>> GROUP: Shadow ECB Council / EZB-Schattenrat  Prof. Dr. Merijn Knibbe

Prof. Dr. Merijn Knibbe: It is not yet time for the ECB to part with its ultra loose monetary policy. Housing markets are showing serious signs of overheating - but the flow economy still doesn't; in countries like the Netherlands there is ample room for macro Prudential measures to keep the housing market in check. There still is a 100% tax deduction for mortgage interest rates and loan to value ratio's are still at max 101% - in such a situation it is not fair to blame the ECB for bubbling housing markets.

In an area consisting of the south of Germany as well as parts of Switzerland, the Czech Republic and Austria, unemployment is at this moment: low. Even in Bavaria it is getting lower (0,4% lower than last year). It might be expected that a kind of tipping point might be reached, after which wages suddenly start to increase faster (i.e. >3% a year), especially in Germany and Austria. Only after this point has been reached (which can also be made visible by tracking how many employers actively try to lure people away from other companies) it might be time for less easing. Though, at this stage, unemployment (and surely 'broad' unemployment) in Southern Europe will still be massive. A part of the classical solution of such 'regional' imbalances is internal migration, i.e. Italian workers moving to Austria and Germany. Without transfers, this will in the long term however lead to problems with government and private debts in countries like Italy as it won't be the least enterprising and able who leave, while populations are already dwindling. Extremely low ECB interest rates can be understood as a kind of transfers. Higher rates might have to be accompanied by higher traditional transfers, for instance a 70+ Euro Area pension of 400,-- per person (domestic pensions can be lowered with (part of) this amount.
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