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]Read more
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]Read more
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]Read more
In the latest Spotlight, DIW President Marcel Fratzscher explains why helicopter money offers the possibility to “circumvent” the banking system and make loans and funding directly available to households and private companies, which would help the ECB to fulfill their price stability mandate again.… [continue reading]Read more
- 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.
Joint op-ed by: Marcel Fratzscher, Reint Gropp, Hans-Helmut Kotz, Jan Krahnen, Christian Odendahl, Beatrice Weder di Mauro and Guntram B. Wolff published on Bruegel.org. A shorter version of this op-ed was published in FAZ.
The eurozone remains in a deep, largely macro-economic crisis. A robust global economy and falling oil prices have supported Europe’s economy for some time, but by now it is clear that the eurozone will only be able to pull itself … [continue reading]Read more
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]Read more
The European Central Bank decision to stay course does not come as a surprise. The weaker projected inflation and growth figures were expected. The ECB is caught in a difficult dilemma: with its projections, the ECB admits that it will miss its price stability objective over the medium term. But it is wise for the ECB to follow a wait-and-see strategy. Global uncertainty has risen and is very high. The biggest concern for the ECB is not China or the … [continue reading]Read more