"The ECB Risks Accusations of Stubbornness"


The ECB sticks to its current extremely expansive monetary policy.

Despite increasing economic and political confidence in the eurozone, the European Central Bank (ECB) is still yet to reach the point of changing its outlook regarding its monetary policy and has continued to suggest that even lower ECB interest rates are on the cards. Professor Friedrich Heinemann, head of the "Corporate Taxation and Public Finance" Research Department at the Mannheim Centre for European Economic Research (ZEW), comments on the ECB's decision.

"The ECB is increasingly running the risk of not seizing the right moment to change the message they are sending. The cautious wording of the bank's monthly communiques is becoming less and less reflective of the available data, which has shown a marked improvement.

If Emmanuel Macron is confirmed as the next French President, ECB President Mario Draghi will have to put his cards on the table and lay out exactly when and how the bank is going phase out its current extremely expansive monetary policy. Otherwise he is likely to be accused of stubbornness by ECB observers.

Though the bond purchase programme and negative interest rates are helping the economic climate, the negative side effects of these policies are having a significantly increasing impact on the stability of banks. The ECB should also avoid creating the impression that its monetary policy is biased towards the interests of Member States who are more reluctant to reform."

For further information please contact

Prof. Dr. Friedrich Heinemann, Phone +49 (0)621/1235-149, E-mail heinemann@zew.de