ECB interest rates: bankers hold “helicopter money” dangerous – t-online.de

After the European Central Bank (ECB) interest rates lowered again to boost inflation, even further measures will be discussed now. Because so far, ECB President Mario Draghi has famously missed its target, the direction to push inflation back two percent.

One of the measures of ultra loose monetary policy is the so-called helicopter money. The core idea: Instead of spending money to pump on the buying of securities in the market, is almost given away central bank money – by being figuratively thrown from the helicopter

receiver could be for example the citizens or. the State. Proponents see it as an advantage that the money would arrive on consumption directly into the economic cycle.

German bankers to “helicopter money”

Bundesbank President Jens Weidmann and the chief economist of Berenberg Bank , Holger Schmieding have, but issued an unfavorable opinion on this idea. “The ‘helicopter money’ is nonsense,” Schmieding told the news agency dpa-AFX. it was not necessary Economically and politically it would thus create a dangerous precedent. “It would foster the illusion that the Fed could for citizens simply print more money and thereby solve the problems,” Schmieding said

Weidmann told the newspapers the spark group. “Instead of getting more daring monetary experiments bring into play to, it would be useful to pause for a time. monetary policy is not a panacea, does not replace the necessary reforms in each country and also does not solve the growth problems of Europe. “

ECB expresses vague

Meanwhile, leading members of the ECB have expressed the “helicopter money”. Draghi called it after the recent interest rate decision on demand “an interesting concept”. However, he also made it clear that it would be connected in practice with difficulties.

Also, ECB chief economist Peter Praet expressed at least not hostile. Theoretically, all central banks use this “extreme instrument,” Praet said in an interview to the Italian newspaper “La Repubblica”. It imagine only the question of whether and when the application actually makes sense.

Weidmann criticized ECB rate when interest rates

Weidmann reiterated his critical attitude to the monetary policy of the ECB. The recent decisions were “very largely” and had not convinced him. “We continue to expect a strengthening of economic activity and prices. It threatens no deflation.” With deflation a dangerous downward spiral of declining prices and an economic downturn is meant.

Because the control is in the euro zone for some time under the ECB’s target of just under two percent, the monetary authorities had in Frankfurt over a week ago an unprecedented package of measures. They lowered surprisingly the key interest rate from 0.05 percent to zero percent and increased the penalty to be paid is due if financial institutions to park money at the ECB

Finally, the ECB pumped even more money in the economic cycle, by the monthly bond runs will be increased from previously 60 to 80 billion euros. All this should be rising faster rates in the euro area and boost sluggish in parts of the monetary union economy.

“But I have repeatedly pointed out that the effect of ultra-loose monetary policy is weaker, the longer it lasts” , Weidmann said. “At the same applies: the greater it is gas, the greater risks and side effects.”