Summary: The monetary experiments central banks are running in Japan, Europe, and America will shape the global economy of the 21st century — no matter what the result. Here Stratfor looks at the growing tensions between the ECB and Germany. It’s a sound analysis. But note Stratfor’s top-down perspective. By “Germany” they refer not to its people, but to its corporations and elites. Stratfor provides a useful look at how the 1% (and their minions) see the world.
Germany and the European Central Bank Face Off
Stratfor, 20 April 2016
- The European Central Bank (ECB) looks as though it will stay on the course of loose monetary policy in the coming months.
- Germany’s insurance and banking sectors will suffer as a result, whipping up anti-ECB sentiment among German voters.
- The frustration of German voters will increase friction between Germany and the ECB.
The ECB is gearing up to hold its first monetary policy meeting since bank President Mario Draghi announced a new package of measures that included more quantitative easing and an interest cut that will push rates, already in the negatives, even lower. During the April 21 meeting, Draghi will probably address concerns raised by German Finance Minister Wolfgang Schaeuble that loose ECB policies created and fueled the rise of the German opposition party Alternative for Germany (AfD). As Schaeuble’s statements highlight, the relationship between Germany and the ECB is antagonistic — and it is going to get worse.
Because the eurozone lacks a unified fiscal institution for its central bank, the ECB, to collaborate with, the bank plays more of a political role than peer institutions such as the U.S. Federal Reserve do. Unlike the Fed, the ECB has to balance the competing demands of the national economies under its jurisdiction. Aiding one country’s economy often means harming another’s.
Northern European countries such as Germany have historically preferred a tighter monetary policy so as to control inflation. Southern European countries such as Italy, by contrast, are more accustomed to looser monetary policy and to the economic stimulation that follows. Their confrontation over monetary policy has snowballed since the beginning of the global financial crisis, and the ECB is stuck in the middle.