The ECB has chosen a gradual and cautious exit from its expansionary monetary policy stance. The decision gives the ECB a maximum of flexibility for exiting QE. I expect the ECB to terminate its QE program after September 2018 and to raise rates for the first time in 2019 at the earliest. The ECB can tighten policy only gradually as it is only slowly approaching its price stability mandate. The ECB has to maintain a high degree of flexibility in … [continue reading]Read more
The euro area has recently seen some good news. A broad-based economic recovery is under way. Significant institutional reforms have been achieved, particularly in the area of banking union. Significant economic reforms are under way in several countries, including in France.
As French and German economists committed to Europe and to the friendship between our countries, we are nonetheless concerned that the Euro area continues to face significant fragilities. Addressing these requires a comprehensive, collaborative push for reforms. If this … [continue reading]Read more
The decision of the German constitutional court concerning the lawsuit against ECB QE program is a false compromise. The constitutional court signals that it considers the ECB QE program as a violation of European law and to constitute monetary financing. Yet the constitutional court is not willing to take a decision itself at this stage, but rather asks the European court of justice (ECJ) for “advice”.
I expect that the ECJ will again support the ECB, as it did with … [continue reading]Read more
The op-ed was first published on FT.com on August 9, 2017.
The gains would outweigh the costs and help chart a path for the continent’s future
As Germany heads towards its general election one of the debates in Berlin and elsewhere is what course the next government will pursue on Europe. In particular there is much speculation about a possible “grand bargain” between France and Germany that would see Berlin re-engage in reforming Europe.
At the centre of such a … [continue reading]Read more
The ECB keeps its options open about the exit of its expansionary monetary policy stance. There has been no significant change in ECB communication. The statement by President Draghi makes a very gradual tapering of its bond purchases in 2018 the most likely path. Many open questions about ECB monetary policy remain unanswered. It is still open when the ECB will end its bond purchases and when it will start raising interest rates.
The overreaction of financial markets to ECB … [continue reading]Read more
Economists criticize his decisions on German reunification and the euro, but he understood better the relationship between politics and economics.
Helmut Kohl’s death earlier this month has revived a contentious debate over his legacy. Although the former chancellor of Germany is widely considered to be a political genius, conventional wisdom holds that his economic policy was a failure. It’s time to reassess that view. Kohl was smarter on economics than many professional economists are willing to admit.
The arguments that … [continue reading]Read more
The ECB has now cautiously started its monetary policy reversal, even if only through words rather than deeds. The change in communication is an important step in the right direction.
Many in Germany consider the ECB’s exit as too slow. Many underestimate the importance of the ECB decision, which signals a sustained monetary policy tightening for the first time in more than ten years. The ECB is right in preparing the exit gradually and not abruptly in order not to … [continue reading]Read more
It is wise for the ECB to stick to its policy strategy and not let itself be impressed by criticism from Germany. The pressure from Germany for the ECB to end its expansionary policy stance prematurely has increased. The ECB is right to resist the pressure from Germany as the economic and financial risks for the euro area are still significant.
The ECB is only gradually getting closer to meeting its price stability mandate as in particular core inflation is … [continue reading]Read more
If Trump wants a Europe that takes care of its own needs, he needs a strong partner in Berlin.
Donald Trump’s relationship with Angela Merkel has gotten off to a rocky start. Trump has, effectively, singled out Germany and its chancellor as his main nemesis in Europe. He has criticized her for her policy toward refugees, for an unfair trade policy, and for a lack of leadership in Europe. For its part, the German government, alongside many of its European … [continue reading]Read more
January 20, 2017 is a historic day, with Donald Trump’s entry into office as the 45th U.S. President marking the beginning of a new era. Yet his inauguration is accompanied, at least among certain political circles, by a widespread anticipation of his failure – as well as the belief that it’s only a matter of time until everyone else catches on.
The prospect of a Trump presidency is generating collective concern around the globe: since he was elected in … [continue reading]Read more