Schaeuble Sees Extended Low Rates and Financial Excess

German Finance Minster Wolfgang Schaeuble said he expects interest rates to stay low, increasing the risk of bubbles as an “overweight” financial industry distorts investment decisions.

In a speech to parliament in Berlin introducing Chancellor Angela Merkel’s balanced budget for 2016, Schaeuble said global acceptance of the idea that sustainable growth requires sustainable finances is increasing.

“Voices are growing louder even in the international debate that an overweight of the financial sector versus the real economy, caused by the immense short-term profit opportunities, is a danger for sustainable global growth,” Schaeuble told the lower house on Tuesday. At the same time, “we need to get used to the idea of an extended, even longer phase of low interest rates,” he said.

Schaeuble coupled his warning with a rebuff of critics who say Germany is too focused on fiscal discipline, while pledging to avoid net new borrowing in the years ahead. German government bonds last week had the longest winning streak since July as traders speculated the European Central Bank will expand its asset-buying program.

“It is undisputed that high global liquidity and debt promotes the willingness in the financial sector to take risks and leads to the danger of new bubbles, further debt and bad investments,” Schaeuble said.