Dutch, Germans Critical of European Quantitative Easing

Media in Germany and the Netherlands are critical of the European Central Bank’s latest policy.

European Central Bank president Mario Draghi answers questions from reporters in Frankfurt, December 4, 2014
European Central Bank president Mario Draghi answers questions from reporters in Frankfurt, December 4, 2014 (ECB)

European Central Bank president Mario Draghi said on Thursday his institution would start pumping €60 billion per month into the European economy until September next year or until inflation reaches its 2 percent target. Media in Germany and the Netherlands did generally not take kindly to the announcement.

The policy of quantitative easing is controversial in both countries. Dutch and German officials worry that “cheap money” will discourage budget consolidation and structural economic reform in other states, such as France, Greece and Italy.

The central bank says it will accomplish its stimulus by buying government bonds from member states relative to their size, meaning Germany will be the largest direct beneficiary of the policy, even if it borrows little and already pays extremely low interest rates.

Draghi’s announcement was widely expected because the eurozone was looking at deflation. Falling oil prices pushed the bloc’s inflation rate below zero at the end of last year.

Inflation has been below the Frankfurt bank’s 2 percent target since the European sovereign debt crisis began in 2008.

In a concession to Germany, Draghi said asset purchases would be subject to risk sharing. 80 percent of potential losses would fall on national central banks.

American and British financial media responded positively to Draghi’s announcement. Bloomberg’s Mark Gilbert cheered the central bank president for dragging “the Bundesbank kicking and screaming into quantitative easing.” The Wall Street Journal said the policy could benefit the United States. “A more vibrant eurozone would provide more fuel for the global economy, stimulating the appetite for American goods and services around the world.” Britain’s The Economist was only slightly less supportive, calling the policy “better late than never” and cautioning it might turn out to be less effective than similar actions taken in Japan and the United States.

Dutch and German media were far more critical. Elsevier, the Netherlands’ leading right-wing weekly, said the assumption that bond purchases will stir more economic activity was dubious at best. It pointed out that the European Central Bank is already lending hundreds of billions of euros at low interest rates to eurozone banks in hopes they, in turn, will lend more to companies and consumers. That has hardly happened. “This is unlikely to change,” the magazine predicted.

De Telegraaf, the Netherlands’ biggest newspaper, lauded Dutch central bank president Klaas Knot for joining his colleagues from Austria, Germany and Estonia in opposing the latest measures.

Germany’s conservative Die Welt newspaper warned that Germans were losing confidence in the central bank. Handelsblatt likened Draghi’s stimulus to a “drug” and the tabloid Bild asked, “Is the ECB banker destroying our money?” Even the leftist Süddeutsche Zeitung argued that German savers were being “penalized”.