Tuesday 16 July 2019

Low ECB interest rates hitting savers, warns Merkel successor

Successor: Annegret Kramp-Karrenbauer, left, replaced Angela Merkel, right, as leader
Successor: Annegret Kramp-Karrenbauer, left, replaced Angela Merkel, right, as leader

Paul Carrel

The European Central Bank's low interest rate policy is causing problems for savers and thought should be given to curbing its duration, Annegret Kramp-Karrenbauer, leader of Germany's Christian Democrats (CDU) has said.

Ms Kramp-Karrenbauer, who succeeded Chancellor Angela Merkel as CDU leader in December, stressed in an interview with Frankfurter Allgemeine Zeitung that the ECB is independent and should remain so.

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"At the same time, one has to look to the future at whether the low interest rate phase should not, nonetheless, be curbed a bit," she said in the interview. "Because the effect of these low interest rates is problematic, among other things because people with conventional savings deposits - including many in Germany - do not benefit from them."

She told the newspaper: "And when yields are so low, capital flows out of Europe. That is why we must ensure we continue to have leeway in monetary policy, but at the same time, make monetary policy sustainable and very sensible. That is now a task for Christine Lagarde."

Ms Lagarde, a former French finance minister and International Monetary Fund director since 2011, was tapped by European leaders last week to replace Mario Draghi as ECB president. Ms Kramp-Karrenbauer's comments reflect frustration in Germany with the ECB's record-low interest rates, which many believe are deployed to support weaker southern European economies, and leave German savers with poor returns for their financial prudence.

Her comments are nonetheless a rare, if veiled, criticism of the ECB's policy stance from a senior German politician. Since taking over as CDU leader, Ms Kramp-Karrenbauer has made a series of gaffes that have raised questions about her suitability to become Chancellor once Mrs Merkel relinquishes the post, which she plans to hold on to until 2021.

In March, Ms Kramp-Karrenbauer drew sharp criticism from her Social Democrat coalition partners for poking fun at transgender people in a light-hearted carnival speech.

In February, she was also ridiculed for addressing a high-profile meeting of her conservative CDU party by calling them Social Democrats.

Reuters

Irish Independent

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