ECB’s Holzmann Says Monetary Policy Has Reached Its Limit
ECB’s Holzmann Says Monetary Policy Has Reached Its Limit
(Bloomberg) --
European Central Bank official Robert Holzmann signaled that monetary policy has reached its limit, and argued it’s time for fiscal stimulus to step in.
“Monetary policy seems to have reached its end,” the Austrian central-bank governor told Bloomberg TV’s Guy Johnson and Vonnie Quinn on Wednesday. Cutting interest rates further is unlikely to have a positive impact on output or inflation, he added. “For this reason, fiscal policy has to take over.”
His comments follow former President Mario Draghi’s multiple calls for euro-area governments to step up fiscal spending that his successor Christine Lagarde has since reiterated.
Holzmann, who is also a member of the ECB’s Governing Council, said that any spending should be focused in the right direction. “What you need is public expenditure that helps youngsters,” he said, adding that investment in artificial intelligence and information technology is needed.
Germany likely slipped into a technical recession last quarter, and its manufacturing sector is struggling to emerge from a slump, casting continued gloom over Europe’s economic outlook. Other risks from a no-deal Brexit to the U.S.-China trade war are also weighing on momentum.
A meeting between the presidents of both countries -- Donald Trump and Xi Jinping -- to sign a long-awaited partial trade deal could be delayed until December, Reuters reported Wednesday.
A “trade war is bad news for everybody and of course also for the European Union,” said Holzmann. “As Europe is tightly linked both with the U.S. as well as China, a trade war will of course reduce the outlook of our economic growth for the next years.”
Asked about German Finance Minister Olaf Scholz’s suggestion that the country is seeking to end an impasse in discussions over European deposit insurance, one part missing from a banking union in the region, he said “on substance not too much has changed, but it gave it a positive spin and the possibility for a restart of the discussion.”
To contact the reporters on this story: Yuko Takeo in Frankfurt at ytakeo2@bloomberg.net;Piotr Skolimowski in Frankfurt at pskolimowski@bloomberg.net
To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Jana Randow
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