Germany pressures the ECB: “Buy public debt is like a drug addiction”

Germany pressures the ECB: “Buy public debt is like a drug addiction”

  • This is defined by the president of the Bundesbank, the German central bank, Jens Weidmann.
  • He says that the massive purchase of debt by the ECB to nations with problems will end up affecting the taxpayers of the other countries.
  • Weidmann also warns of an immediate risk of inflation in the euro zone.
  • The words of the president of the Bundesbank have been subsequently endorsed by the German Chancellor, Angela Merkel.
Euro

Headquarters of the ECB in Frankfurt. ARCHIVE

The president of the Bundesbank , the German central bank, Jens Weidmann, has warned the European Central Bank (ECB) against the start of a new public debt purchase program and affirmed that this type of financing can “create addiction like a drug “.

“A policy of that type is for me close to state funding through the machine to print money, ” says Weidmann in statements published on Sunday the weekly Der Spiegel.

The rain of money from the central banks would only awaken existing ambitions. He adds that “in democracies, parliaments and not central banks must decide on such a broad pooling of risks “.

 

It also stresses that if the central banks of the euro area acquire public debt of certain countries “the titles will end up appearing in the balance of the euro system” and “in the end the taxpayers of the other countries will have to respond”.

After noting that this is not the way to solve the basic problems of the crisis, he comments that “the rain of money from the central banks would only awaken existing ambitions “.

“We should not underestimate the danger that funding through central banks can create addiction like a drug,” says Weidmann, who also sees the ECB’s independence threatened .

He adds that at second glance it is striking that the plans “lead to concerted actions by the state rescue funds and the central bank, in this way there is a link between fiscal and monetary policy” and therefore he wishes to avoid “politics monetary policy is subject to the domain of fiscal policy “.

In spite of everything, Weidmann considers that there is no immediate risk of inflation , although he warns that “if monetary policy is manipulated to become the political solution of the problems, its goal will end up being relegated increasingly to the background”.

The president of the Bundesbank is also opposed to the ECB being compromised “to guarantee at all costs the permanence of the member countries in the euro area.” Therefore, it considers that when deciding whether Greece should remain in the euro “the role of the monetary union should also play a role that does not suffer a greater loss of confidence and that the political and economic conditions of the aid programs maintain their credibility”.

As for the criticisms against his person for his critical stance, he says: “We, (the responsible ones) of the central banks, are currently acting in a borderline situation and therefore more and more basic questions arise, so we must be prepared to defend the positions that we maintain in the council also in a public way “.

Merkel supports her words

German Chancellor Angela Merkel has endorsed the warning made by the president of the Bundesbank. “I think it’s good that Weidmann constantly warns, I support Jens Weidmann and I think it’s good that he, as president of the German Bundesbank, has so much influence in the European Central Bank,” he told the ARD in an interview.

The chancellor also had words of support to the Greek Prime Minister, Antonis Samarás , who begged the German politicians not to issue too harsh statements against Greece so that the country can regain the confidence of the investors.

“I ask everyone to carefully measure their words, ” said Merkel, who believes that Europe is at a “decisive moment” since the beginning of the crisis three years ago.

Ultimately, Merkel considered that “there is no indication” that the International Monetary Fund (IMF) will abandon its role within the “troika” responsible for the rescue plan to Greece, as has been speculated lately.

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Image: Young man in job interview 

At the beginning of working life, the salary is still quite meager. Nevertheless, trainees and young professionals should set aside a small amount each month. Already with little money much can be achieved. Ralf Scherfling from the consumer center North Rhine-Westphalia in Dusseldorf are saving tips for young people with a small merit.

Whether hairdresser, gas plumber or banker – trainees usually earn little. And yet the start of your career is a good time to start building your wealth. Because even with small savings rates, you can build a fortune. However, it depends on two things: the right order and enough flexibility.

Always stay flexible

First, career starters should bring their own finances in order, recommends Ralf Scherfling of the consumer center North Rhine-Westphalia in Dusseldorf. “He who gets his first salary should pay all the debts.” Because only then can really be started to build a financial cushion.

Consider risk hedging

“The risk protection is also important,” explains Scherfling. Trainees should check whether they are covered by their parents’ liability insurance during their first training. If not, they should definitely complete their own. Also a disability insurance is recommended. The amounts may be high here. However, this also ensures an important risk. “Good insurances protect you from losing a lot of money later,” explains Niels Nauhauser from the consumer center Baden-Württemberg in Stuttgart.

In search of the right savings product

Once these tasks have been completed, apprentices can then start looking for suitable savings products. The top priority: “career starters should save flexible,” recommends financial expert Nauhauser. Because with young people, the needs sometimes changed quickly. “So one may need money for a first car, another wants to set up their first home.”

“For long-term contracts, young people should be very careful,” says Andreas Beck, director of the Institute for Asset Recovery (IVA) in Munich. Because with pension or life insurance, the acquisition costs are spread over the first few years. The consequence: “In case of an early exit, the insured lose.” Bauspar contracts are only partially suitable for young professionals because the return is usually low.

First choice for saving is therefore initially a good interest-bearing savings account. “You can build up a liquidity reserve for that first,” explains Ralf Scherfling. Two or even three net salaries should be parked here by Auzubis. Because: “Unforeseen expenses always exist.”

Savings Account offers benefits for job starters

A savings account has several advantages: deposits and withdrawals are possible at any time. In addition, such an account is inexpensive, because fees are usually not collected. If you set up a savings plan with your bank, you can even regularly transfer a small amount from your giro account to the savings account.

In addition, trainees should inquire with their boss, whether the operation promotes austerity measures. “If there is an employer-funded company pension plan, you should definitely complete it,” recommends Scherfling. As a rule, the contributions are deducted directly from the salary.

Many companies offer asset-based services

Many companies also offer asset-based services (VL). Employers pay their employees a fixed amount, which varies according to the industry. For example, civil servants receive € 6.65 a month, employees of the iron and steel industry and the motor industry € 26.59, and bankers € 40. “You should not underestimate that,” says Scherfling. “Over the years, something can accumulate quite a bit.”

With low income – like that of trainees – there is also something added by the state. Employees whose taxable annual income is less than 20,000 euros (single) or 40,000 euros (married) are entitled to employee savings.

Do not set saving rates too high

If you have already saved a certain amount, you can also invest it in fixed deposits. Although the money is invested for a fixed period of time, the interest is often higher than for a money market account. “Even an equity fund could offer itself,” says Andreas Beck. “Some fund companies offer savings plans from just € 25 per month.” Anyone who bets on exchange-traded funds, so-called ETFs, also saves fees.

However, trainees should not be too ambitious when it comes to saving money: “You should not set the saving rates too high,” says consumer advocate Scherfling. “After all, you still want to live.”

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