“We Need a Debate on Financial Literacy and Better Investment Advice, Not a Ban on Negative Interest Rates”


The monetary policy of the European Central Bank has been deemed unconstitutional in an expert opinion by former Constitutional Court judge Paul Kirchhof. According to the expert report, the ECB’s policy represents an expropriation of savers and violates the right to private property. Professor Friedrich Heinemann, head of the Research Department “Corporate Taxation and Public Finance” at ZEW Mannheim, comments on this matter:

“The view that negative key interest rates represent an unjustified expropriation of savers is not convincing from an economic perspective. Even in D-Mark times, there were long periods when savers lost assets due to inflation if they had money lying idle in their savings accounts. It would be against all free-market logic to guarantee savers positive returns even if they do not want to take any financial risk in their investment. The ECB’s monetary policy can be criticised for many reasons. However, it is hardly justifiable to deny the ECB the right to set key interest rates below zero in times of low inflation. It is also not true that small savers do not have access to alternative investments. Thanks to highly developed market for investment funds, every saver can invest cost-effectively and broadly diversified in the global equity markets even with the smallest amounts. Against the backdrop of persistent negative interest rates, we need a debate on financial literacy and better investment advice rather than an economically unjustifiable ban on negative interest rates.”