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Schaeuble Sees Draghi’s Instruments for Growth Exhausted

Wolfgang Schaeuble
German Finance Minister Wolfgang Schaeuble endorsed this week's French cabinet changes, saying new Economy Minister Emmanuel Macron, a former banker at Rothschild & Cie, is rightly focusing on competitiveness. Kosuke Okahara/Bloomberg

The European Central Bank has run out of ways to help the euro area, putting the burden on governments to spur growth without running excessive deficits, German Finance Minister Wolfgang Schaeuble said.

In an interview with Bloomberg Television at the Medef business leaders’ conference near Paris, Schaeuble said he agrees “100 percent” with ECB President Mario Draghi’s appeals for governments in the 18-country currency union to complement monetary policy with “structural reforms” to boost competitiveness and overcome the legacy of Europe’s debt crisis.

‘‘Monetary policy can only buy time,’’ Schaeuble said in the interview yesterday. “Liquidity in markets is not too low, it’s even too high. Therefore I think monetary policy has come to the end of its instruments and therefore what we urgently need is investments, regaining confidence by investors, by markets, by consumers.”

Schaeuble’s comments reflect the mainstream view in Chancellor Angela Merkel’s coalition and Europe’s biggest economy as policy makers debate how to boost growth and Draghi signals the euro area may need more monetary stimulus. French Prime Minister Manuel Valls urged the ECB on Aug. 27 to use all means at its disposal to lift inflation to its target level.

Euro-area inflation slowed in August and the jobless rate remained close to a record, according to EU data published today. Consumer prices rose 0.3 percent in August from a year earlier, the lowest rate since October 2009, adding to possible arguments for Draghi to deliver quantitative easing. The euro was little changed at $1.3181 at 11:15 a.m. Frankfurt time, trading near an 11-month low.

Stick to Rules

“I don’t think ECB monetary policy has the instruments to fight deflation, to be quite frank,” Schaeuble said. Domestic demand is driving German growth “because we have high confidence of consumers, investors.”

“And the main reason why we have such a high confidence is they think our public budgets are sustainable, we will stick to what we have promised and we stick with investment,” he said.

Schaeuble, 71, is Germany’s longest-serving active federal lawmaker and a longtime advocate of French-German ties and European unity, including deeper cooperation within the euro area since the debt crisis erupted in Greece in 2009. Last year, Merkel asked him to stay on as finance minister when she switched coalition partners and allied with the Social Democrats for her third term.

French Deficit

Schaeuble endorsed this week’s French cabinet changes, saying new Economy Minister Emmanuel Macron, a former banker at Rothschild & Cie, is rightly focusing on competitiveness.

“It’s a good decision,” said Schaeuble, who used his speech and a news conference in Paris late yesterday to urge French President Francois Hollande to stay the course on deficit reduction.

Asked in the interview whether France would lower its budget shortfall to reach the euro-area limit of 3 percent of gross domestic product next year, Schaeuble said he’s confident that “my French colleagues will do what’s needed in line with the rules that have been agreed again and again.”

“It’s very important that we all know in Europe -- every member state -- that we have to stick to structural reforms and enhance competitiveness, even in Germany,” he said. “We are fine actually, but if we were not to continue to enhance our competitiveness in coming years we would lose our position.”

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