Column euroschau: saving europe looks different

It looks inconspicuous, but it has it all: ECB boss Draghi. At the beginning of the year he pushed through the controversial purchase of government bonds against opposition in the Governing Council. And he will probably continue to push through his politics.

By Klaus-Rainer Jackisch, HR

He is small, a bit plump and has a mustache. His face smiles friendly at the viewer. The Italian plumber is a bit nondescript. But the man in the red dress with a big "M" on his chest should not be underestimated. Because Super Mario always tries to save the world with a verbal "Mamma Mia" or "It’s a me, Mario". With success!

For generations of Playstation players, Super Mario is the epitome of goodness and the global savior. To the delight of the inventor, a Japanese manufacturer of video games. The tills have been ringing vigorously for decades.

Sometimes inconspicuous

Even speculators on the European stock exchanges are currently seeing the euro bills flicker before their eyes. They also have a "Super Mario". He’s not fat and a plumber, but also Italian, smiles friendly and sometimes looks inconspicuous. He also has it all. He doesn’t want to save the world, but he does want to save Europe. His name is Mario Draghi and he is President of the European Central Bank.

At the beginning of the year he opened the money locks on a massive scale. Against clear resistance in the Governing Council, he pushed through the controversial purchase of government bonds. This further weakened the euro in order to stimulate the economy. That should drive the inflation rate.

So far, the project is not a failure. But saving Europe looks different. The economy is picking up in some euro countries, such as Spain or Ireland. In problem countries like France and Italy, however, things look bleak.

Open money locks further

The inflation rate is only 0.1 percent. If you factor out the effect of the low oil price, the so-called core inflation is 1.1 percent. Both values ​​are far from the self-imposed target of an inflation rate of close to two percent. Therefore, Mario Draghi now wants to open the money locks even further: The bond purchase program will probably be expanded, the time limit removed. Another weapon is said to be even more effective: the interest rate on bank deposits at the ECB is to be turned even further into the red.

Banks already have to pay penalty interest when they park money at the ECB. Because the monetary authorities want the banks to pay a lot of money in the form of loans to companies and consumers. They should blow it up and boost the economy. But exactly this mechanism does not work. Therefore, the thumbscrews should be tightened and the penalty interest increased. This is of particular concern to citizens. Because of the ECB’s monetary policy, they are already getting hardly any interest on their savings account, their life insurance is shaky and their pension fund is on the brink of abyss.

With the tightening of the penalty interest, the costs of the banks increase, which they will sooner or later pass on to the customers: in the form of even less interest, in the worst case in the form of fees for depositing into the savings account. So far, German banks have been holding back because of the fierce competition. But at some point the dams could break.

Fatal development for the real estate market

The development of the ECB’s monetary policy for the real estate market is also fatal: in recent years a real estate bubble has developed in major German cities. Even according to the Bundesbank’s assessment, the prices are around 20 percent higher than the real values. Even in medium-sized cities, prices are now going up dramatically.

The soaring of the German share index was only driven by the ECB. He has long since lost touch with the actual economic situation at companies. More and more investors are being driven into the stock market by banks and investment advisors and are initially earning a lot from it. After all, they argued that there would no longer be any return anywhere else. And many follow like the lemmings. The crash is now programmed.

Meanwhile, the canon of critics of the ECB is getting louder. Even economists who have supported Super Mario in the past are getting thoughtful. If the bubbles on the property and stock markets burst, the rescue of Europe is in the bucket. The euro crisis would be back.

Resistance in the Governing Council

That is why there is clear resistance in the Governing Council: the Bundesbank and central banks of the Baltic states and Slovenia have been against the loose monetary policy for some time. But Super Mario always knows how to skilfully eliminate opponents: Because he is publicly attuning the financial markets to his policies with a great roar even before the official decision, the opponents in the ECB Council cannot do much against Mario Draghi. Who would want to be responsible for the fact that the financial markets react violently when "Super Mario" does not keep its promises as a polluter??

So the man will probably push through his politics this time too. It is doubtful whether he will really be able to stabilize the eurozone in this way. Mamma Mia!