German advisers want tighter ECB policy, longer Brexit
talks
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 [November 08, 2017]
BERLIN (Reuters) - The
European Central Bank should wind down its asset purchases quickly and
publish a strategy for normalizing its expansive monetary policy, a
panel of economic advisers to the German government said on Wednesday.
In their annual report, the five-member German Council of Economic
Experts who advise the German government on economic policy said the
ECB's expansive monetary policy risks jeopardizing financial stability
and creating market volatility.
Germans have led criticism of the ECB's bond-buying program, which was
introduced three years ago to depress borrowing costs and reignite
growth in the euro zone's heavily indebted southern periphery.
"In view of macro economic developments, the ECB should quickly reduce
the purchases and end them earlier," group said in its report.
Last month, the ECB took a step towards weaning the euro zone off loose
money but promised years of stimulus and even left the door open to
backtracking. [nL8N1N132C]
Market interest rate developments "suggest the ECB should significantly
tighten its monetary policy to adapt to macro economic developments",
the group said, pressing the central bank to urgently publish a strategy
for normalizing policy.
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German Chancellor Angela Merkel attends the presentation of a report
of the German Council of Economic Expert's (SVR) at the Chancellery
in Berlin, Germany, November 8, 2017. REUTERS/Hannibal Hanschke
The German economy, Europe's largest, was heading for a "boom phase",
the group added. They raised their forecasts for German economic growth
to 2.0 percent this year and 2.2 percent next year.
However, the group identified a disorderly, so-called 'hard Brexit' as
one risk that would hit Britain hardest but also create upheaval in the
remaining 27 European Union member countries.
"The Council of Experts believes a one-off extension (of Brexit
negotiations) that largely preserves the status quo would be sensible,"
the group added.
With the German economy in robust shape, the wise men urged the next
government to tackle the looming challenges of demographic change and
digitization rather than focusing on social welfare.
(Reporting by Paul Carrel and Joseph Nasr Editing by Jeremy Gaunt)
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