The ECB’s zero interest rate policy: business associations put pressure on


Status: December 27, 2021 12:24 p.m.

In the German economy, displeasure with the ECB’s loose monetary policy is growing. In view of the high inflation, it should send the first exit signals, demand several associations.

The adherence of the European Central Bank (ECB) to its ultra-loose monetary policy is met with increasing lack of understanding in the German economy. In a survey published today by the Reuters news agency, several business associations are vehemently criticizing the bond purchases and the zero interest rate policy of the European monetary authorities.

“ECB is doing the wrong thing”

The foreign trade association is particularly dissatisfied. “The ECB is not doing too little, it is doing the wrong thing,” complains Dirk Jandura, President of the Federal Association of Wholesale, Foreign Trade and Services (BGA). “The fact that the ECB helps stabilize public finances in times of crisis can be politically justified – but not in the long term. “In the long term, this jeopardizes confidence in the currency through the destruction of the value of money. Jandura is therefore calling for a departure from the ECB’s previous loose monetary policy.

The chambers of commerce and industry are also critical of the currency watchdog’s strategy. In view of the high inflation rate of 5.2 percent recently, Peter Adrian, President of the German Chamber of Commerce and Industry, is concerned that the ECB is still “not showing any real exit signal from its loose monetary policy”.

ZDH demands “exit signal”

Similar sounds come from the Central Association of German Crafts (ZDH). “So that the current price dynamics do not solidify in the long term, the ECB must immediately give the first signals in the direction of a more cautious monetary policy”, the association demands. In addition, the collective bargaining partners would have to be careful that no wage-price spiral becomes entrenched.

The digital association Bitkom has expressed concern about several inflation drivers such as rising raw material and energy prices, CO2 pricing, persistent delivery bottlenecks and excess demand for many goods and products. “The central banks shouldn’t add fuel to the fire with a sustained policy of super cheap money,” warns Bitkom President Achim Berg. You should use the available instruments to counteract this.

Is the ECB fueling inflation?

For some time now, representatives of the German economy and banks have been accusing the ECB of fueling inflation with its flood of money, which it actually wants to keep in check. At the most recent meeting of the Governing Council, the monetary authorities sent the first signal that the ultra-loose monetary policy was coming to an end: the ECB will only purchase additional securities as part of its PEPP corona emergency program until the end of March.

However, the central bank is still investing billions in government bonds and corporate papers: The general APP purchasing program is being temporarily increased. Funds from expiring PEPP papers are to be reinvested by at least the end of 2024. ECB boss Christine Lagarde also let it be known that the zero interest rate policy should be continued in 2022.

ECB director expects inflation to weaken in 2022

The ECB expects inflation to weaken in 2022 due to the absence of special factors such as the sharp rise in oil prices after the corona shock. In addition, the withdrawal of the temporary VAT cut in Europe’s largest economy, Germany, is having an impact.

“We know that inflation will be high for a while, but also that it will decline over the course of next year. We are less certain about how fast and how strong the decline will be,” said ECB board member Isabel Schnabel recently published in the French daily “Le Monde”.

In the coming year, Europe’s monetary authorities are expecting an annual average price increase of 3.2 percent in the euro area, mainly because of energy prices. The ECB predicts 1.8 percent for 2023.

BGA and Bitkom also criticize the government

When it comes to dealing with inflation, the business associations also see federal politics as responsible. The BGA demands that the traffic light coalition should also check its measures for their price effects, “especially by keeping the change in energy supply and mobility affordable for citizens and businesses,” said BGA President Jandura.

Bitkom President Berg advises a moderate funding policy. “It makes no sense to spend huge sums of money on broadband funding if the capacity is lacking to block these additional funds,” he said. “Too much money can be counterproductive here and only leads to an increase in prices for network expansion and then for mobile and broadband services.” One billion euros per year to support network expansion in sparsely populated regions would be sufficient, according to Berg.


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