Germany attacks central bank policy

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During the growth years, it became fashionable for politicians to claim that central banks were “independent”. But as the current crisis has grown, this has been increasingly exposed as a myth.

As the blog noted back in September 2007, Alan Greenspan (former US Federal Reserve Chairman), revealed that ‘the presumption that we were fully independent and have full discretion was false’.

Now Germany’s Chancellor, Angela Merkel, has gone one step further. Speaking in Berlin, she made a remarkable attack on current central bank policies. “What other central banks have been doing must be reversed. I am very sceptical about the extent of the Fed’s actions and the way the Bank of England has carved its own little line in Europe. Even the European Central Bank (ECB) has somewhat bowed to international pressure with its purchase of covered bonds.”

In other words, the ECB should do what the politicians tell it to do, not what it thinks is the right policy. The blog will watch to see if it now begins to retreat on recent initiatives, even at the cost of breaking central bank unity as the current crisis deepens.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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