• Marcus Vitt

"We're calling for a turnaround."

A letter from ... Marcus Vitt, Spokesman of the Board of Donner & Reuschel, Edmund Stoiber, Peer Steinbrück, Günther Oettinger, Hans-Werner Sinn, Wolfgang Reitzle and many more.

The ultra-expansive monetary policy pursued by the ECB for years has stabilised economic development in a number of member states of the monetary union in the short term. However, the long-term risks associated with the massive monetary overhang are obvious.

01 There are increasing signs of rising inflation. If the ECB wants to meet its price stability target, it will sooner or later have to unwind the government bond purchases and cautiously raise interest rates. This could trigger severe distortions for government and also bank financing in the member states concerned if they do not adjust to this early on by making determined efforts to consolidate their budgets. If, on the other hand, the ECB lets inflation run its course, the result would be massive social upheavals and distributional disparities. This harbours social explosives and could lead to further political polarisation.

The ECB's permanent negative interest rates entrench uncompetitive economic structures and reduce the incentive for EU countries to increase their competitiveness through structural reforms.

In the meantime, an attitude of entitlement has become entrenched that the state has to cover all economic risks. Self-responsibility and the market-based selection process are taking a back seat. The successful German social market economy is being undermined.

The ECB's "all-round carefree package" disenfranchises politicians by undermining the necessary setting of political priorities in spending policy and thus ultimately leading to financial overstretching of the states.

The European banking system is being weakened.

// 06. For the first time, the EU Commission is taking on debt on a large scale that is jointly guaranteed by the member states. If this does not remain a one-off exception, cohesion in the EU will be jeopardised. Joint liability leads to disputes between "poor" and "rich" states.

In order to be able to effectively counter these dangers, we expect from the future Federal Government:

// 01. a concept that provides for a gradual reduction of new debt and the reinstatement of the constitutional debt brake as soon as the economic situation permits.

02. a national growth strategy, a moratorium on burdens for companies and citizens, an internationally competitive tax policy, a climate protection policy based on market economy principles, and investments in research, education and infrastructure.

// 03. That it demands compliance with the European Treaties, in particular the "no bail-out" clause and the ban on monetary state financing.

// 04. that it will work to ensure that the European Reconstruction Fund is limited on a one-off basis to overcoming the Corona crisis. This debt should also not be repaid by 2058, but much earlier.

05. also demand from other Eurozone states a reform agenda to restore competitiveness and advocate a reform of the European Stability and Growth Pact.

We expect the European Central Bank:

// 01. that it focus on its core task of ensuring price level stability. It must make clear that it is willing to gradually reduce the volume of government bond purchases and, once the crisis is over, to reduce the stock and the inflated money supply.

// 02. That until then, it will base government bond purchases on the capital key of national central banks and not favour certain highly indebted countries.

// 03. That it clearly informs about the risks of monetary policy - the potential for inflation, which is already evident in asset prices, but also the negative impact on savings and pensions.

04. that it refrains from giving preferential treatment to "green" corporate bonds. Tackling climate change is a matter for politicians, not the ECB. ®