Frankfurt – The expansionary monetary policy of the European Central Bank is not endorsed by everyone. Savers in particular are being hit as interest rates on overnight money and time deposits have been on the decline for years and are stagnating at a low level

Image: Broken euro piece 

Statement: The ECB keeps the euro exchange rate artificially low, mainly benefiting German exports (Source: US Government)

Facts : The exchange rate is expressly not an objective of ECB policy. “We are not currency manipulators,” stresses ECB President Mario Draghi. The development on the foreign exchange markets is driven, among other things, by the different interest rates in the US and the eurozone. With rising interest rates in the United States, it is more profitable for investors to invest money in dollars than in euros. This strengthens the greenback and weakens the European common currency. Many investors also hope that US President Donald Trump will cut taxes and invest billions in infrastructure as announced. The prospect of new momentum for the US economy strengthened the dollar since Trump’s election. Trump admitted that he was partly to blame for the strength of the dollar, people trusted him. The ECB intervened directly on the foreign exchange market together with other major central banks in March 2011 in order to slow down the soaring Japanese yen.

Statement: With the interest rate depression, the ECB expropriated the savers (source: inter alia, Bavaria’s Minister of Finance Markus Söder – CSU)

Facts : Passbook and Co. throw because of the low interest rates hardly anything. As long as the inflation rate lulled close to the zero line, this roughly balanced out. But inflation has started to pick up again so that savers can even lose money. Nevertheless, Bundesbank President Jens Weidmann is in favor of a balanced view: “We are not only savers, but also workers, home builders, taxpayers and entrepreneurs – and from this perspective, the low interest rates are not only negative.”

Statement: The ECB is dominated by the southern European states (Source: AFD top candidate Alice Weidel)

Facts : In the highest decision-making body of the central bank, the Governing Council, all 19 euro countries have an equal voice – regardless of the weight of the respective national economies. In total, the body has 25 members: the 19 chiefs of the national central banks plus the 6 members of the Executive Board around ECB President Draghi. 8 of the 25 members of the Governing Council come from Southern Europe.

Decisions are usually taken by a simple majority. The ECB is politically independent on the model of the Deutsche Bundesbank. Its primary objective is to maintain price stability in the common currency area – that means, according to its own understanding, an annual inflation rate of just under 2.0 percent.

Statement: With its multi-billion bond purchases, the ECB is banning illegal states (source: German economists)

Facts : According to its articles of incorporation, the ECB may acquire government bonds that are already outstanding – for example from banks or other investors such as insurance companies or hedge funds. Since March 2015, the central bank has been buying billions of such securities every month in the fight against economic downturns and low inflation. In order to avoid suspicion of state financing, the ECB has imposed on it to buy no more than 33 percent of the government bonds of a eurozone or a single security. But that does not appease the critics. The central banks of the euro countries, on which the ECB purchases are wound up, have become the largest creditor of the Eurosystem member states due to the ongoing bond purchases, Bundesbank President Weidmann warned at the beginning of 2016. This reduces the pressure for reform in the central government. “Central bank action is seen as a solution to all sorts of problems that go far beyond monetary policy,” said Weidmann in an interview.

Statement: With its ultra-loose monetary policy, the ECB is draining banks of water (source: various banks)

Facts : Long-standing banks are well off paying more interest on loans than paying for savings. But the difference between the two, the net interest income, is shrinking due to the slump in interest rates. The result: Banks and savings banks break the income.

In addition, they have to pay penalties of 0.4 percent if they park money overnight with the ECB. At the same time, however, the ECB supports banks with long-term loans at mini-interest rates. From June 2016 to March 2017, the Federal Reserve launched a new four-year loan program. “Low or negative interest rates can not be held responsible for low profitability per se,” argues ECB vice-president Vítor Constâncio. Europe’s banks need to adjust their business models to improve their business prospects.


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