Schaeuble warns central banks of fostering a new bubble

Germany's Finance Minister Wolfgang Schaeuble has voiced fears over a market bubble developing because central banks are too willing to pump money into nations' economies.

Wolfgang Schaeuble

By Kuebi = Armin Kübelbeck (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

His warning came after Mario Draghi, president of the European Central Bank (ECB), said the bank would be prepared to extend its current quantitative easing programme, involving a €1.1 trillion bond-buying, beyond its planned conclusion at the end of next year if necessary.Speaking in Berlin, Mr Schaeuble, who has warned in the past of an over-reliance on central bank stimuli, said that nations should draw lessons from the last global financial crisis."When we call for structural reforms in return for financial assistance, this isn't some narrow-minded mantra being repeated by people who have lost sight of the big strategic questions of the future," he said."In fact, this may well be the most important long-term strategic question we face today. If you look at what's going on (at) a global level, this increasing public and private liquidity on the financial markets... we are moving to the next bubble."Arguing for the need for more difficult, structural reforms in many nations, Mr Schaeuble added, "We have seen that monetary policy – and finance ministers as well as central bank governors agree on that – can't solve the problems we face."Mr Schaeuble did not comment directly on whether or not he thought the Fed should raise US interest rates when it meets later this week, but his remarks were being interpreted as suggesting he favoured an increase sooner rather than later – a move opposed by both the World Bank and the International Monetary Fund.Speaking at a conference of the American Council on Germany and the German Atlantik-Brücke, Mr Schaeuble said that "in the European Union, we have to act differently than in the union that makes up the United States" and that Germany had a crucial role to play.Citing the unpopular but successful austerity measures imposed on the now-recovering economies of Spain, Portugal and Ireland, he said, "The formula is working. When it comes to making sure that Europe is successful, Germany has a special responsibility, simply because of our economic strength and our position in the heart of Europe."He said that Germany had found this special responsibility difficult to accept."But this management role, as I would like to call it, has fallen to us, at a time when Europe is in crisis and is also surrounded by new crises. Others have high expectations of us."For more Re:locate news and features about Europe, click here

Related Articles