At the Industrie-Club Düsseldorf, the Director of the IW discussed the European Central Bank’s monetary policy with chairmen of the boards of banks and insurance companies. Professor Hüther gave a very pragmatic answer to the headline question of the event, “Is the ECB’s policy still appropriate in the current environment?” Looking at the past, his answer was yes; for the present and future, however, he took a more critical view.

In his statements, Professor Hüther made it clear that reforming the euro area once again required groundbreaking political decisions. In his opinion, times had become harder. With Donald Trump’s presidency, the transatlantic relationship had started to crumble and the Chinese were challenging Europe with their authoritarian economic model. Given this “increasing competition of the systems”, only a united Europe stood a chance. Professor Hüther advocated a long-term European investment program to drive infrastructure and digital transformation forward. The ECB’s monetary policy was occasionally in danger of being influenced by politics and owing to the banking and sovereign debt crisis was working to a limited extent only, he argued. For instance, cleaning up their balance sheets currently still had a higher priority for banks than granting loans, while companies were putting cleaning up their balance sheets before making new investments. “Low financing costs lead to low cost pressure in indebted companies,” explained Professor Hüther. A normalization of these “transmission channels”, however, was being forced by the growth path of the euro area which should lead to a rise in inflation.   

During the lively discussion, the “nonsense of the Brexit vote” and Germany as a center for banks and insurance companies were other important topics. The participants called upon politicians to strengthen the “proven 3-pillar model of the banking industry” by supporting banks and savings banks in order to “unchain” them from overly tight regulatory and consumer protection requirements

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