Germany Versus Spain Problem for ECB
What’s to be done about Germany's inability to pull itself out of its economic mire?
Europe's largest economy has been flatlining at best for much of the past two years
Bloomberg Economics analysis estimates that half of the near 7% drop in trend growth since 2019 has been cyclical, and could recover over time.
Unfortunately, at least half of the decline is structural and may never bounce back.
The German auto industry has the added conundrum of having to shapeshift from its familiar domination of the internal combustion engine toward electric vehicle manufacturing, just as China is set to flood the global market.
Meantime, the southern economies of Spain, Portugal and Greece are displaying promising signs of growth.
Setting monetary policy for 20 separate nations is hard enough at the best of times; when there’s such a wide economic divergence it's a recipe for disunity.
The German government has deliberately written into law the Schwarze Null (black zero) rule, a debt brake specifically designed to keep spending aligned with borrowing.
ECB has long been accused of weighting its monetary policy decisions in Germany's favor, interspersed with rapid emergency measures to bail out more profligate peripheral nations.
This time the boot's on the other foot
With euro-area consumer prices proving somewhat stubborn at 2.5% in June, the ECB has got to keep a firm eye on its sole mandate — nudging inflation down to its 2% target over the medium term.
But it can’t ignore the economic carnage befalling the bloc’s former industrial powerhouse.
By the time their next decision arrives in September, policymakers may well decide that the need to attempt a rescue of German growth outweighs the danger of rising prices.
Marcus Ashworth Bloomberg 30 juli 2024
Det mest uppenbara och för svensk del mest oroande sänket är den tyska industrin
ECB kan mycket väl bedöma att efterfrågan fortsatt behöver hållas tillbaka med hjälp av restriktiv penningpolitik
Viktor Munkhammar DI 24 juli 2024
https://englundmacro.blogspot.com/2024/07/stigande-insatsvarupriser-oroar-ecb.html
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