How Germany strives to mold ECB’s monetary policy to her interests

European Parliament, ECON Committee meeting, 'Vote and appointment of a member of the Executive Board of the European Central Bank’. On 13 January 2014, Sabine Lautenschläger (first from right) was approved by the previous EU legislative as an ECB executive. (European Parliament Audiovisual Services, 13/1/2014, ¬© European Union 2014 EP).

European Parliament, ECON Committee meeting, ‘Vote and appointment of a member of the Executive Board of the European Central Bank’. On 13 January 2014, Sabine Lautenschläger (first from right) was approved by the previous EU legislative as an ECB executive. (European Parliament Audiovisual Services, 13/1/2014, ¬© European Union 2014 EP).

Sabine Lautenschläger, a Member of the Executive Board of the European Central Bank and at the same time Vice-Chair of the Supervisory Board of the Single Supervisory Mechanism is in itself a living proof that euro area is a Germanic monetary zone, in reality an extension of the zone of the German mark. According to market sources there is a conflict of interest between formulating monetary policy in ECB’s Executive Board and at the same time supervising the banking industry. Sabine, instead of lying low about this fact, she insists to noisily protect the interests of her country, despite her mandate to impartially care about the interests of all euro area member states.

Last week she overtly tried to impair those mainstream ECB policies which the German government and the Bundesbank (the German central bank) have strongly criticized and tried to block. The German central bank vehemently objected ECB’s decision to loosen up its monetary policy, while the Berlin government strongly opposed the low-interest rate strategy. Sabine doesn’t even recognize the fact that Eurozone suffers of negative inflation, obviously forgetting that in many euro area countries consumer prices keep falling steadily for some years now. Let’s take one thing at a time.

Conflict of interest

On 2 April the prestigious German weekly business magazine ‘Wirtschaftswoche’ published an interview of Sabine Lautenschläger. She bypassed quite superficially the question about the possible conflict of interests involving her responsibility of drawing up monetary policy and simultaneously supervising the banking industry being affected by it. A catch-22 situation may arise if these two roles are performed by one person. Suppose that the monetary policy puzzles the banks and then this same official, under the supervisor’s hat, comes back and reprimands one or more lenders for being badly affected by the monetary policy. In answering that she just said, “I always clarify whether I am speaking as a supervisor or as a monetary policy-maker”.

This antithesis is nothing however compared with her open endeavors to debilitate the mainstream monetary policies of ECB. Of course every member of the central bank’s Executive Board has the right of having his/hers own opinions. But on this level their views and objections should be confined within the walls of the meeting room. Sabine’s position is quite different from the situation of the Bundesbank President Jens Weidmann, the other German who participates in ECB’s Governing Council.

Executive Board and Governing Council

Lautenschläger participates in both those decision-making bodies, the Board and the Council, while Weidmann participates only in the latter. In a way the members of the Council are in a more distant position from ECB’s heart that beats in the Board. It must be mentioned that the Board has just six members compared with the 25 of the Council. In a way the Board is the government of ECB, while the Council is its legislative body. This said, Sabine should have raised her opinions about monetary policy only during a Board meeting, while Weidmann is fairly free to air his objections. It’s him who represents Germany in the ECB as a member of the Council. Sabine’s position in the Board is located in the heart of the central bank, and consequently she is not allowed to openly advertise her objections and stand up for her country.

Cheaper money? Why?

Now let’s see what she said when asked about the function of ECB’s low-interest rates policy. She commented that “The low interest rate environment is certainly a challenge for the banks. On top of that, in particular the German banking sector is marked by strong competitive and price pressure. This means that some business models will drift into a precarious situation over the medium and long-term”. Not a word about the growth effect that the low interest rates may have on the Eurozone economies which are haunted from recession for years now.

This approach falls within the German monetary orthodox ideology, where money doesn’t matter and only hard labor can fuel growth. As if the US, British, Japanese and many other central bank governors who massively use cheap money policies don’t know a thing about economics. She worries about the ‘long term’ effect of the cheap money strategy but she forgets that “in the long run we are all dead”. However, it’s not only ideology that Germany cares for. Being the only Eurozone member state with colossal reserves, this country strives to keep yields on the high side. The huge German savings deposit balances and the immense insurance companies’ assets cry for higher returns. But can the rest of Eurozone pay for them?

Buy government bonds? Oh no!

When it came to the government bond purchasing program that the ECB started in March, Sabine commented that “Given the low-interest rates in the euro area, I have my doubts as to whether the economic effects of the purchase program will be able to reach the desired order of magnitude…” and then she added “… I am absolutely aware of the danger that the low costs of financing alleviate the pressure on governments to consolidate their public budgets and tackle the necessary structural reforms”. Again she campaigns in favor of the austere Germanic economic ideology, in direct contrast of what every other developed country did to overcome the devastating effects of the 2008-2010 financial crisis.

Undoubtedly Germany has managed to place her execs to key positions in all and every European Union institution, at numbers and ranks largely exceeding the weight of country. This author has no data to support this allegation, but the taciturn work and the burgeoning mightiness of Berlin’s economic powers during the past years is now bearing fruits. Sabine Lautenschläger’s case is a strong proof of that.

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

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

Young people meet in Malta to shape the future of Europe

As human caravan moves through Mexico, ‘full respect’ needed for national control of borders: UN chief

‘Continue working together’ UN chief urges DR Congo, as country heads to polls

World Cancer Day: Early cervical cancer diagnosis could save lives of over 300,000 women

UN launches plan to promote peace, inclusive growth in Africa’s Sahel

UN chief calls for ‘increased commitment’ to resolution on 10th anniversary of Georgia conflict

Eurozone at risk of home-made deflation and recession

UN refugee agency ‘deeply shocked’ at stabbing death of ‘deeply courageous’ Polish mayor

Health Education, is it a necessity?

The Brussels bureaucracy blocks the Youth Guarantee scheme

A Sting Exclusive: “Leading by example! EU must push for UN deal to avoid dangerous climate change”, European Parliament Vice-President Ulrike Lunacek cries out from Brussels

10th ASEM in Milan and the importance of being one: EU’s big challenge on the way to China

How close is the new financial Armageddon? IMF gives some hints

The big five EU telecom operators in dire straights

The Brexit factor in the US-China trade war and other conflicts

Two States ‘side-by-side’ is the ‘peaceful and just solution’ for Israel-Palestine conflict: Guterres

Fresh airstrikes kill dozens in conflict-ravaged Syria

UN and partners appeal for $920 million to meet ‘dire needs’ of Rohingya refugees

Medical Education is #NotATarget

EU Ambassadors in the EP: a multilateral approach to global challenges needed

EU budget: Making the EU fit for its role as strong global actor

The movement of anti-vaccers: taking humanity back 200 years

EU Parliament: Deposit guarantee and trading platform transparency sought

Main results of Environment Council of 09 October 2018

10 cities are predicted to gain megacity status by 2030

Why Italy will not follow the Greek road; Eurozone to change or unravel

Black Panther’s ‘General Okoye’ joins the fight against gender-based violence

MEPs call on EU countries to end precarious employment practices

The battle for the 2016 EU Budget to shake the Union; Commission and Parliament vs. Germany

‘Leaders who sanction hate speech’ encourage citizens to do likewise, UN communications chief tells Holocaust remembrance event

This project in India helps people and tigers co-exist peacefully

ILO’s Bureau for Employers´Activities to publish new study on women in business and management

It’s not summer holidays what lead to the bad August of the German economy

Investing in rural women and girls, ‘essential’ for everyone’s future: UN chief

COP21 Breaking News_03 December: Europe’s children urge leaders to commit to climate action at UN Climate Summit in Paris

European Commissioner for Youth wants young people to be at heart of policy making

The global economy isn’t working for women. Here’s what world leaders must do

Eurozone: Inflation plunge to 0.4% in July may trigger cataclysmic developments

How the United States can win back its manufacturing mojo

EYE to kick off on Friday: 8000+ young people discussing the future of Europe 1 – 2 June

India’s economy is growing fast, but its poorest areas lag behind. Here’s why this could be about to change

EU Copyright Directive: Google News threatens to leave Europe while media startups increasingly worry

Ecofin: ‘The Friday battle’ for the banking union

How fungi could save the world

UN relief official in Yemen condemns ‘horrific’ attack on passenger buses

Nigeria: UN chief ‘appalled’ by killing of aid worker; calls for release of remaining hostages

Germany openly seeks more advantages for its banks

A young student discusses the determinants of migration in the European Union

Erdogan vies to become Middle East Sultan over Khashoggi’s killing

Robots aren’t stealing all our jobs, says the World Bank’s chief economist

EU Budget 2019 deal: EP boosts support for researchers and the young

European Commission recommends to the European Council (Article 50) to find that decisive progress has been made in Brexit negotiations

European Semester Autumn Package: Bolstering inclusive and sustainable growth

Google prepares to final EU judgement over Android antitrust case

800,000 people commit suicide every year: WHO

A day in the life of a Rohingya refugee

‘Well-being of two million’ in Gaza at stake as emergency fuel runs dry: UN humanitarian coordinator

Eurozone slowly but surely builds its Banking Union

The economic cost of anti-vaccination movements in Italy

MWC 2016 LIVE: Mobile World Congress shows off planes, trams and automobiles

More Stings?

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