German Finance Minister Wolfgang Schaeuble said there’s no rolling back the reform course in the Europe Union and that resorting to any form of debt sharing would ultimately lead to Europe’s demise.
Schaeuble, speaking to a meeting of insurers in Berlin Thursday, said that he had told the European Central Bank of the risk that its monetary policy set “wrong incentives.” Rather, it’s necessary for countries to “stay the course” agreed upon by policy makers during the euro-area debt crisis that emerged in Greece four years ago, he said.
“Any mutualization of liabilities, in whatever shape, would lead to the contrary,” Schaeuble said. “It would mean the decline of Europe in a rapidly changing world. That’s why monetary policy also mustn’t create the wrong incentives.”
The remarks by Schaeuble, made in the week the central bank’s Governing council is holding a mid-month meeting in Frankfurt, suggest that he backs the view of Bundesbank chief Jens Weidmann, who has warned against further loosening of monetary policy.
The ECB has reduced its benchmark lending rate to a record low of 0.25 percent and is considering a smaller-than-normal cut in the deposit rate if officials decide to take it negative for the first time, according to two people with knowledge of the debate.
Schaeuble said that the German government’s council of economic advisers had “pointed out clearly” the risks of “wrong incentives” through monetary policy in its recent report. “I have ensured that the opinion was made available to the ECB,” he said.
Schaeuble, who was Chancellor Angela Merkel’s point man during the sovereign debt crisis that dominated her second term, is due to take his message to a meeting of European finance ministers in Brussels tomorrow. He has said he wants to serve as German finance minister in negotiations now under way in Berlin on forming Merkel’s third-term government. [Bloomberg]