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In a foolish as well as never-ending attempt to prevent price deflation and revive growth, the ECB Urges Berlin to Cut Taxes and Spend.
Berlin has hit back at calls from a top European Central Bank official urging Germany to spend more to help the eurozone escape from its economic malaise.One must differentiate between the official views of the ECB and the views of a pair of ECB governors and that of Mario Draghi.
In one of the most politically charged statements to come from the central bank, Benoît Cœuré, a member of the ECB’s executive board, urged Berlin to increase borrowing in order to support investment and cut taxes.
The article follows calls by ECB president Mario Draghi last month for governments to match the central bank’s steps in loosening monetary policy with growth-boosting measures. However, Mr Cœuré and Mr Asmussen have gone further than Mr Draghi, who stopped short of asking Germany to raid its fiscal coffers.
The German government reacted angrily at the op-ed, which comes ahead of French prime minister Manuel Valls’ visit to Germany on Monday.
“The article does not reflect current government policy and we don’t agree,” a spokesperson for Germany’s finance ministry said. “Complaints that the German government supposedly does not invest enough are unfounded. We do invest significantly.”
Nonetheless, the position of Benoît Cœuré closely matches that ECB president Mario Draghi who hopes to spur lending, especially to SMEs (small and medium-sized businesses) via a trillion euro TLTRO scheme.
The only difference is that Draghi did not come out and say Germany specifically. Draghi simply wants more spending across the board.
Mike "Mish" Shedlock