German finance minister says the ECB’s priority is to bring inflation down
Germany’s finance minister, the liberal Christian Lindner, said Thursday that the European Central Bank (ECB) must bring inflation down quickly.
Lindner added that the priority at the moment “is to establish price stability” while participating virtually from Berlin in a banking conference in Frankfurt organised by the German daily “Handelsblatt”.
The minister was unable to be in Frankfurt today because of his political commitments in the capital and because he is recovering from the covid-19 infection he contracted while attending the informal Ecofin in Santiago (Spain) last week.
Lindner supported the interest rate hike that the ECB agreed last week, “which is understandable for the German government”, even though the German economy is contracting.
Inflation in the euro area is now above 5%.
Euro area headline inflation in August was 5.2 per cent year-on-year and core inflation, excluding energy and food, was 5.3 per cent.
The ECB last week raised its interest rates for the tenth consecutive time since July 2022, by a quarter point to 4.50 %.
In addition, its deposit facility, which is the interest rate at which it remunerates banks’ excess overnight reserves, increased by the same amount, to 4 per cent.
Bundesbank President Joachim Nagel told another conference of German cooperative banks that he does not know whether the ECB has raised its interest rates to the maximum in this upward cycle.
Nagel also believes that the inflation rate in the euro area is still “too high” and that the ECB’s key interest rates “must therefore remain at a sufficiently high level for long enough”.
The German finance minister says that a four-day working week is not the same as a five-day working week and that prosperity is achieved through hard work.
The German Finance Minister criticised the fact that a four-day working week with the same pay as a five-day working week is being discussed in Germany, because without productivity this is not possible.
Lindner considered that this is a problem of mentality and that Germany can only maintain its prosperity through hard work.
The proposal of less work for the same pay is being put forward in Germany by the metalworkers’ union IG Metall in the negotiations for the new collective agreement in this sector.
Lindner also expressed his concern about irregular immigration in Germany and said that “there are many people who can work and do not work”, which is why it is necessary, according to the German Finance Minister, to facilitate the standardisation of qualifications and reduce incentives not to work, among other measures.
He also considered it important for women with children in Germany to enter the labour market.
Financing pensions with stock market investments
Lindner intends to introduce a bill in the coming weeks to finance part of public pensions with equity investments (“Generationenkapital”), a foundation that invests public money in the capital market.
The idea is to use income from the mid-2030s to finance pension contributions and offload them to the younger generation.
The German finance minister added that “confidence in the capital market is underdeveloped in Germany” and that participating in the capital markets is not a risk, but that “the risk is to park savings in the current account” as many Germans do.
“The German government is very happy with the development of Commerzbank” but has not yet taken any concrete decision on the 15 % state participation, according to Lindner.
German banking stability despite inflation and high interest rates.
He also considered that German banks and savings banks are stable in contrast to what was seen a few months ago in other countries where some banks failed, referring to the US banks and the Swiss Credit Suisse.
But the German banking sector needs to improve in “profitability, competitiveness and digitalisation”, according to Lindner.
He also considered that German banks do not have the weight that the German economy has at international level and that the German government should improve conditions and reduce bureaucracy.
Lindner congratulated German Bundesbank Vice-President Claudia Buch on her appointment to chair the ECB Supervisory Board, which was endorsed by the European Parliament (EP) yesterday.
