Following Draghi’s announcement of further rate cuts and to speed up the process for ABS purchases, a number of leading German economists have expressed criticism.
“The ECB used up its ammunition much too early and cut interest rates by too much. Now it is in a liquidity trap. At this point, there is not much it can do” said Hans-Werner Sinn, president of the German ifo Institute.
“We are increasingly under the impression that the ECB is offering a belated summer sale on the Euro,” said Liane Bucholz (pictured), president of the Association of German Public Banks, responding to the impact on currency values.
“The rate cut to 0.05% is unlikely to revive lending to SME’s as anticipated, as even the lowest level of interest rates will not be able to improve the willingness of eurozone banks to take risks” she adds.
Critics of the ECB measures reportedly also include Jens Weidmann, the president of the German Bundesbank, who disagreed with both rate cuts and ABS purchases, according to Bloomberg, which cites ECB sources.
Meanwhile, German stock market index DAX rose following the announcement of ECB measures. “These decisions reaffirm the impression that the ECB is extraordinarily concerned about the health of the Eurozone” comment’s Holger Fahrinkrug, chief economist for BNY Mellon Boutique Meriten.
“We believe that the planned combination of TLTRO’s, ABS and covered bond purchases will show their effect over the coming months,” he says. While TLTRO’s and ABS purchases will supersede other refinancing operations, they will have a positive impact on liquidity provisions and bank balance sheets,” Fahrinkrug adds.