expect interest rates to remain close to zero for another 3 to 4 years.… [continue reading]

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Currency and Financial Markets Macroeconomics Monetary Policy

“In an International Comparison, Too Little Is Being Invested in German Industry”: Six Questions to Marcel Fratzscher

  1. Mr. Fratzscher, there are concerns about an overall lack of investment in Germany. Is the problem more urgent in the public sector or in the private sector?
    The investment gap exists in both the public and private sector. Three years ago, we calculated that Germany’s investment gap amounts to roughly 75 billion euros per year. The investment gap has also been confirmed by other studies. The problem is definitely more urgent in the private sector.
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Currency and Financial Markets ECB Economic Policy Macroeconomics Monetary Policy

Statement on the Decision of ECB’s Governing Council 03/10/2016

With its decision the ECB is sending a strong signal that it is strongly determined to use all of its instruments to pursue its mandate of price stability. The further expansion is massive and surprising.The decision underlines the ECB’s concerns over a weakening European economy and the banking system. The ECB had no other choice than to further ease its monetary policy stance given the continued risk of deflation and the weaker outlook for the European economy. … [continue reading]

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