Inflation in the U.S. is higher than the inflation in Germany. The ECB, unlike the Fed pursues no political agenda. The primary objective of the ECB is to maintain monetary stability. It says so in the Treaty establishing the European Community.
Unlike the American sister, the FED, have policy goals not high on the agenda of the ECB. The low inflation and high employment provoke a conflict of interest. However, the Greek crisis shows that when the going gets tough, the ECB follows rather political goals. The ECB’s Trichet wants to save Greece. He wants to boost the economy and bends so the pressure of politics. High-risk Greek government bonds will continue to be accepted as collateral. In addition, artificial injections of money from the IMF will be regarded as a blessing.
The resulting inflation risks are played down and accepted. The political independence of the ECB is in danger and the euro threatened to weaken further.
No to the EWF!
The European Monetary Fund was actually on the table. Nevertheless, since last Friday the idea is gaining the upper hand again after deliberations in Madrid, the chairperson of euro finance ministers, Jean-Claude Juncker, announced that a bailout fund for euro-strapped states is fast approaching. Here, the science regarding a bailout is agreed as rare. Overwhelmingly reject Germany’s economists from the creation of a European Monetary Fund. Of 91 economists surveyed said 64 out against such a rescue package for euro countries.
EWF had a credibility problem – because the Member States would decide the appropriate sanctions jointly. In addition, those countries such as Italy and Portugal would express in his own considering the budget situation for profound sanctions is unlikely. On top of that, the anger of the sanctioned country would work against the EU, which would weaken the European Community and its currency.
It would be better to call in a threat of national bankruptcy to the IMF to help and to make their political independence to benefit. However, it must be made sure that he takes the lead role – as has happened in Latvia and Hungary. The IMF would have the necessary expertise, credibility and authority – all properties where there is a lack of the EU.