Germans React to Stimulus With Even More Gloom, Bundesbank Says

Central bankers and finance minsters may have succeeded in calming markets with their extraordinary stimulus this year, but ordinary Germans are a lot harder to convince.

That’s the result of a new Bundesbank study, which found that households in the country react to news of wide-ranging monetary or fiscal measures with greater pessimism about the future, even though such moves are meant to achieve the opposite by bolstering the economy.

One possible explanation is that announcements of government aid or emergency programs by the European Central Bank suggest to households that the economy is doing worse than they thought, the Bundesbank said in a paper published Wednesday.

This shows that in uncertain times, economic policies can have “unexpected consequences” and should be carefully calibrated and communicated, it said.

Households play a crucial role in the recovery from the coronavirus shock, as their spending behavior helps determine the depth of the recession and the speed of recovery once restrictions are lifted again. The Bundesbank study said that households who think they have problems accessing credit tended to react positively to news of stimulus measures, whereas those who didn’t were more pessimistic.

The ECB is preparing more monetary stimulus after wide swaths of the euro area introduced new curbs to stem a fresh spike of virus infections in recent weeks.

©2020 Bloomberg L.P.

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