Melvyn Krauss, Columnist

Christine Lagarde Should Worry Less About the Germans Now

To help contain the coronavirus crisis, the European Central Bank should follow the Fed’s stimulus move.

March 11, 2020 at 6:00 AM UTC

Melvyn Krauss is a senior fellow at the Hoover Institution at Stanford University and an emeritus professor of economics at New York University.

Can Lagarde stand up to Germany?
Photographer: Geert Vanden Wijngaert/Bloomberg

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The stakes couldn’t be higher for Europe. With the U.S. Federal Reserve aggressively cutting interest rates to buoy the U.S. economy in the face of the Covid-19 crisis — and the Bank of England following suit — a “too little, too late” policy on the part of the European Central Bank risks sending the euro soaring to uncompetitive levels and Europe into recession.

European policymakers should keep in mind that in March 2015, it was the soaring euro that forced the ECB to adopt quantitative easing to bring its monetary policies in sync with those of the U.S., which had begun easing in 2008. The ECB had sought initially to take an independent path and not resort to QE but the euro rising to $1.40 put a stop to that.