German political spillovers: ECB’s Draghi resists first attacks by AfD

European Parliament. Economic Committee meeting – Dialogue with Mario Draghi, President of the European Central Bank. Event Date: 25/09/2017. Copyright: © European Union 2017- Source: EP. Brussels, Belgium.

Last Monday, Mario Draghi, President of the European Central Bank, speaking at the Economic Committee of the European Parliament had the opportunity to test the grounds and familiarize himself with the nature of political climate he may come across after the German elections. He had a heated exchange with the head of the AfD group of European parliamentarians, a former leader of this party. But let’s start from the beginning.

On Sunday 24 September Chancellor Angela Merkel succeeded in holding on to the country’s top job, but her powers to set the tunes are gravely compromised. She has repeatedly and effectively backed Draghi’s choices at crucial moments, but the right and Eurosceptic turn of the German voters may impede that. The extreme right wing, almost fascist, aggressively anti-European, chauvinistic, xenophobic and anti-immigration AfD party (Alternative for Germany) entered the country’s federal legislative for the first time, having gained 12.8% of the ballots and 85 seats in the Bundestag (German Federal Parliament).

A game changer?

Last election also brought again in the Bundestag the FDP, the Free Democrats Party, after a four years absence. This party is a rather Eurosceptic, conservative, nationalistic, right wing and dubbed as pro-business. On the same day the two major parties, the center-right Christian Democrats of the CDU/CSU alliance and the center-left Social Democrats of SPD, jointly lost around 15% of their votes. Those two parties in close cooperation during the past sixty years have defined between them Germany’s position in Europe and, in doing so, have even redrawn the map of the Old Continent.

All along those years, 80% of the Germans considered themselves politically as centrists. It seems that this is not like that anymore. Not only the two center-something parties have lost much of their electoral appeal, but they are about to break the tradition of forming between them coalition administrations. They both took Germany out from her economic and political hurdles of the early 2000’s and made her the largest exporter of the planet today.

A heavy political cost

The task was herculean and, as it turns out, was carried out at a great political cost for the two largest parties. The social-democrats blinked first. Martin Schulz, the new leader of SPD, rushed to declare last Sunday night that his party won’t act any more as a junior partner of CDU/CSU in a Merkel government. Then, the only viable in Parliament administration she can now form is a colorful coalition of…antipodes.

This is an eventually tripartite government with CDU/CSU as its main pillar, plus the FDP and the left leaning, pro European and anti-austerity Greens. This mathematically possible but politically incoherent coalition government is dubbed ‘Jamaica’, because the colors of those three groups are black, yellow and green, as the flag of the Caribbean island nation. Under such a combination of opposites, deciding policies may beat even the famed conciliatory abilities of the Chancellor.

Full of terms and conditions

Already, Christian Lindner, the middle-aged but paying much attention to look boyish, leader of the FDP has claimed for his party and understandably for himself the portfolio of Finance. If this is the case, the incumbent Minister, the renowned Wolfgang Schäuble 75, would have to change post. It’s more or less final the latter will remain in the cabinet at a ministry… close to Finance.

Quite predictably then, Lindner, being greatly preoccupied with his looks, will find it difficult to act without the consent of the old wolf, who will continue to authentically represent the deep German business-state interlock. Schäuble also possesses a strong European power network of personal contacts Lindner cannot beat. In any case, even under the leader of FDP, the German Finance ministry’s positions in the two main fronts, budget and Eurozone, will be rather more Schäubleish than less. That’s why Draghi will find it more difficult to sail under stronger adverse wind. He had a first taste of that last Monday in the European Parliament.

A right turn

Coming back to our introductory remarks, it must be explained first, why the AfD extremists have managed to gain some seats in the European Parliament, before entering the Bundestag. This is due to the electoral system of the EU’s legislative. Every EU country is one big constituency and those who pass the vote threshold are elected. On Monday, 25 September it was the head of the EU Parliamentary group of AfD deputies, who tried to press the President of the ECB. The key issue was central bank’s super relaxed monetary policy that is money printing and zero interest rates.

Bernd Lucke, European legislator and former leader of AfD, who was attacked not without good reason as ‘fascist’, repeatedly reprimanded Draghi for his monetary accommodative measures. The core of Lucke’s criticism was that the ECB helps the ‘lazy’ southerners to refinance their debts at low interest rates and at the same time denying any returns to the bank deposits of the Germans. These are the arguments the AfD over exploited to get 12.8% last Sunday and seemingly won’t hesitate to continue on the same direction.

Draghi’s answer

In any case, Draghi answered in his usual matter of fact way. He used the same arguments as when confronting for many years now Jens Weidmann, the Governor of Bundebank, the German central bank. Germany, under the strong guidance of Schäuble and his ‘protégé’ Weidmann has been opposing all the extraordinary measures which Draghi has introduced so far, initially to save the euro in 2012 and subsequently to support growth and revitalize the dying inflation rate.

On the same occasion Draghi reassured the MEPs of the Economic Committee of the European Parliament, including Lucke, that the ECB will continue injecting tens of billions of freshly printed euros every month into Eurozone, and stick to its zero interest rate. So far, the ECB has printed and distributed €2.2 trillion in trying to revive inflation and support growth in all Eurozone, not just in Germany. Now, however, Draghi said there is one more reason to continue on the same line of extraordinary measures. This is the appreciation of the foreign value of the euro, which undermines growth in all member states.

According to Reuters, he told the European legislators that, “ample ECB accommodation is still needed because a premature and hasty move could unravel its work…we also know that a very substantial degree of monetary accommodation is still needed for the upward inflation path to materialize… We can’t afford hasty moves…We also have to be sensitive to the danger of not halting a recovery through hasty monetary-policy decision making”.

Then, Draghi confronted the new danger, the appreciation of the euro, by saying, ”We still see some uncertainties with respect to the medium-term inflation outlook..Most notably, the recent volatility in the exchange rate represents a source of uncertainty which requires monitoring…We therefore need to be patient and persistent.”

The ECB doesn’t blink

In conclusion, the Germans and whichever Schäubleistic personality is to head the ministry of Finance, should comprehend –  that the ECB’s answer will be the same to all their denigration of the very low interest rates and new money printing. After last Sunday’s earthquake, Germany may have shifted to the right but the rest of Europe stays where it is, as Draghi underlined. It’s the task of the German mainstream political and economic elites to understand that. If they don’t themselves become more popular, by favoring higher wages, increased incomes for the many and more investments at home, somebody else will do it for them. This has happened before…in 1933

 

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

Close to 7,000 evacuated from Syrian towns after enduring nearly 3-year siege

Infrastructural and system barriers to Universal Health Coverage: get in my patient’s shoes

This plastic-free bag dissolves in water

Charles Michel advocates a strong Europe that acts where it can add real value

Can elections in Italy and Germany derail Eurozone?

Celebrating the Customs Union: the world’s largest trading bloc turns 50

The developing countries keep the world going

The EU lets the bankers go on rigging the benchmarks

Why do US presidential elections last so long? And 4 other things you need to know

From sun-powered trikes to mind-controlled TV – 10 top gadgets unveiled at CES 2020

G20 LIVE: “Our response needs to be robust…otherwise we will only find the fire we are trying to put out”, UN Secretary General Ban Ki-moon just lit up G20 in Antalya Turkey

5G mobile is nearly here – but we should share networks to make it affordable

How Mobile Technology is Changing the Healthcare System

COP21 Breaking News: Conference of Youth Focuses on Hard Skills to Drive Greater Climate Action

As the year closes out, UN political chief talks the art of diplomacy – and crises to watch in 2019.

‘Historic’ moment: Palestine takes reins of UN coalition of developing countries

Coronavirus: €117 million granted for treatments and diagnostics through the Innovative Medicines Initiative

Africa-Europe Alliance: first projects kicked off just three months after launch

He died so I could live: UN peacekeeper pays tribute to fallen colleague

3 natural mysteries that could be explained by quantum physics

ITU Telecom World 2017: exploring smart digital transformation

How to get ageing populations to invest in their health

Window for a Brexit deal: Brussels to think again May’s proposal

State aid: Commission approves €6 billion Italian schemes to support SMEs affected by coronavirus outbreak

Commission launches the Fit for Future Platform and invites experts to join

Taxation: Commission refers Poland to Court for failing to remove certain tax exemptions on the use of energy products by highly polluting businesses

European Commission welcomes the positive assessment about how it has managed the EU budget

High internet taxes are restricting access and slowing economic growth

Both sides in Libya conflict agree need for lasting ceasefire: UN negotiator

Historic first, as Tolstoy’s War and Peace lands in Geneva, to mark international centenary

France is building a village for people with Alzheimer’s

World simply ‘not on track’ to slow climate change this year: UN weather agency

This is how New York plans to end its car culture

These tech start-ups are changing what it means to farm

COP24 addresses climate change displacement ahead of crunch migration meeting

Here’s how to bring agility into the boardroom

Global migration, by the numbers: who migrates, where they go and why

Draghi tells the Parliament the ECB to use all its weaponry; euro slides to parity with the dollar

What could a no-deal Brexit mean for developing countries?

MEPs condemn criminalisation of sex education in Poland

7 ways to break the fast fashion habit – and save the planet

Horn of Africa: UN chief welcomes Djibouti agreement between Eritrea, Ethiopia and Somalia

Meet the man who drove from the Netherlands to Australia without visiting a gas station

Will AI make the gender gap in the workplace harder to close?

Mergers: Commission approves acquisition of Bayer’s animal health division by Elanco, subject to conditions

‘Democratic aspirations of the Sudanese people’ must be met urges Guterres, following military removal of al-Bashir from power

Make the internet safer: stop using passwords

18th EU Eco-Innovation Forum in Barcelona shows the way for Europe’s new Environmental policy

Crimea: The last bloodless secession of a Ukraine region?

How do we go about improving mental health in the community and reducing suicide rates in the 15-29 age group?

Coronavirus: First case confirmed in Gulf region, more than 6,000 worldwide

Philippe de Backer of ALDE at European Business Summit 2015 stresses: “Reinvent your business”

Kenya wants to run entirely on green energy by 2020

3 things to know about women in STEM

Welcome to the COVID-19 era of world sport

We need a global convention to end workplace sexual harassment

International Women’s Day: Where does she belong?

$683 million appeal to deliver reproductive health services, where they’re most needed

Does the sharing economy truly know how to share?

Parliament approves €500 million for schooling of refugee children in Turkey

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