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The ECB can only tighten its monetary policy gradually

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]

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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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Mere criticism of the ECB is no solution

Joint op-ed by: , , , , , and 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]

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Greece’s debt burden can and must be lightened within the Euro

by Armin von Bogdandy, Marcel Fratzscher and Guntram B. Wolff on 5th August 2015

Perhaps the greatest damage caused by the confrontation with Greece is a general loss of confidence. If we want to get Greece back to growth, people, companies and investors have to regain confidence in the viability of the country. For this to work, a legitimate and competent government as well as an efficient administration and judiciary are essential. Yet the issue of debt sustainability is … [continue reading]

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Strong and Overwhelming Support for the ECB

Statement on the recommendation of the ECJ advocate general Cruz Villalón on bond purchasing of the ECB

The recommendation of the advocate general of the ECJ is an overwhelming success for the European Central Bank (ECB). Such a strong and overwhelming support for the ECB is surprising and could not have been expected. The decision finds the OMT program to constitute a legal instrument of monetary policy that pursues a legitimate objective. The recommendation is in clear contradiction to the … [continue reading]

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Germany’s Pyrrhic Victory

This article was first published on Project Syndicate on 10 February 2014.

The German Constitutional Court has ruled against the European Central Bank’s pledge to buy potentially unlimited quantities of distressed eurozone countries’ government bonds, and has called on the European Court of Justice (ECJ) to confirm its decision. Until that happens, the “outright monetary transactions” (OMT) scheme is effectively dead, weakening the ECB’s ability to act as an effective and credible financial-market backstop at a time when European governments … [continue reading]

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Temporary End of the OMT Programme

The German Constitutional Court today declared that the OMT programme of the European Central Bank (ECB) constitutes a violation of European law, and asked the European Court of Justice to confirm its ruling. The curiosity is that the German Constitutional Court has no mandate to issue such a ruling on European law, as stressed by the two dissenting judges.

The ruling implies a temporary end to the OMT programme, as it would be highly controversial for the ECB to implement … [continue reading]

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Taking the mandate of the ECB seriously

by Marcel Fratzscher, Michael Hüther and Guntram B. Wolff

This is a translation of the original German article published in FAZ on February 6, 2014.

European Central Bank President Draghi has played down German fears about high inflation and urged Germany not to ignore the positive impact of European monetary policy. Bundesbank president Weidmann has also recently stressed that there are no reasons for German concern about inflation. The public debate about European monetary policy, however, has become more heated … [continue reading]

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The Costs for Germany if the Eurozone Collapses

This article first appeared in the Autumn 2013 issue of Europe’s World (www.europesworld.org).

It’s not a message that public opinion in Germany wants to hear, but a collapse of the EU’s troubled single currency would have devastating economic, financial and political consequences for the eurozone’s largest and most successful member.

Germans have long been among the most europhile of countries, but their mood is turning against Europe and its common currency, the euro. There’s now an openly anti-euro … [continue reading]

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