POLITICS & POLICY
On Wednesday, the President of the European Central Bank, Mario Draghi, visited the German Bundestag in a bid to defend the ECB’s low interest rate policy. Draghi claimed that low interests are necessary in the medium-term to revive the European economy. At the same time, the ECB’s President called for structural reforms to take place in those countries that lack competitiveness. Against Draghi, Gunther Krichbaum, an MP of the conservative Christian Democratic Union party, claimed that the Central Bank’s policy represents a hidden rescue of Southern European countries at the expenses of Germany’s taxpayers. Moreover, low interest rates are a threat to German small-scale financial institutions, which base their activity mainly on loan extensions, he said. However, in what sounded as a direct reference to the recent troubles undergone by Germany’s Deutsche Bank, Draghi argued that the ECB cannot be blamed for Germany’s financial problems.
Indeed, the possibility of a collapse of the biggest German private financial institution, Deutsche Bank, is worrisome both in Germany and elsewhere in Europe. After the US Financial Justice Office imposed a 14 billion fine on the bank, the value of its shares dropped by 6% at the beginning of this week. As a consequence, rumours about a potential second “Lehman Brothers case” rapidly spread over the continent. However, on Wednesday, Bank of England Vice-governor Minouche Shafik tried to calm waters by inviting not to compare the two cases. In the meantime, Deutsche Bank sold its British insurance subsidiary, Abbey Life, in a bid to raise fresh cash. On Tuesday, both German Finance Ministry spokesman Martin Jaeger, and the CEO of the Deutsche Bank, John Cryan, denied the prospect of a state-driven bail-out.
In other news, the Brexit debate continues to make the headlines in the UK and across Europe. On Wednesday, The Guardian revealed that it had received a series of emails exchanges between the Liberal Democratic party and the Conservative party, dating back to 2014. The leaked documents show Liberal Democratic experts complaining about Theresa May’s – then Home Secretary – interference with the realization of a key study aimed at evaluating the costs and benefits of EU immigration. According to the accusations, Theresa May repeatedly tried to remove evidence about the positive impact of immigration on the UK economy.
Migration turned out to be a main concern also during the Labour party’s general conference, held in Liverpool. Whereas Labour’s leader, Jeremy Corbyn, said that limitations to EU immigration are off the table, many party members argued the contrary. Andy Durham, the departing shadow Home Secretary and Labour candidate for Greater Manchester’s municipal elections, said that the party should not simply back the status quo, but instead deal with the anxieties of its own electorate, which is worried about low-skilled immigration. In the same vein, Angela Rayner, the shadow Education Secretary, promised a stricter policy, aimed at gaining back control over migration flows. Meanwhile, both Hanno Kirner, Executive director at Jaguar Land Rover, and the UK’s Central Bank governor Mark Carney have recently made worrying predictions about the development of the British economy following Brexit. The former pointed to the risk of increased export tariffs for the British automotive industry, whereas the latter noted that the UK economy is “moving from a strong growth economy to something less than that”.
“The great fear is that the disintegration of the European Union — whatever you may think about the European Union — is going to come at a very, very large human cost […] We are going to have deflationary forces far worse than now in the Germanic part of a “fragmented Europe”; and inflation and high unemployment in the Latin part […] That kind of Europe is one that breeds monsters. It is not the kind of Europe that the world needs”.
Yanis Varoufakis, former Finance Minister of Greece
Source: CNBC, 27.09.2016
The number of migrants welcomed by Austria, Denmark, Hungary and Poland from Greece or Italy after the establishment of the European migrant relocation system.
Source: EUobserver, 28.09.2016
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