21 July 2013

Handelsblatt: Germany is not the scapegoat of the euro crisis - Issing

Germany should not be stigmatised as a scapegoat in the ongoing euro crisis, warned ex-ECB chief economist Otmar Issing. The idea of a stable euro and an independent central bank was not a German invention.

Translated from the German

"By far the greatest political risk", he said to the Handelsblatt, "is the impression that the regime of a stable euro and an independent central bank was a German invention". This impression and the assessment that the rest of Europe had to suffer from Teutonic predominance was spreading in some Member States, so Issing.

For a stable monetary union, non-political control was necessary, he said. He concluded that only the markets could perform this task by raising interest rates that a country pays for its government bonds as soon as it does not comply with the rules. This mechanism had been disabled. Policy-makers no longer granted the markets this control, and by deciding on aid programmes that suppressed exactly these signals, they actively weakened the will and committment to reform in crisis countries. 

Furthermore, Issing sharply criticised the decision to entrust the ECB with the European Banking Supervision. He stated two main reasons: Firstly the unavoidable conflict with monetary policy and secondly, political involement. "With any closure or rescue of a bank, it ultimately comes down to taxpayers' money. There will be a frequent coming and going of ministers at the ECB", predicts Issing. "This will lead to a further politicisation of the ECB - and poses a threat to its independence."

Full article (in German)

© Handelsblatt