• Germany's news in English
 
app_header_v3
Germany against G20 fiscal stimulus package: Schaeuble
German finance minister, Wolfgang Schaeuble told a conference that government attempts to boost their economies with monetary loosening could be “counterproductive”. Photo: DPA

Germany against G20 fiscal stimulus package: Schaeuble

AFP · 27 Feb 2016, 10:59

Published: 27 Feb 2016 10:59 GMT+01:00

Government attempts to boost their economies with monetary loosening could be “counterproductive”, Wolfgang Schaeuble told a conference ahead of a G20 finance ministers meeting in Shanghai.

But the US, Britain, EU and China all backed the use of monetary policy, while France gave Germany some support. 

The gathering comes with the global economy assailed on multiple fronts, from slowing growth in host nation China to weak commodity prices, and after the OECD last week cut its 2016 global growth forecast from 3.3 percent to 3.0 percent.

Japan has already adopted negative interest rates, the European Central Bank has embarked on a huge quantitative easing programme and the US Federal Reserve has signalled possible delays to interest rate rises.

Schaeuble insisted that reforms were more important and “thinking about further stimulus just distracts from the real task at hand”.

Berlin does “not agree on a G20 fiscal stimulus package,” he said.

“Monetary policy is extremely accommodating to the point that it may even be counterproductive in terms of negative side effects.

– ‘No crisis’ –

“Fiscal as well as monetary policies have reached their limits — if you want the real economy to grow there are no shortcuts without reforms.”

As the European Union’s largest and richest country, Germany often has different economic priorities than other members, and Schaeuble’s wide-ranging stance put him at odds with other key G20 members.

Speaking at the same conference, Bank of England governor Mark Carney retorted: “Several commentators are peddling the myth that monetary policy is out of ammunition.”

The world “risks being trapped in a low growth, low inflation and low interest rate equilibrium”, he said.

He criticised negative interest rates as a “zero-sum game” that exported problems to other countries, but said monetary stimulus “can buy time for structural adjustments” and the challenges “demand that our firepower is well aimed”.

– ‘Walking dead’ –

In the US, Federal Reserve policymakers say economic risks have worsened since they lifted interest rates for the first time in more than nine years in mid-December.

US Treasury Secretary Jacob Lew told reporters: “It’s increasingly important to use all the levers of policy that are available, and that means using fiscal levels as well as monetary policy and structural reforms.”

And Jeroen Dijsselbloem, president of the Eurogroup of single currency members said monetary policy had not come to the end of its usefulness.

“There is always more that can be done,” he said, adding: “It will have to be designed in a very proper way to…have the effects we need on economic growth.”

But French Finance Minister Michel Sapin offered his German counterpart some backing, saying there was “no crisis” in the world economy and “we don’t have to put in action new policies”.

“We don’t need to launch a global fiscal stimulus package,” he said in Hong Kong, but added some countries “may have more capacity and should use their budgetary capabilities to support global growth”.

Schaeuble, known for being frank, has previously openly criticised the ECB for being too accommodative.

The use of spending to mitigate against economic crisis no longer appeared to work, he said Friday, adding that debt levels were too high while growth remained too low.

“The debt-financed growth model has reached its limits,” he said. “If we continue on this path we no longer need to watch television, the walking dead will overwhelm us, particularly in finance and construction.”

Story continues below…

He did not specify in which countries such zombie enterprises existed — although they are a perennial issue in current G20 president China.

The country is the world’s biggest trader in goods, but its slowing growth has roiled global markets and sent prices of commodities such as base metals plunging, leaving producer countries facing a bleak outlook.

China’s growth fell to 6.9 percent in 2015 — high compared to most other G20 members but the worst in a quarter of a century and a far cry from the fat years of double-digit increases.

A shock currency devaluation in August followed by another drop in January raised suspicions Beijing was pursuing a currency war to make its exports cheaper at others’ expense, and a stock market slump has also raised alarms.

Beijing has more room to boost the economy, the governor of the central People’s Bank of China said Friday as he sought to reassure markets.

“China still has some monetary policy space and monetary policy tools to address potential downside risk,” Zhou Xiaochuan said in a possible signal of more interest rate cuts and reductions in the amount banks must keep in reserve.

“We will not resort to competitive devaluations to boost our advantage in exports,” he added.

For more news from Germany, join us on Facebook and Twitter.

Today's headlines
What's on in Germany: July 2016
Berlin Pride celebrations. Photo: DPA

Beer, beach and the BMX - here's what's coming up in Germany this month.

Brexit vote
'Over 100,000 Brits' flood Berlin job site after Brexit vote
"Searching for job." Photo: DPA.

A German job-hunting website reported getting four times the amount of traffic from the UK that it normally does in the wake of the Brexit vote.

Man who stabbed Cologne mayor gets 14 years jail
Photo: DPA

The man who almost killed Cologne Mayor Henriette Reker when he stabbed her in the neck was sentenced to 14 years in jail on Friday.

Germany ups Turkey travel advisory after Istanbul attack
Berliners at the Brandenburg Gate mourn the victims of the Istanburl airport attack. Photo: DPA.

Germany on Friday warned its citizens to exercise particular caution if they travel to Turkey, following this week's deadly Istanbul airport attack.

Young Muslim takes on state on headscarf ban and wins
Aqilah Sandhu in court on Thursday. Photo: DPA

A 25-year-old lawyer has taken on the state of Bavaria over its attempts to stop her from wearing a headscarf - and scored a major victory.

Video
WATCH: Comic teaches about Ramadan on flying carpet
Photo: Screenshot from Dattelträger video.

A young comedian hopes his flying carpet stunt can help fight back against stereotypes - by becoming one.

Brexit vote
'It won't be romantic. But I need an EU passport'
Lucy Thomas (left), director at Give Something Back to Berlin. Photo: Private

British expats in Berlin tell The Local that a week after the Brexit vote they are still stunned - and are considering their next steps.

Town ravaged by floods tries to pick up the pieces
Rebuilding in Simbach. Photo: DPA

July 2nd should have been the start of a new life for Anna Kluchan and her husband. But then the floods came.

Lufthansa finally buries hatchet with cabin staff
Photo: DPA

Lufthansa and its cabin staff said Thursday they had reached an agreement on working conditions, bringing to an end a long and bitter industrial dispute that hit thousands of passengers.

Six burning questions for British expats about Brexit
Photo: DPA.

Uncertainty has kicked in over Brexit and what it may mean for Brits living in Germany.

Sponsored Article
Avoid hidden fees when sending money overseas
National
How to get German citizenship (or just stay forever)
Sponsored Article
Why you should attend an international job fair
Technology
Brexit will turn Berlin into 'Europe’s startup capital'
International
'Germany needs to make UK come to its senses'
Sponsored Article
Education abroad: How to find an international school
Features
Six odd things Germans do in the summer
Sponsored Article
Health insurance for expats in Germany: a quick guide
Travel
These 10 little-known German towns are a must see
Features
How two gay dads cut through German red tape to start a family
National
Five things to know about guns in Germany
Sponsored Article
US expats: Taxes are due June 15th
Culture
10 things you need to know before attending a German wedding
National
Eight weird habits you'll pick up living in Germany
Lifestyle
Six reasons 'super-cool' Berlin isn't all it's cracked up to be
Society
Only one country likes getting naked on the beach more than Germany
Lifestyle
23 ridiculously fascinating things you never knew about Berlin
Culture
8 German words that perfectly sum up your 20s
Lifestyle
Can't make it past the door at Berlin's most famous club? Help is at hand
Business & Money
Why Frankfurt could steal London's crown as Europe's finance capital
Features
6 surprising things I learned about Germany while editing The Local
Culture
Five sure-fire ways to impress Germans with your manners
Features
6 reasons Germany's summer is unbeatable for thrill-seekers
National
The future belongs to these 10 German regions
7,900
jobs available
Toytown Germany
Germany's English-speaking crowd