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Collateral damage from ECB strategy: ultra-loose monetary policy has little benefit - and harms many


Dieter, Heribert

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Corporate Editor Stiftung Wissenschaft und Politik -SWP- Deutsches Institut für Internationale Politik und Sicherheit
Abstract "2015 will be a defining year for the European Central Bank. It is expected to start buying up government bonds from member states from the end of January. This means the ECB is entering into significant risk and becoming dependent on the fiscal policy of the member states. As the example of Greece demonstrates, the central bank is thus making itself -along with other state creditors- vulnerable to blackmail. Governments can threaten to stop servicing their debt, forcing the ECB to continue financing them. Furthermore, the reasoning for starting to finance member states is spurious. The supposed risks of deflation are actually small: while the prices of apples and heating oil have fallen, those of machine tools and consumer durables have not. At the same time, it is becoming increasingly apparent that the depreciation of the euro brought about by the loose monetary policy harbours huge disadvantages for many of Europe’s trade partners - from Switzerland to the US." (Autorenreferat)
Keywords EU; European Central Bank; monetary policy; credit policy; deflation; steering; monetary economy
Classification Economic Policy
Document language English
Publication Year 2015
City Berlin
Page/Pages 8 p.
Series SWP Comments, 3/2015
ISSN 1861-1761
Status Published Version; reviewed
Licence Deposit Licence - No Redistribution, No Modifications