Paris, Washington, IMF against Berlin and ECB on money and interest

Mario Draghi, Governor of ECB and Chairman of the Financial Stability Board, on the left, and Olli Rehn, Member of the EC in charge of Economic and Monetary Affairs, at the conference to strengthen the foundations of integrated and stable financial markets, organised jointly by the EC and ECB. (EC Audiovisual Services).

Mario Draghi, Governor of ECB and Chairman of the Financial Stability Board, on the left, and Olli Rehn, Member of the EC in charge of Economic and Monetary Affairs, at the conference to strengthen the foundations of integrated and stable financial markets, organised jointly by the EC and ECB. (EC Audiovisual Services).

Inflation in Eurozone is steadily following a downward path for months now, having already reached levels below the ECB benchmark of 2%, being estimated by Eurostat, the EU statistical service, at 1.8% in February. At the same time, the euro area is bound to be announced in technical recession by 31 March, for having recorded negative growth rates in two consecutive quarters. Eurostat said last week that Eurozone lost 0.6% of its GDP during the last quarter of 2012, while most economic analysts are predicting that the negative performance will continue well into the first three-month period of 2013. Yet the European Central Bank (ECB) does nothing.

Any other central bank worthy of its name would have already started making plans for interest rate cuts and liquidity injections to revive the ailing economy. The Bank of Japan has already announced such plans not paying attention if the yen’s parity will plunge.The American central bank, the Fed, is following supportive policies for the real economy all along its long history. Even the most conservative Swiss National Bank has made clear that it will use freely its money printing right, to keep the parity of the Swiss franc at 1.2 with the euro, in order to help the alpine country’s economy going.

Germany controls the ECB?

In short, all central banks almost invariably are accommodating their country’s real economy by appropriate monetary measures like interest rate reductions and liquidity injections. The problem with ECB is that it has no…country, or is it that it is based on German soil and probably cares only for Germany’s economy, neglecting all the rest sixteen nations? The Sting has repeatedly tackled this problem. Last time, it curried an article with this title: “Is ECB helping Germany to buy cheaply the rest of Europe?”

With that article the Sting predicted that the ECB will do nothing this week to alleviate the ailing economies of many Eurozone countries and that the monthly gathering of its governing council, which took place last Thursday 7 February, will change nothing. It turned out to be exactly like that.

Last Tuesday, the Sting wrote: ”Presumably there will be no change of ECB’s main interest rate…Nor any other major policy changes are expected to be announced by Mario Draghi…At the same time, however, all over Eurozone the local financial markets are at boiling point. In Italy, the borrowing cost…oscillates now at three month highs…Cyprus is threatened to be kicked out from the euro…and Greece, Portugal, Spain and Ireland still paying the dearest price for Eurozone’s sovereign debt crisis”.

France, US and IMF agree

Fortunately, the decision not to reduce interest rates was not taken uncontested during last Thursday’s governing council of ECB. Mario Draghi, afterwards, during the traditional Press conference, in answering a journalist’s question, if the decision not to take supportive measures for the real economy, like reduced interest rates, said “yes, we have discussed the possibility of doing it. So, there was discussion. The prevailing consensus was to leave the rates unchanged”.

This is a plain recognition that within the ECB there is an ongoing fight. The two sides are well-shaped. There are those who, guided by France, believe that the central bank is there to help with monetary measures the economies and of all Eurozone member states, and Germany plus Austria and Finland on the other side of the fence believing the opposite. It seems that Berlin insists that ECB is just the continuation of the Bundesbank, the country’s central bank.

It is obvious that the fight between the two sides will continue and the outcome will be some kind of compromise. However, this confrontation between the two Eurozone’s heavyweights is taking world-wide dimensions. Already, the International Monetary Fund, under the influence of Washington has already taken the side of France, for many reasons.

Yesterday, Christine Lagarde, IMF’s general manager speaking from Dublin, came out very strongly, asking the ECB to reduce its interest rates. Lagarde went even further asking the ECB to help Portugal and Ireland to come to markets on their own account. In this way the IMF’s head did not want to leave the slightest doubt, that the IMF and the US are clearly supporting France, in asking relaxed monetary measures from Eurozone’s central bank. Obviously, France and the US are convinced that Germany wants to bring the rest of Eurozone’s countries to their knees, in order to buy their assets cheaply. It’s clear that Paris and Washington are in close cooperation in confronting Germany.

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

It’s time to get serious about the causes of pandemics: UN report

When will Eurozone’s unemployment rate stop being Europe’s worst nightmare?

Gender equality within junior enterprises: the effect of President’s gender

Planes can now fly for 21 hours non-stop. But are people ready?

COP21 Breaking News: China has promised to cut emissions from its coal power plants by 60% by 2020

Drought in Europe: Commission presents additional measures to support farmers

Flexible jobs can make work-life balance worse, a German study finds

Commission tries to solidify the EU statistical system

Youth not prioritised in new Commission

New rules to help consumers join forces to seek compensation

YouTube stars get creative at UN, to promote tolerance

Renewable energy can get India’s returned rural migrants back to work

The Chinese solar panels suddenly became too cheap for Europe

With human rights under attack, UN chief unveils blueprint for positive change

What can each individual do to lessen the burden of mental health in times of the pandemic?

Millennials (and Gen X) – Here are the steps you should take to secure your financial future

In New Zealand it takes less than a day to start a business

Merkel had it her way with the refugees & immigrants but can Greece and Turkey deliver?

A Sting Exclusive: “Our Great Awakening, Rebuilding in a Culture of Collective Trauma”, by Dr Hokemeyer

It’s time to switch to a four-day working week, say these two Davos experts

Inaction on obesity stands in the way of sustainable development

“China will strive to enhance the performance of economic growth”, President Xi highlights from the World Economic Forum 2017 in Davos

Global spotlight on world drug problem ‘is personal’ for many families, says UN chief

Deaf advocate voices importance of sign languages as UN marks first commemoration

First EU-wide protection for whistle-blowers agreed

Senior UN official strongly condemns Southern California synagogue attack

Eurozone retail sales fall shows recession

Using the quarantine to your advantage

UN’s Guterres condemns ongoing airstrikes on Syria’s hospitals, medical workers

Which countries’ workers spend the longest (and shortest) in retirement?

“Decent working conditions for the young health workforce: what are the challenges and can we find solutions?”

Big world banks to pay $ 4.95bn for cheating customers; Is it a punishment or a gentle caress?

This ‘hidden killer’ is responsible for one in five deaths, and you might never have heard of it

Brexit and migration dominates the debate on October’s EU summit

Mental health as a tool of survival at the Pandemic

Progress made in UN talks to end Yemen war, Envoy lauds ‘positive and serious spirit’

Why Microsoft is a regular to Almunia’s

The Eurogroup has set Cyprus on fire

The Parliament defies a politically biased Banking Union

End discrimination against women and children affected by leprosy

The dark side of Diwali, festival of lights

Libya: €2 million in humanitarian assistance to cover basic needs

Antitrust: Commission provides guidance on allowing limited cooperation among businesses, especially for critical hospital medicines during the coronavirus outbreak

Scale of displacement across Myanmar ‘very difficult to gauge’, says UN refugee agency

How to future-proof India’s economy

Our indispensable problem: the paradox of modern plastics

Quelling antimicrobial resistance: a clinico-pharmacological exigency

A Sting Exclusive: “Our ambition is by 2020 Indonesia to become an emerging power of World’s Maritime Access”, reveals the Chargé d’Affaires at the Embassy of Indonesia in Brussels, treating WEF, ASEAN and EU-Indonesia relations on the eve of the World Economic Forum East Asia 2015 in Jakarta

This is what has led to the George Floyd protests in the United States

Why the 21st century’s biggest health challenge is our shared responsibility

Conditions deteriorating alarmingly in Yemen, warns senior UN official

ECB: Reaching the limits of its mandate to revive the Eurozone economy

Canada and EU officially sign the trade agreement that could open-up the road to TTIP

OECD leading multilateral efforts to address tax challenges from digitalisation of the economy

Franchise India 2016, returns in 14th year 

WEF Davos 2016 LIVE: “Chinese economy has great potential, resilience and ample space for policy adjustment”, China’s Vice President Li Yuanchao reassures from Davos

Syrian civilians must be protected amid ISIL executions and airstrikes: Bachelet

The EU lets the bankers go on rigging the benchmarks

‘Chance for peace’ in South Sudan finally within reach, declares UN Peacekeeping chief

Khashoggi murder trials must public and meet international standards, UN expert urges

More Stings?

Advertising

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s