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Today’s decision extends the ECB’s emergency bond purchase scheme to mid-2021 and increased it by 600 billion euros to 1.35 trillion euros, which should allow the bank to buy up most of the new debt eurozone governments are issuing to overcome the pandemic. The move is intended to mitigate the impact of the pandemic on countries which are members of the monetary union, particularly Spain and Italy, with ECB President Christine Lagarde saying the decision was taken in the context of the eurozone experiencing an “unprecedented contraction”.
However, Hans-Olaf Henkel, who stood down from the European Parliament, believes ultimately it will simply make a bad situation worse.
Referring to last month’s decision by a federal German court in Karlsruhe ordering the ECB to justify its bond buying scheme or lose Germany’s Bundesbank as a participant, Mr Henkel said: “Instead of reacting to the verdict of Germany‘s Constitutional Court the ECB decided to do the same as before, in fact more of the same, much more.
“For years, the ECB throws huge amounts of euros into the financial markets with the objective to achieve ‘an inflation rate of close to but below two percent’.
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The ECB acts like a Medical Doctor prescribing a certain medicine and, after realising that it doesn’t work, rather than change the treatment, constantly increasing the dose
“This is grotesque. Apart from the fact that before the euro a Central Bank’s role was to control inflation and not to increase it, the ECB never achieved that goal.
“As a result, the ECB acts like a Medical Doctor prescribing a certain medicine and, after realising that it doesn’t work, rather than change the treatment, constantly increasing the dose.”
In reference to US President Donald Trump’s comments about treating coronavirus with bleach, Mr Henkel said: “In the Corona Crisis, the ECB acts like President Trump.
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“While Trump suggested to look at injecting Corona patients with disinfecting agents, the ECB throws ever more money at him.
“Both do harm to the patient. Both ignore the real causes of the patient’s sickness.”
In the case of Mr Trump, Mr Henkel said, there were at least experts prepared to disagree – for example, adviser Dr Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases.
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Mr Henkel added: “”But the actions of the ECB are widely applauded, mostly by those who benefit from the short-term effects like the participants of the stock market and politicians who love to spend money for their particular voters.
“The ECB needs a Dr Fauci to tell them that the problem is the euro itself: it is much too weak for German, Austrian, Dutch, Danish and Swedish industry, too strong for Italy, Spain and Greece.”
Having a “one-size-fits-all” currency for different economic environments was like having a “a one-size shirt”, Mr Henkel said.
He explained: “For some it is too loose, like countries in the north, others can’t get into it, like the south, while it might really fit only one: France.
Ultimately, the ECB was simply storing up trouble further down the line, Mr Henkel warned.
He said: “With today’s announcements the ECB indirectly supports State budgets in the south of the eurozone, it helps to avert the necessary reforms in those countries and hollows out the competitiveness of the entire eurozone.
“While the latest decisions under Mrs Lagarde are being justified as an emergency reaction to the corona crisis, let’s not forget that they are nothing but a continuation of the ECB policy started under Mario Draghi.
“When he started opening the money flood gates there was no dangerous virus around other than the virus of political complacency.”
“The eurozone did not reform, it lost in productivity and, by the way, it trailed the world in economic growth rates for many years, well before Corona.
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