Negative Rates Should Prompt German Action, Not Angst

The European Central Bank's policy decision Thursday comes at a time of tension with Germany, its largest shareholder. German criticism of the ECB is not new, but the vehemence of recent attacks raises a difficult question: What happens if the euro's most important founding member loses faith in its independent central bank, or the currency project as a whole? Neither Germany nor the ECB can afford for that to happen.

When German Finance Minister Wolfgang Schaeuble recently blamed the ECB's monetary policies for half of the recent electoral gains won by the populist, anti-immigrant, anti-euro AfD party, he was expressing the view of a growing number of Germans. The latest Eurobarometer survey reported that 52 percent of the Germans do not trust the ECB, up from 21 percent before the financial crisis. If this trend continues, it's hard to see the euro surviving.