German economists criticise ECB measures

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Following Draghi’s announcement of  further rate cuts and to speed up the process for ABS purchases, a number of leading German economists have expressed criticism.

“The ECB used up its ammunition much too early and cut interest rates by too much. Now it is in a liquidity trap. At this point, there is not much it can do” said Hans-Werner Sinn, president of the German ifo Institute.

“We are increasingly under the impression that the ECB is offering a belated summer sale on the Euro,” said Liane Bucholz (pictured), president of the Association of German Public Banks, responding to the impact on currency values.

“The rate cut to 0.05% is unlikely to revive lending to SME’s as anticipated, as even the lowest level of interest rates will not be able to improve the willingness of eurozone banks to take risks” she adds.

Critics of the ECB measures reportedly also include Jens Weidmann, the president of the German Bundesbank, who disagreed with both rate cuts and ABS purchases, according to Bloomberg, which cites ECB sources.

Meanwhile, German stock market index DAX rose following the announcement of ECB measures. “These decisions reaffirm the impression that the ECB is extraordinarily concerned about the health of the Eurozone” comment’s Holger Fahrinkrug, chief economist for BNY Mellon Boutique Meriten.

“We believe that the planned combination of TLTRO’s, ABS and covered bond purchases will show their effect over the coming months,” he says. While TLTRO’s and ABS purchases will supersede other refinancing operations, they will have a positive impact on liquidity provisions and bank balance sheets,” Fahrinkrug adds.

ABOUT THE AUTHOR
Mona Dohle
Mona Dohle speaks German and Dutch, she is DACH & Benelux Correspondent for InvestmentEurope. Prior to that, she worked as a journalist in Egypt and Palestine. She started her career as a journalist working for a local German newspaper. Mona graduated with an MSc in Development Studies from SOAS and has completed the CISI Certificate in International Wealth and Investment Management.

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