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

Prof. Dr. Merijn Knibbe: Considering the still fragile institutional set up of the Eurozone I propose continued bond purchases by the ECB and a 0,25% increase of the interest rate with no forward guidance.

Low interest rates increasingly lead to problems with asset valuation as well as to strong pression on pension funds to increase premiums which has a deflationary effect on the economy; it’s the opposite of helicopter money (also as such policy’s only increases uncertainty about pensions). High pension premiums are one of the causes of the extreme and unsustainable current account surplus of the Netherlands. I stick to my point that monetary policy is overburdened but that’s exactly the reason to increase rates: it will impose discipline governments to improve the Eurozone institutional structure and to take more responsibility for economic prosperity (i.e.: to end austerity). The Italian problem will in the end not be solved by the ECB but by high nominal growth in the EU.
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