BERLIN (Reuters) - The European Central Bank should start unwinding its ultra-loose monetary policy this year, German Finance Minister Wolfgang Schaeuble said in an interview to be published on Friday, adding that it would not be easy.
“The European Central Bank will have the tough task of getting out of the ultra-expansionary monetary policy,” Schaeuble told the Sueddeutsche Zeitung newspaper. “It would presumably be right if the ECB dared to exit this year”.
Schaeuble added it was “possible and necessary” for the next government to lower taxes after Germany’s general election in September.
He said forecasts that inflation could reach 3 percent in Germany this year would exacerbate concerns about current low interest rates.
While admitting he was no fan of the ECB’s monetary policy, he added, “The ECB has a mandate for the eurozone, and it carries it out well.”
Schaeuble said the core issue was that a number of eurozone countries had not been able to boost competitiveness as required. “The problem is the weakness of the other countries, not Germany’s strength,” he said.
The conservative minister said it would take a great effort to convince German citizens that the common currency provided more employment, social and business benefits than risks and negative consequences.
To help Germany make the argument, he said it was essential that Italy and other countries stuck to the agreed rules.
Schaeuble’s deputy Jens Spahn told Reuters last week that a “prudent start to the exit” of the ECB’s expansive monetary policy was desirable.
The ECB aims for inflation of just under 2 percent, but it has undershot its target for years. To fight off deflation, the central bank has cut interest rates to zero and launched a massive but controversial bond-buying program.
Schaeuble and other German lawmakers have warned the ECB risks fuelling support for eurosceptic parties if it does not change course soon.
German federal, state and local governments and its social insurance funds have saved 240 billion euros since 2008 as the result of low rates, and 47 billion euros in 2016 alone, the Handelsblatt newspaper reported in Friday editions, citing calculations made by the German central bank.
The Rheinisch-Westfaelisches Institut fuer Wirtschaftsforschung, an economic policy center, estimates that an interest rate increase of one percent would raise Germany’s debt service costs by 21 billion euros per year, Handelsblatt said.
Reporting by Joseph Nasr and Andrea Shalal; Editing by Tom Heneghan